Do farmers really benefit from subsidised power? That question deserves a careful answer but what is fairly clear is that the overall cost of subsidised power on the country has been very heavy.
IndiaSpend’s Sourjya Bhowmick finds that agriculture ranks 3rd among all sectors in India when it comes to consuming power but raises the lowest revenue. And of course, it pulls the highest amount as subsidy (Rs 2 lakh crore).
IndiaSpend earlier reported on the equation between agricultural productivity and rainfall. India’s agriculture (52% derive their livelihood from farming) is, to say the least, totally dependent on monsoon; lesser the rainfall, lesser the productivity and thus the adverse impact on growth.
Reasons vary from poor access to irrigation and backward techniques used in agriculture. Irrigation, which is the solution, needs power and therein lies the connection. So power and power subsidies in some ways become imperative to protect farmers.
Let’s start with per capita consumption of electricity in India vis-a-vis some developed countries:
Table 1: Country-wise Per Capita Consumption Of Electricity
||Agriculture as % of GDP composition
Lowest Electricity Consumption
India is at the bottom of the table of electricity consumption. However, agriculture in India still comprises 14.2% of the gross domestic product.
Let’s take a look at the consumption of electricity by sectors in India:
Table 2: Sector-wise Consumption Of Electricity
Source: Central Statistical Organisation
Agriculture’s share, as can be seen, is 3rd. In 2010-11 it was around 19% out of the total consumption of 694,392 Gigawatt/hour, which is lower than Industry (39%) and Domestic (24%).
Huge Subsidies For Agriculture
Now, let us look at the subsidies:
Table 3: Domestic & Agriculture Subsidies
Source: Planning Commission
From the table, it can be seen that subsidy to agriculture surpasses the next largest sector by a huge margin. A whooping Rs 207,652 crore has gone as subsidy to agriculture during the last five years.
During this period, agricultural productivity has come down and monsoon has been erratic. The dire condition of the monsoon right now may lead to more subsidy than decided for the agriculture sector this year.
Agriculture Has Lowest Tariff
Now, let us take a look at average tariff, category-wise, for the last five years:
Table 4: Average Tariff For Last 5 Years
From the table above, we see that the average tariff is the lowest for agriculture. The average tariff has increased every year for agriculture but it still remains the lowest, forcing the highest subsidy.
Industry Has Highest Electricity Sales
The next table shows the sector-wise share in total electricity sales for the last five years:
Table 5: Sector-wise Share In Total Electricity Sales
||Electricity sales (Mkwh)
Source: Planning Commission
Agriculture is ranked 3rd when it comes to total electricity sales over the last five years. Industry and domestic sectors had the highest sales. The next table gives an outline of the sector-wise share of the total sales revenue over the last five years:
Table 6: Total Sales Revenue (%)
Sources: Planning Commission
The share of agriculture in revenue has increased by 2% in the last five years but it is still the lowest…
So, what are the reasons for such huge subsidies for agriculture while the revenue generation from the sector is very low? As per the World Bank, the reasons are;
- Poor service which includes interruptions and voltage fluctuations,
- Disrupted agricultural production and less agricultural investments,
- Low yields and low income,
- Farmer dissatisfaction and political interference,
- Low electricity tariffs leading to financial crisis
And thus the vicious cycle continues.
What can be the way out?
Many states have huge debt due to free rural electricity… Schemes like Gujarat’s Jyotigram Yojana may be the solution.
Jyotigram Yojana is a state sponsored scheme aimed at providing farmers electricity in a phased manner. The average expenditure per village is Rs 6.72 lakh, and the total expenditure planned is Rs 1,290 crore. The scheme has already reduced the distribution losses by 3.74% and transmission failure by 1.17% in one year in 2005-06. Madhya Pradesh is also planning to implement the Gujarat model very soon.
The Shunglu Committee report on the financial position of distribution utilities, chaired by V.K.Shunglu, former Comptroller and Auditor General (CAG) , has also suggested a few measures to reduce losses in agricultural supply. They include:
- A separate feeder for the agriculture sector.
- 8 hours of minimum supply; and
- Agricultural consumers are billed monthly on the basis of newly installed pump sets and at least 50 paise/unit.
These recommendations, if implemented could give some respite from the subsidy burden for agriculture, and improve the financial status of the power utilties.