Power tariffs for farmers to be linked to water table

The tariff policy under the Electricity Act is the guiding principle for setting rates

To check the overutilisation of groundwater, the Centre has proposed that states link power rates for farmers with the water table in an area concerned and water requirements for crops there. 

Alongside, it has also asked states to retire any subsidy to farmers in areas that have low water tables.

The Electricity Act provides that geographical position could be a criterion for tariff differentiation. The Union government wants to bring in the change through an amendment to the National Tariff Policy. The lower the water table in an area, the higher would be the power tariff. 

Cracking down on the misuse of free power, the amendment has suggested states do away with tariff slabs when subsidised power supply is given and rather pass on the relief through “direct benefit transfer” (DBT). The tariff for “poorer sections of the society shall be a single part tariff”, said the draft amendment to the policy.

“Metering all connections and gradually eliminating cross-subsidy were the original objectives of the 2003 Act, which are still not achieved. The proposed amendments are practical. They are based on learnings from the success of DBT in PAHAL (LPG scheme). If states cooperate in their implementation, it could a game changer for the turnaround of this ailing sector,” Debasish Mishra, partner, Deloitte Touche Tohmatsu India LLP.

The tariff policy under the Electricity Act is the guiding principle for setting power rates, power purchase agreements, sale and purchase of coal and power — both conventional and renewable energy. Amendments to the policy pave the way for reforms through the Act. The policy was revised in 2016 and this is the latest amendment.

To put the new system in place, state electricity regulatory commissions will have to come up with separate tariff regulations.

The new policy also aims to restrict the number of consumer categories for power to five at the outside. The move is to simplify power tariffs, which have become complex owing to the introduction of many categories. The amendment follows principles based on the “purpose of use” such as domestic, commercial, agricultural, industrial and institutional. “Over the years, the tariff structure across the states has become very complex and disparate and there is a need to not only simplify and rationalise the tariff structure but also make it harmonious across all states,” said the draft.

There are more than 150 tariff slabs in the country. Most of these have been created to cater to subsidised populations and support poll promises of cheap power. This in turn has affected the health of state-owned power distribution companies (discoms), which cannot recover power procurement cost. Most of the subsidy is directed at the rural population and for irrigation purposes.

A June report of the NITI Ayog on water management says the water efficiency of Indian farmers is among the lowest in the world. “Currently, the populous northern states, which account for 20-30% of India’s agricultural output, face high to extreme water stress, posing a significant food security and livelihood risk for the country,” it said.

It further added that, under and non-pricing of electricity to farmers remains one of the biggest water problems in the country. “Most connections for farmers in the rural areas of larger northern states are not metered, and inevitably, in the vast majority of metered connections, the true cost of providing electricity is highly subsidized. These policies lead to over-extraction of groundwater for use in inefficient irrigation practices such as flood irrigation,” said the report.

Senior government officials said the new tariff policy identified this issue and had suggested that tariffs for agricultural use might be set at different levels for different parts of a state, depending on the condition of groundwater table to prevent excessive depletion of ground water.

Powering the change

Tariff policy – then & now

Earlier: Farmers in low water table areas received subsidy for power

Now: No subsidy. Power tariff to be decided on the basis of the water table in an area and crop consumption 

Earlier: More than 150 tariff slabs for different kinds of consumers

Now: Maximum five slabs: Domestic, commercial, agricultural, industrial, and institutional

Earlier: Subsidised power for the poor by waiving fixed cost

Now: Single-part tariff. No slab for subsidised customers; subsidy through DBT

Earlier: Post-paid meters

Now: Pre-paid metering policies and infrastructure by 2019

Earlier: Supply-based tariff, depending on power suppliers

Now: Time of the day tariff, depending on what supply the consumer chooses