Punjab is cash-strapped for infrastructure development. The state's Finance Department and a group of experts engaged by the Chief Minister have strongly recommended that farm power subsidy be rationalised.
For about 20 years now, the state has given free power to its farmers. The lion's share of this subsidy — 56 per cent — is pocketed by Punjab's medium and big farmers. Free power also means that the farmers continue to draw up groundwater indiscriminately through tube-wells.
Nevertheless, the state's ruling elite have categorically refused to rationalise farm power subsidy, which shall save Rs 3,407 crore annually. The reason? Votes matter more than the looming critical water shortage. Also, they and their kin form part of the landed elite. If farm power subsidy is rationalised, they will have to pay the bills.
Farm power subsidy was introduced by Punjab two decades ago. The move was intended to help the state’s poor farmers. However, the major part of the subsidy has been cornered by the state’s medium and big farmers. The anomaly came to light in the report submitted to the state government by the Group of Experts (GOE), led by noted economist Montek Singh Ahluwalia, who is the former Deputy Chairman of the Planning Commission. Punjab Chief Minister Capt Amarinder Singh entrusted the GOE with the task of studying Punjab’s economy and preparing a report to provide the roadmap for its revival. The expert group called Punjab’s farm power subsidy “regressive” because it provides inordinate benefits to medium and large farmers.
Free power means that the farmers continue to draw up groundwater indiscriminately through tube-wells for paddy cultivation. (Representative photo: Reuters)
The report submitted by the group to the CM has stated that 3.62 lakh medium and big farmers of Punjab corner 56 per cent of the total farm power subsidy. This way, the big and medium farmers are gifted free power worth crores of rupees by the state every year. At 7.29 lakh, the small, semi-medium, and marginal farmers are twice the number of the medium and big farmers. Yet they get only 44 per cent of the farm power subsidy. The state’s subsidy bill for power provided to the economically weaker farmers stands at Rs 2,653 crore.
It is not just the GOE which found fault with Punjab’s free farm power subsidy. The state’s Finance Department wrote to the Chief Minister in December 2019 that the farm power subsidy must be rationalised. The Finance Department highlighted that the state is starved of funds for the development of infrastructure. If it saves on the bill of Rs 3,407 crore given as subsidy to medium and large farmers, the funds can be freed for development. The state deferred decision on this recommendation.
In response, Punjab Chief Minister Capt Amarinder Singh specified that he would not withdraw free farm power as long as he is in the government. He made it clear that he would not accept any recommendation from any expert in this regard. It seems that in Indian polity, votes will continue to dictate policy regardless of the party in power.
Meanwhile, Punjab’s water resources are increasingly getting into the critical red zone. Groundwater is depleting at a rate much higher than its replenishment. One of the primary reasons is that Punjab is a major paddy-producing state, and is hugely dependent on groundwater for irrigation.
Paddy is a water-guzzling crop. Farmers utilise water indiscriminately for paddy through tube-wells that are being dug deeper and deeper as groundwater levels see a drastic fall. As per the Agriculture Census 2015, 10,92,713 farmers operate 13,51,692 tube-wells in the state. The subsidy to each tubewell costs the state Rs 44,835 per year. Punjab’s free farm power bill cost the state exchequer more than Rs 6,000 crore last year.