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Tariff Reform and Farmer Welfare in Rajasthan
(with Nicholas Ryan) |
Energy Research
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Agricultural electricity subsidies in India have been meant as a lifeline to farmers, allowing the spread of irrigation using electric pumps to extract groundwater. Instead, they have locked rural India into a destructive cycle of groundwater depletion and bad power supply. Farmers, given electricity nearly for free, use too much, draining groundwater, worsening poverty and bankrupting electricity distributors. Economic theory suggests that, given the distortion caused by pricing power below cost, a Pareto improvement is possible—both farmers and the distribution companies could be made better off if subsidies, instead of being tied to power use, which promotes over-consumption, were given as a lump-sum transfer. This proposal requests funding to collect data and design such a Pareto-improving tariff reform in partnership with the Government of Rajasthan’s electricity distribution companies. Rajasthan suffers from extreme groundwater depletion and sees tariff reform as needed to contain power subsidies that threaten the state’s solvency.
Funding Support: Yale University Project Status: Implementation ongoing |
