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Can Electricity Pricing Save India’s Groundwater? Field Evidence from a Novel Policy Mechanism in Gujarat

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  • Ram Fishman
  • Upmanu Lall
  • Vijay Modi
  • Nikunj Parekh

Abstract

Efficient pricing of water and energy, advocated by economists as a means of achieving more efficient allocations, is often politically infeasible, especially in developing countries. In India, for example, subsidized, nonvolumetric pricing of the electricity used to pump groundwater is politically entrenched and often blamed for groundwater depletion. Are there politically feasible ways to introduce incentives for conservation? We worked with a state government to design and test an alternative, voluntary approach, that invites farmers to install electricity meters and receive compensation for every unit they “save.” Interest in participation was high, leading to an unprecedented voluntary shift to meter-based billing, but we found no impacts on water usage. These results provide some of the first empirical evidence on the effect of incentives on water use in India, and we discuss the extent to which they are informative about other policy tools, such as full pricing.

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  • Ram Fishman & Upmanu Lall & Vijay Modi & Nikunj Parekh, 2016. "Can Electricity Pricing Save India’s Groundwater? Field Evidence from a Novel Policy Mechanism in Gujarat," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, vol. 3(4), pages 819-855.
    • Handle: RePEc:ucp:jaerec:doi:10.1086/688496
    DOI: 10.1086/688496
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    1. Hrozencik, R. Aaron, 2018. "Energy, Food, and Water; Electricity Cooperative Pricing and Groundwater Irrigation Decisions," 2018 Annual Meeting, August 5-7, Washington, D.C. 274322, Agricultural and Applied Economics Association.
    2. Khanna, Tarun M., 2022. "Using agricultural demand for reducing costs of renewable energy integration in India," Energy, Elsevier, vol. 254(PC).
    3. R. Aaron Hrozencik & Dale T. Manning & Jordan F. Suter & Christopher Goemans, 2022. "Impacts of Block‐Rate Energy Pricing on Groundwater Demand in Irrigated Agriculture," American Journal of Agricultural Economics, John Wiley & Sons, vol. 104(1), pages 404-427, January.
    4. Disha Gupta, 2023. "Free power, irrigation, and groundwater depletion: Impact of farm electricity policy of Punjab, India," Agricultural Economics, International Association of Agricultural Economists, vol. 54(4), pages 515-541, July.
    5. Soumya Balasubramanya & Nicholas Brozović & Ram Fishman & Sharachchandra Lele & Jinxia Wang, 2022. "Managing irrigation under increasing water scarcity," Agricultural Economics, International Association of Agricultural Economists, vol. 53(6), pages 976-984, November.
    6. Schoengold, Karina & Brozovic, Nicholas, 2018. "The future of groundwater management in the high plains: evolving institutions, aquifers and regulations," Western Economics Forum, Western Agricultural Economics Association, vol. 16(1).
    7. Naresh Devineni & Shama Perveen & Upmanu Lall, 2022. "Solving groundwater depletion in India while achieving food security," Nature Communications, Nature, vol. 13(1), pages 1-10, December.
    8. Fishman, Ram & Giné, Xavier & Jacoby, Hanan G., 2023. "Efficient irrigation and water conservation: Evidence from South India," Journal of Development Economics, Elsevier, vol. 162(C).
    9. Vasilaky, Kathryn & Harou, Aurélie & Alfredo, Katherine & Kapur, Ishita, 2023. "What works for water conservation? Evidence from a field experiment in India," Journal of Environmental Economics and Management, Elsevier, vol. 119(C).
    10. Mitra, Archisman & Balasubramanya, Soumya & Bouwer, Roy, 2021. "Can electricity rebates modify groundwater pumping behaviours? Evidence from a pilot study in Punjab, India," 2021 Annual Meeting, August 1-3, Austin, Texas 313871, Agricultural and Applied Economics Association.
    11. Aditi Mukherji, 2022. "Sustainable Groundwater Management in India Needs a Water‐Energy‐Food Nexus Approach," Applied Economic Perspectives and Policy, John Wiley & Sons, vol. 44(1), pages 394-410, March.
    12. Sidhu, Balsher Singh & Kandlikar, Milind & Ramankutty, Navin, 2020. "Power tariffs for groundwater irrigation in India: A comparative analysis of the environmental, equity, and economic tradeoffs," World Development, Elsevier, vol. 128(C).
    13. Harris, Lena, 2024. "Farmer response to policy induced water reductions: Evidence from the Colorado River," Journal of Environmental Economics and Management, Elsevier, vol. 125(C).
    14. Bahinipati, Chandra Sekhar & Viswanathan, P.K., 2019. "Incentivizing resource efficient technologies in India: Evidence from diffusion of micro-irrigation in the dark zone regions of Gujarat," Land Use Policy, Elsevier, vol. 86(C), pages 253-260.
    15. Nicholas Ryan & Anant Sudarshan, 2020. "Rationing the Commons," Working Papers 2020-93, Becker Friedman Institute for Research In Economics.
    16. Buisson, Marie-Charlotte & Balasubramanya, Soumya & Stifel, David C., 2020. "Effects of electric pumps on farm-level agricultural production and groundwater use in West Bengal," 2020 Annual Meeting, July 26-28, Kansas City, Missouri 304212, Agricultural and Applied Economics Association.
    17. Kaur, S. & Pollitt, M. G., 2024. "Using rewards and penalties to incentivize energy and water saving behaviour in agriculture – Evidence from a choice experiment in Punjab," Cambridge Working Papers in Economics 2434, Faculty of Economics, University of Cambridge.
    18. Sayre, Susan Stratton & Taraz, Vis, 2019. "Groundwater depletion in India: Social losses from costly well deepening," Journal of Environmental Economics and Management, Elsevier, vol. 93(C), pages 85-100.
    19. Nicholas Ryan & Anant Sudarshan, 2020. "Rationing the Commons," Cowles Foundation Discussion Papers 2239, Cowles Foundation for Research in Economics, Yale University.
    20. Nicholas Ryan & Anant Sudarshan, 2020. "Rationing the Commons," NBER Working Papers 27473, National Bureau of Economic Research, Inc.

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