A World Bank study on power supply in the agricultural sector has said that providing highly subsidised but poor quality power is an impediment to agricultural growth and income.

Due to the erratic power supply, farmers’ costs, particularly in the purchase of unnecessarily high-powered electric pumps, are notably higher than they would have been if supply was reliable and voltage steady, the study has said.

Power subsidies have missed their target as they benefit larger farmers, who use groundwater for irrigation, as compared to small farmers. “The present pricing regime based on a flat rate structure results in higher electricity prices for the small farmers compared to large farmers, because of their lower consumption levels,” the study has said.

“The fiscal cost associated with the provision of this subsidy is very large at 1.2-1.5 per cent of the gross state domestic product in Haryana and Andhra Pradesh and creates other distortions and sacrifices elsewhere in the economy," it has said.

Also, electricity consumption by farmers is estimated to be much lower than what is officially attributed, thereby implying that theft and losses are much higher than earlier estimated. "The state subsidies to agriculture, which are assumed to help the poor farmers, are in fact benefiting mainly better-off farmers and power thieves," it has said.

Over the medium term, farmers’ income will increase if the quality of power supply is improved, partially financed through higher tariffs. Marginal and small farmers’ income stand to gain even more from an improvement in the power supply conditions at higher tariffs.

The two important recommendations offered by the World Bank are the need for metering all consumers and for a communication campaign. "To achieve a broad-based consensus and support for reforms, it is critical to foster an increased awareness and understanding among general public and the farming community in particular about the potential benefits of reforms, and the level of theft and pilferage," the study said.

An integrated approach to supply through a rehabilitation of the electricity distribution network with the metering installation and the replacement of existing irrigation pumpsets with more efficient equipment has been suggested.

“New institutional and incentive systems, however, are also required to implement this programme. Significant management, customer relations and marketing skills, changes in corporate culture, load research, programme monitoring and evaluation skills are required, none of which are readily available in the utilities today," the study said.