Study of electricity subsidy in Punjab agriculture

Abstract

Subsidies are among the most powerful instruments for balancing the growth rate of production and for an equitable distribution of income for the protection of weaker sections of the society. Electricity subsidy is the part and parcel of the growth story of agriculture in Punjab. From all of the subsidies, electricity subsidy in Punjab served in the initial stages of green revolution, as incentives to the farmers for adopting many electric pumps and motors to support the successful drive for the green revolution. All the major farming inputs including electric energy saw a big jump along with cropping intensity and irrigated area. Use of electricity for irrigation and shifting production to irrigated crops results into more than two-folds growth in total food grain production in Punjab in less than forty years between 1960 and 2000. No doubt, electricity subsidies that encourage production and productivity which help in attaining a new height of economy growth in agriculture has been widely criticized because of the cost of subsidies that causes unsustainable fiscal deficits and causing most harmful effect in terms of reduced public investment in agriculture. Moreover, this subsidy encourages wasteful use of scarce resources like water and leads to agriculture unsustainability.