Power tariffs for groundwater irrigation in India: A comparative analysis of the environmental, equity, and economic tradeoffs

Groundwater irrigation using electric pumps plays a key role in India’s agricultural water supply. Power utilities across different states use two common tariff modes to charge groundwater consumers: flat tariffs, where payments are fixed according to a pump’s power rating, and metered tariffs based on units of power actually consumed. In this review, we use empirical evidence from past studies across multiple jurisdictions in India to compare the two tariff structures in terms of three key features: administrative burden on utilities; equity of groundwater access between high-income and low-income farmers; and influence on farmers’ pumping behavior. Our analysis shows that flat tariffs have low administrative costs and more equitable distributional outcomes, but provide no incentive to farmers for water conservation. Conversely, metered tariffs have the potential to encourage judicious consumption, but are expensive to manage and disadvantageous to low-income farmers who often buy water from wealthier groundwater well owners. Flawed tariff policies, in conjunction with large subsidies for agricultural power, have caused rapid groundwater depletion in many regions as well as massive financial losses to power utilities and governments – both state and central. Since there is considerable heterogeneity in agricultural practices and groundwater availability across India, we propose location-specific strategies for rationalizing agricultural power tariffs in different regions. While the groundwater-abundant eastern regions can benefit from a hybrid flat-cum-metered tariff that encourages farmer-to-farmer water sales, western states facing unsustainable groundwater exploitation should develop tariff policies that ration power, prioritize its supply during the most critical seasons, and reward farmers who reduce their groundwater consumption. Not only will such tariff policies help conserve groundwater, but also augment government financial resources for social welfare programs such as education, health, energy access etc. Thus, improved power policies can provide substantial assistance in India’s progress towards multiple UN Sustainable Development Goals.