Agricultural demand-side management needs multi-sectoral interventions


Cheap agricultural electricity has bedevilled the Indian power sector for decades, but enhanced agricultural demand-side management won’t solve the problem alone

Virtually everyone with a working knowledge of the Indian power sector will agree that one of the sector’s biggest problems is the very inexpensive (way below average cost) electricity supplied to agriculture. This mostly good-intentioned 1960s-era policy to prop up India’s farmers has had large and largely unintended consequences: discoms tottering on bankruptcy, unreliable electricity for farmers, dramatically increased diesel use in the countryside, and quinquennial state and national government financial interventions to bolster discom finances. All of this against the backdrop of continuing economic and financial turmoil in the agricultural sector.

Well-meaning Indian and international experts have often chimed in with some standard “solutions” to this problem, ranging from “just raise the prices”, to “give away more efficient pumps”, and “load management.” While these solutions have some merit, they have proved either infeasible in India (it’s a very hard vote for a regulator to dramatically raise prices on the rural citizenry without suffering adverse consequences) or too small in their impacts to address the magnitude of the problem.

So, 18 months ago, we began an investigation to imagine a better, more comprehensive solution — one that would result in a rural economy that was no longer a burden on the discoms, that managed its water resources sustainably for the long term, and that saw a reversal in the downward trend in rural livelihoods.

We interviewed key Indian stakeholders and analysed best international practices related to rural electrification, water management, and agricultural practices. Our conclusions and recommendations are contained in our recently released study, Cooperative Governance: Opportunities to Enhance Rural Livelihoods in India.

Our study’s key finding suggests that an alternative rural governance and implementation structure might be the answer.

Our study’s key finding suggests that an alternative rural governance and implementation structure might be the answer. Most past and current agricultural policy schemes have only attempted to address individual aspects of the nexus. We have learned that the interlinked nature of the problems demand interlinked solutions. Experience shows that tackling only one aspect is unlikely to be successful.

Rural institutions — governed by farmers, for farmers — are the most likely to successfully co-manage water and power and sustainably enhance rural livelihoods. Based on our examination of these issues and interviews with stakeholders over the past 12 months, we believe that farmer-producer organisations, water-user associations, and electricity cooperatives can meaningfully enhance rural livelihoods. They will not emerge on their own; they will require government support to reach scale. Without such support, they will certainly fail in improving rural livelihoods across India.

In short, cooperative institutions with sustained support from civil society organisations, along with state and central governments, can enhance rural livelihoods through capacity-building in cooperative management, inclusivity in cooperative governance, and tackling legislative, institutional, and policy barriers. Such a possibility makes them worthy of further attention and research. Interventions we explored above lead to better financial management and revenue realisation making discoms better off from a cash-flow perspective.

For more detail on our rural cooperative governance proposals, download our Cooperative Governance document.