Does marginal cost pricing of electricity affect groundwater pumping behaviour of farmers? Results from a natural experiment in West Bengal, India
Speaker: Dr. Aditi Mukherji, Date: September 17, 2012
As part of the power sector reforms in India, West Bengal began electric metering of agricultural consumers in 2007. Following this, tube well owners were charged on the basis of power usage instead of the prevalent flat tariff rate. An impact evaluation was undertaken to quantify the implications of the policy change. Surveys conducted in 2004 and 2007 served as a baseline. A 3ie-supported follow-up survey was undertaken in 2010, to create a panel data set for analysis.
The study found that a groundwater market had flourished where tube well owners were selling water to marginal farmers. Post-metering, tube well owners increased the price of water even though they had to pay a lower electricity cost. Metering, in effect, had disempowered small and marginal farmers and increased the leverage of tube well owners. Besides, it did not influence either cropping patterns, or the paddy output.
The researchers of this impact evaluation A Mukherji, JV Meenakshi, A Banerji and A Gupta identified existing legislation that needed to be amended in order to empower small and marginal farmers. The evidence from the study was presented to the new state government that assumed office in 2011 which carried out the necessary policy change.