Research

Publications

Abstract: This paper examines the impact of a change in the policy regime from flat rate to free farm electricity pricing, introduced in Punjab, India in February 1997 using a difference-in-differences framework. Based on village-level data from the second and the third rounds of the Minor Irrigation Census, the study finds a differential increase in the number of electric-operated tubewells and horsepower load of pumps in Punjab as compared to an agriculturally-similar and neighbouring state, Haryana, which is taken as the control group. Through these channels, the study finds that the average groundwater depth increased by 1.9 meters more in Punjab as compared to Haryana, which is 22 per cent of the baseline average groundwater depth in Punjab. Nationally-representative well-level data on groundwater depths from the Central Ground Water Board shows impact heterogeneity with sharper effect on groundwater depth for wells that are lying closer to the cut-off of about 10 meters where a technological shift from centrifugal to submersible pumps is required to maintain access to groundwater pumping.

How to cite this article: Gupta, D. (2023). Free power, irrigation, and groundwater depletion: Impact of farm electricity policy of Punjab, India. Agricultural Economics, 54, 515–541. https://doi.org/10.1111/agec.12773 

Dissertation Papers

Abstract: There has been a declining trend in groundwater depths in India and subsidies on farm electricity contribute to over-extraction of groundwater raising concerns about its sustainability for irrigation. In this paper, I estimate the reduction in groundwater pumping under volumetric pricing of farm electricity for Punjab where farm electricity is free. I use parcel-level cost of cultivation data from the Ministry of Agriculture for 2011-12 to 2013-14 to estimate the production function for paddy using the instrumental variable approach. I find that the estimated marginal product of water function is relatively flat at the level of the average water application. The average marginal product of water is 32 kilograms for an additional thousand cubic meters of water per hectare, which is very low. Simulations show that increasing the price of electricity from current level of zero to the true cost of electricity supply leads to sharp cutbacks of 59 percent in water extraction using electric pumps. However, the decline in average paddy yields is 11 percent. I show welfare gains in terms of reduction of the deadweight loss under volumetric pricing. Finally, I quantify the average lump-sum subsidy that can be given to farmers as direct transfers to keep their surplus unchanged and I show that this can be financed using collections done by the state electricity board from pricing electricity.

Abstract: This paper examines the relationship between farm size and productivity in Punjab. It is motivated by evidence of tapering of paddy yields in recent years, and the increasing trends in the number of land holdings. Building on a rich and old literature in this area, I take a fresh look at this relationship using farm-level panel data. The farm-specific total factor productivities, the measure of productivity used in this paper, are estimated using production function estimation for the principal crops cultivated in the kharif season in Punjab. I find no relationship between farm size and productivity even after controlling for a rich set of observed soil characteristics. The result is consistent across all the specifications and is not sensitive to the crops cultivated by the farmer. This finding is in contrast to the previous literature which suggests either an inverse or a U-shaped relationship.

Work in Progress