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Photo: Priyanka Parashar/Mint
Photo: Priyanka Parashar/Mint

Equity over efficiency in groundwater policy

Rationing electricity to check groundwater use reduces farm output, but the policy works because it reaches all farmers alike, says a new study

Many Indian states limit groundwater use by supplying electricity to farmers only for certain hours every day. A new study finds that although this ration policy reduces the overall agricultural output, it is an equitable system that reaches all farmers alike.

In a working paper published by the US National Bureau of Economic Research, Nicholas Ryan and Anand Sudarshan examine how efficient and equitable the rationing policy is as compared to other alternatives. For this, they survey over 4,000 farmers in Rajasthan.

The paper sets out to examine the general view that since farmers in most Indian states get electricity almost for free, they may be pulling out more water than needed. The study finds that this is not true as electricity is available only for fixed time in a day, and the nature of the rationing policy guards against misuse.

However, the policy misallocates resources. Less productive farmers, or those with less land, get access to the same amount of water as those who could make better use of it. To solve this, the authors consider an alternate policy: charging farmers for the electricity and water.

This system could lift productivity by 6% and raise social surplus by 11,000 per farmer in a cropping season—around 12% of the annual household income, the paper finds.

But the authors say this is not desirable in favour of the equity that rationing provides. A pricing regime would increase production costs and losses for less productive farmers, which in most cases are small farmers. This is not politically feasible, the authors say.

Thus, without a better alternative, rationing remains the most equitable groundwater policy for India, say the authors. The policy has endured because access to groundwater is vital for small farmers and has helped India boost its agricultural productivity in the last 50 years, the paper argues.

Also read: Rationing The Commons

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