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November 30, 2020

Punjab Govt ending power subsidies to farmers with more than 10 acres land

TPE Correspondent

Chandigarh, January 4

The Punjab government is considering ending power subsidies to big farmers (owning more than 10 acres of land). This is a step in the right direction, though much delayed. Punjab State Farmers’ and Farm Workers’ Commission had first proposed charging farmers with more than four acres of land Rs 100 per BHP of their pumps per month in 2018.

It had subsequently proposed, in a draft farm reforms policy, that subsidies to such farmers be cut to 33% and to 66% for farmers who adopted micro-irrigation. The government had taken it up for consideration twice before now. Punjab’s power subsidies have brought the state to its knees, the CAG had highlighted that the state government had to pay off loans incurred by Punjab State Power Corporation (PSPCL), the state-owned genco-discom, which had severely depleted state finances. PSPCL, of course, had taken these loans because the state had deferred payment of subsidy dues. The state has been reluctant, so far, to end the power subsidies for farmers, likely because of the political fallout the move would have.

The subsidy policy had long stopped making economic sense—while power consumption in agriculture rose 1.2 times between FY02, when the policy came into effect and FY15, the share of agriculture in the Punjab GSDP has fallen from 18.8% in FY12 to 14.4% in FY19. This is likely to fall further given the water-table in the state has crashed—in 2016, nearly 85% of the blocks in the state were classified as over-exploited/critical for groundwater availability versus 53% in 1984—and climate change effects could exacerbate the pain. Given how free power and the procurement policy, centred on water-guzzling crops like paddy, resulted in unsustainable drawing of groundwater in the state, any reform in either of the policies can only be welcome.

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