Depleted aquifers and bankrupt electricity industry have emerged as collateral impacts of farm power policy in India. During the 1970’s, high transaction costs of metering India’s millions of irrigation tubewells forced State Electricity Boards to abandon metered power tariffs, and charge farmers a flat tariff linked to horse-power of the motors. This created massive welfare for marginal farmers with whom tubewell owners began sharing groundwater irrigation through localized, informal pump irrigation markets. But this also led to groundwater depletion and an unviable power industry.
In response, power professionals and international lenders argued for return to metered charge. But farmers successfully opposed such moves through energetic political mobilization. In 2002, IWMI proposed a second-best strategy of controlling electricity subsidies and groundwater draft simultaneously through rationing power supply to tubewells by separating power lines supplying tubewells from those supplying non-farm users. The IWMI argument (Research Report 70, 2003) was widely discussed and shared with top policy makers in Gujarat and other states in December 2002 (see Project 3, MTP 2003-2005).
In September 2003, Gujarat instituted Jyotirgram Scheme which incorporated most IWMI recommendations. During 2003-6, Gujarat invested US $260 million to rewire rural electricity network and began providing 8 hours/day of continuous, full-voltage power supply to farmers while providing 24*7 3-phase power supply to non-farm users in 18000 villages.
A recent IWMI impact assessment showed: [a] drastic improvement in the quality of rural life; [b] upsurge in non-farm economic activity; [c] halving of electricity–and groundwater use–in agriculture; and [d] turn-around of State Electricity Board. Water buyers, mostly marginal farmers, took the brunt through drastically shrunken water markets. These deleterious impacts can be alleviated by adopting the one IWMI recommendation that is not implemented, viz., targeting maximum power supply at peak irrigation periods.