Balancing State, Utility and Social Need in Agricultural Electricity Subsidy: The Case for a Holistic Approach to Reform

Balancing State, Utility and Social Need in Agricultural Electricity Subsidy: The Case for a Holistic Approach to Reform

By Ashwini K Swain and Udai S Mehta
Briefing Note, Global Subsidies Initiative, International Institute for Sustainable Development, 2014
30 May 2014

Although the damaging impacts of agricultural electricity subsidy were well recognized, there was hardly any attempt at reform until the early 1990s. With the advent of liberalization, agricultural electricity pricing came under scrutiny for its economic inefficiencies. In response, some state governments have attempted to reform the subsidies by rationalizing electricity tariffs for farmers. While the outcomes vary across states, the reforms have been strongly resisted by the farmers and, consequently, have stalled.

The approach adopted so far has focused narrowly on economic efficiency, while ignoring the social and political dimensions of the problem. However, agricultural electricity subsidies in India are closely linked with food security, poverty alleviation, state finance, water scarcity and, increasingly, climate change. Such a complex issue requires an embedded and inclusive approach, with careful consideration given to social, political, economic and environmental aspects. Drawing on empirical evidence and analyzing socioeconomic-political and environmental dimensions, this paper makes a case for a broader approach to the reform of agricultural electricity subsidies.