Powering reforms: Punjab must implement Ahluwalia report recommendations

A group of experts headed by former Planning Commission deputy chairperson Montek Singh Ahluwalia has advised the Punjab government to reduce procurement of paddy, to drive down demand for the free power the state provides to farmers. Given how the Punjab State Farmers’ and Farm Workers’ Commission’s proposal to charge better-off farmers for electricity, made two years ago, never got implemented—thanks to stiff opposition from farmers—implementation of the Ahluwalia panel’s recommendations also looks uncertain. Free power has left a huge dent in the state’s finances, and has caused significant environmental damage. The farmers’ commission, therefore, had proposed that farmers paying income tax or with land-holding of more than four hectares be asked to pay a part of the bill their electricity consumption generated. But the opposition had protested the move. The Ahluwalia report terms the state’s power subsidy scheme ‘highly regressive’ as it benefits mostly the large and medium farmers—the state’s 3.29 lakh large and medium farmers account for 56% of the power subsidy burden of Rs 6,000 crore, whereas the small and marginal farmers, who are twice the number of large and medium farmers, account for the rest. The power subsidy has led to an “unsustainable burden on the budget” and “excessive use of groundwater which has produced an alarming fall in the water table”.

Despite such a backdrop, Punjab has opposed the Electricity (Amendment) Bill 2020 that calls for junking power subsidies in favour of direct benefit transfers. A study by J-PAL had estimated that if farmers in Punjab received Rs 48,000 as DBT for power instead of free electricity, they would end up using less power. And, as the government weans farmers off free power, the pressure on the water table will ease, especially if the move is accompanied with a shift away from public procurement of water-intensive crops such as paddy. Since the free power scheme came into effect in 1996, the number of tubewell in the state have risen sharply, from nearly 80,000 pumps in 2000-01 to 14.5 lakh today.

Thanks to large-scale paddy and wheat cultivation, there has been excessive use of fertilisers,too; this has had a disastrous impact on soil chemistry. An Icrier paper by Ashok Gulati and Pritha Banerjee showed that, against the ideal N:P:K ratio of 4:2:1, the ratio is 25.8:5.8:1 in Punjab. The state government needs to urgently relook the promotion of crops such as paddy, in the interest of the state’s finances, and the health of its soil and groundwater resources. Indeed, the Ahluwalia report’s suggestion is one that should prompt a rethink at the central level as well as in other states, where ineffective,wasteful subsidies and public procurement policies are not only casting a shadow on their balance-sheets, but also are causing lasting, perhaps even irreversible, environmental damage.