Table of Contents
1 Outline
2 Infrastructure regulation and the political economy of the electricity-irrigation nexus in agriculture
2.1 Literature review: utilities regulation and regulatory agencies
2.2 A theoretical framework for analysis
2.3 Empirics and discussion
2.3.1 Early electricity infrastructure regulation and provision to agriculture
2.3.2 The emergence of agricultural electricity subsidisation
2.3.3 The political economy dimension of subsidisation
2.4 Conclusions and practical implications
3 Farm level economics: The cumulative causation of energy inefficiency
3.1 Methods
3.1.1 Sampling procedure
3.1.2 Farm-level and village-level survey design
3.2 Results and discussion
3.2.1 The actual costs of electricity-driven groundwater irrigation
3.2.2 Energy consumption patterns for electricity-driven irrigation at the farm level
3.2.3 Energy provision and saving measures
3.3 Conclusions and practical implications
References
Christian Kimmich*
July 2010
Abstract
This report focuses on the policies of electricity provision for irrigation and the cost of groundwater-based irrigation. The empirical findings indicate that electricity regulation is unlikely to fulfil the expectations of an allocation-efficient tariff structure in the given political situation, leading to regulatory capture. The report’s chronological approach reveals development paths that are also present in the current action situations. The findings suggest that the involved properties of transactions inherent in the choices available to each actor are constitutive for understanding the unfolding of each potential and the realised development path. The economic conditions of dry-land agriculture and the costs of food provision render a shift towards a cost-based tariff setting unlikely.
The analysis at the level of electricity distribution and agricultural production systems indicates that although marginal costs of electricity supply are inexistent, the costs for the consequences of poor infrastructure incur heavy burdens on agricultural enterprises. The costs of electricity would exceed those for each of the other input factors of production. The absence of marginal costs has led to highly inefficient groundwater irrigation. Fortunately, incentives in agriculture for higher power quality are given, resulting from the high costs of pump set burnouts through voltage fluctuations. This incentive can be combined with energy efficiency measures. Effective measures are most feasible at the level of the electricity sub-station, isolating an agricultural electricity feeder and the connected distribution transformers.
Key words: electricity-irrigation nexus, agricultural policy, production economics, Andhra Pradesh, India
* Tel.: +49 30 2093 6430. Email:christian.kimmich@staff.hu-berlin.de, Division of Resource Economics, Humboldt Universität zu Berlin, Philippstraße 13, 10099 Berlin
Agriculture is a crucial sector either enabling or impeding a transition path towards a sustainable development of urban areas. This is also the case for the emerging megacity of Hyderabad. Several rural-urban linkages support this perspective: (a) The migration patterns, being heavily interlinked with both sector-wise and rural development paths, (b) the food security and provisioning dimension, being especially relevant in the case of perishable agricultural commodities which cannot be traded over long distances, (c) water allocation for agricultural production versus drinking water supply in the city, and (d) power allocation for agricultural production versus urban consumption. This research focuses especially on the latter linkage, as electricity provision is one of the most crucial factors of sustainable development for the emerging megacity, becoming either a driver or inhibitor.
Electricity for agricultural irrigation is subsidised in Andhra Pradesh, where precipitation is highly uncertain and where water builds the bottleneck for agricultural production. The subsidisation policy has led to a heavy increase in electric energy demand, an alarming level of groundwater depletion and financial burdens (World Bank 2001). As a consequence, high electric energy demand for agricultural irrigation has reduced the supply for industrial, commercial and household purposes and impedes economic development in these sectors.
This report addresses two fundamental research questions. One aims at the agricultural policy level (Section 2), the other at the economics at the farm level (Section 3):
• What are the reasons for electricity subsidisation and are there regulatory governance or policy approaches towards addressing the related energy inefficiencies?
• What are the implications on the level of agricultural enterprises and which approaches are feasible at this level?
Subsidisation1 of energy for agricultural irrigation is a widespread phenomenon in many countries worldwide. The semi-arid and arid regions of India play an eminent role in