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Transition from flat to metered electricity tariff in agriculture: Who gains and who loses? Evidence from West Bengal, India. A. Mukherji, B. Das, N Majumdar, N. C. Nayak, R. R. Sethi, B.R. Sharma & P.S. Banerji Presented at the International Conference on Water Resources Policy in South Asia, December 17-20, 2008, Colombo. International Water Management Institute (IWMI)
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Transition from flat to metered electricity tariff in agriculture: Who gains and who loses? Evidence from West Bengal, IndiaA. Mukherji, B. Das, N Majumdar, N. C. Nayak, R. R. Sethi, B.R. Sharma & P.S. Banerji
Presented at the International Conference on Water Resources Policy in South Asia
December 17-20, 2008, Colombo
The context of meteringThe context of metering Rapid increase in area under groundwater Rapid increase in area under groundwater
irrigation due toirrigation due to High population density & small land holdingsHigh population density & small land holdings Inadequacies in canal water supplyInadequacies in canal water supply Demand for assured supply of irrigationDemand for assured supply of irrigation Flat and highly subsidized electricityFlat and highly subsidized electricity
This led toThis led to Proliferation of electric pumps in 1980s and 1990s Proliferation of electric pumps in 1980s and 1990s Emergence of competitive water markets Emergence of competitive water markets Benefited millions of small water buying farmersBenefited millions of small water buying farmers
But there are downsides of flat tariff systemBut there are downsides of flat tariff system
Flat tariffs remained low and became political tools of Flat tariffs remained low and became political tools of appeasementappeasement
Low flat tariff lead to fiscal deficits for the State Low flat tariff lead to fiscal deficits for the State Electricity Boards (SEBs)Electricity Boards (SEBs)
These deficits were over-estimated to hide inefficiency These deficits were over-estimated to hide inefficiency of the SEBsof the SEBs
It lead to groundwater overexploitation in hard rock It lead to groundwater overexploitation in hard rock aquifers with low rainfallaquifers with low rainfall
It benefited the large farmers disproportionatelyIt benefited the large farmers disproportionately
Contd…
ADB & World Bank agreed to finance ADB & World Bank agreed to finance restructuring of electricity sector providedrestructuring of electricity sector provided
SEBs were unbundled (Orissa took the lead)SEBs were unbundled (Orissa took the lead)
Independent State Electricity Regulatory Commission Independent State Electricity Regulatory Commission were formedwere formed
Proper energy auditing through 100% metering was Proper energy auditing through 100% metering was undertakenundertaken
Electricity Act 2003 was enacted & all states Electricity Act 2003 was enacted & all states were asked to meter agricultural supplywere asked to meter agricultural supply
West Bengal and Uttarakhand are the only West Bengal and Uttarakhand are the only states to implement universal meteringstates to implement universal metering
Contd…
Objectives of the studyObjectives of the study
How was GoWB* able to overcome How was GoWB* able to overcome traditional pitfalls (high transaction costs & traditional pitfalls (high transaction costs & corruption) of metering?corruption) of metering?
To assess the impact of change from flat To assess the impact of change from flat to meter tariff system on the to meter tariff system on the Electric pump ownersElectric pump owners Water buyers from electric pumpsWater buyers from electric pumps Overall operation of groundwater marketsOverall operation of groundwater markets Electricity UtilityElectricity Utility
* GoWB: Government of West Bengal
(A)(A) Review of literatureReview of literature
(B)(B) Structured/semi-structured interview with Structured/semi-structured interview with
various groups of farmers, ABECA*, various groups of farmers, ABECA*,
government officials etc.government officials etc.
(C)(C) Three data sets used, two large scale Three data sets used, two large scale
quantitative questionnaire surveys & one quantitative questionnaire surveys & one
qualitative surveyqualitative survey
(D)(D) Sample size of each survey varied between Sample size of each survey varied between
137-143 respondents.137-143 respondents.
Methodology & DataMethodology & Data
*ABECA: All Bengal Electricity Consumers’ Association
West Bengal: A state that bucks West Bengal: A state that bucks the trend in GW* and electricitythe trend in GW* and electricity
Punjab, Haryana, Gujarat, Punjab, Haryana, Gujarat, Tamil NaduTamil Nadu
West BengalWest Bengal
Over-exploitation of GWOver-exploitation of GW Under- development of GW Under- development of GW (42% development)(42% development)
> 60-80% electric pumps> 60-80% electric pumps < 20% electric pumps< 20% electric pumps
Free/very low flat rateFree/very low flat rate Highest flat rate in IndiaHighest flat rate in India
High fiscal deficits due to High fiscal deficits due to electricity subsidyelectricity subsidy
Non-existent electricity Non-existent electricity subsidysubsidy
*GW- groundwater
Electricity reforms in WB: The high-tech way
Introduction of Time of the Day (TOD) metersIntroduction of Time of the Day (TOD) meters TOD tariff rates for agricultureTOD tariff rates for agriculture
‘‘Normal’ hours: 6am-5pm, @Rs. 1.37/unitNormal’ hours: 6am-5pm, @Rs. 1.37/unit ‘‘Peak’ hours: 5pm-11pm, @Rs. 4.75/unitPeak’ hours: 5pm-11pm, @Rs. 4.75/unit ‘‘Off-peak’ hours:11pm-6am @Rs 0.75/unitOff-peak’ hours:11pm-6am @Rs 0.75/unit
Average unit charge (estimated): Average unit charge (estimated): Rs 1.52/unit as against Rs 2.68/unit in flat Rs 1.52/unit as against Rs 2.68/unit in flat
systemsystem Per hour metered tariff ~ Rs. 6.00Per hour metered tariff ~ Rs. 6.00
Electricity reforms in WB*: The high-tech way
Contd…
Tamper proof TOD meter (with optical load sensor)
Meter Reading Instrument (MRI) for data capture and transfer to computer
Engagement of SHG*
Introduction of GSM and GIS technology for monitoring
*WB: West Bengal
*SHG: Self Help Group
Photo Credit: Aditi Mukherji
Hi-Tech Metering Hi-Tech Metering TechnologyTechnology
Source: Adapted from Tongia, R., 2004. What IT can and cannot do for the power sector and distribution in India: link to reforms, incentives and management, Working Paper #19, Program on Energy and Sustainable Development, Stanford University.
Defining gainers and losers• For pump owners
– Loser if they have pay higher electricity bill for the same number of hours of usage as before, gainer otherwise
• For water buyers– Loser if they have to pay higher price for buying same
amount of water & face adverse terms and conditions
• For electricity utility– Loser if they earn lesser revenue from same number
of tubewells than before
0.0
5000.0
10000.0
15000.0
20000.0
25000.0
1 4 7 10 13 16 19 22 25 28 31 34 37 40 43 46 49 52 55 58 61 64
Number of submersible tubewells
Ele
ctr
icit
y b
ill
(Rs/
year)
Predicted bill under metered tariff Electricity bill under flat tariff in 2006-07
0.0
5000.0
10000.0
15000.0
20000.0
25000.0
1 4 7 10 13 16 19 22 25 28 31 34 37 40 43 46 49 52 55 58 61 64 67 70
Number of shallow tubewells
Ele
ctr
icit
y b
ill
(Rs/
year)
Predicted electricity bill under metered tariff Electricity bill under flat tariff in 2006-07
Submersible pump owners
Gainers 63%
Centrifugal pumps owners
Gainers 74%
Gainers and losers among pump owners
Source: Mukherji 2004 survey
Water buyers: Gainers or Water buyers: Gainers or losers?losers?
LosersLosers Water charges increased by 30-50% in Water charges increased by 30-50% in
response to metering response to metering Unwillingness among PO* to sell water Unwillingness among PO* to sell water
due to changed incentive structuredue to changed incentive structure Adverse terms of exchange including Adverse terms of exchange including
demand for payments in advancedemand for payments in advance Buyers perceive that water sellers are Buyers perceive that water sellers are
now providing sub-optimal servicenow providing sub-optimal service
*PO: Pump Owners
4000
8000
12000
An
nu
al c
ost
of
irri
gat
ion
in R
s
O200 400 600 800 1000 1200 1400
16000
20000
1600 1800 2000
Annual hours of irrigation
22000
Hour: 1500, Energy cost: Rs 9000
Self irrigationHour: 700
Energy cost: Rs 4200
Saving in electricity bill
Rs 6600
Break even pointHour: 1927
Energy cost: Rs 10800
Selling irrigationHour: 800
Earning: Rs 14400
Profit in flat tariff system
Rs 3600/yr/TW
Profit in meter tariff systemRs 5400/yr/tw
‘no gain no loss’ 1050 hr
‘no gain no loss’ 1300 hr
250 hr
Annual flat tariff, Rs 10800
Rs 6/hr Rs 18/hr
What happens to the size of GW markets?
The Average Scenario: GWM will contract
Source: Figure created by Mukherji A. based on data from Mukherji, A. et al. 2009. Metering of agricultural power supply in West Bengal, India: who gains and who loses? Energy Policy, 37(12):5530-5539.
4000
8000
12000
An
nu
al c
ost
of
irri
gat
ion
in R
s
O500 1000 1500
16000
20000
2000Annual hours of irrigation
24000
28000
2500
Annual flat tariff, Rs 10800
Break even pointHour: 1927Cost: 10800
Total irrigationHour: 2400
Energy cost: Rs 14400
32000
Self irrigationHour: 1500
Energy cost: Rs 9000
Selling irrigationHour: 900
Earning: Rs 16200
Profit in flat tariff system
Rs 5400
Profit in meter tariff system
Rs 1800
2250
2100
An exceptional case: GWM expands
Gainer and loser in meter tariff system
Source: Figure created by Mukherji, A. based on data from Mukherji, A. et al. 2009. Metering of agricultural power supply in West Bengal, India: who gains and who loses? Energy Policy, 37(12):5530-5539.
ConclusionsConclusions
Same hour of Same hour of pumping – Less pumping – Less electricity billelectricity bill
Same hour of selling Same hour of selling water – Higher water – Higher revenuerevenue
Higher bargaining Higher bargaining power vis-à-vis water power vis-à-vis water buyersbuyers
Win – win situationWin – win situation
Pump owners: Pump owners: Largely winnersLargely winners
Photo Credit: Aditi Mukherji
ConclusionsConclusions
Water buyers:Water buyers: LosersLosers
Increase in water charges by 30-50%
Adverse terms & condition of buying water
Photo Credit: Aditi Mukherji
Depends on Depends on motivation of water motivation of water sellerssellers
If pump owners only If pump owners only want to recover their want to recover their electricity bills, then electricity bills, then GWM* will contractGWM* will contract
If they want to earn If they want to earn more profit, GWM may more profit, GWM may remain same or remain same or expandexpand
ConclusionsConclusionsGroundwater market:Groundwater market:IndeterminateIndeterminate Photo Credit: Aditi Mukherji
*GWM: Groundwater Market
Depends on Depends on motivation of water motivation of water sellerssellers
If pump owners only If pump owners only want to recover their want to recover their electricity bills, then electricity bills, then GWM will contractGWM will contract
If they want to earn If they want to earn more profit, GWM may more profit, GWM may remain same or remain same or expandexpand
ConclusionsConclusionsGroundwater market:Groundwater market:IndeterminateIndeterminate
ConclusionsConclusionsGroundwater Groundwater use efficiency:use efficiency:WinnerWinner
Increased adoption of plastic Increased adoption of plastic pipes for conveyancepipes for conveyance
Better maintenance of field Better maintenance of field channelschannels
Construction of underground Construction of underground pipelines pipelines
But will it save water? And is it But will it save water? And is it important?important?
Photo Credit: Aditi Mukherji
ConclusionsConclusionsElectricity board: Electricity board:
Loser (!)Loser (!)
Probable loss by Rs 145 million per year under existing meter rates
Photo Credit: Aditi Mukherji
Policy implicationPolicy implication Rapid electrification of tubewells to Rapid electrification of tubewells to
encourage competitive GW marketsencourage competitive GW markets Relaxation on issuance of SWID* Relaxation on issuance of SWID*
certificate for new TW* installationcertificate for new TW* installation Give capital cost subsidy for Give capital cost subsidy for
installation of tube wells – target installation of tube wells – target small & marginal farmerssmall & marginal farmers
PanchayatPanchayat (village council) (village council) intervention in regulating water intervention in regulating water pricesprices*SWID: State Water Investigation Directorate
*TW: Tube well
www.iwmi.org
Related Publication: Mukherji, A. et al. 2009. Metering of agricultural power supply in West Bengal, India: who gains and who loses? Energy Policy, 37(12):5530-5539. Available online at www.elsevier.com/locate/enpol
0
5000
10000
15000
20000
25000
30000
35000
Years
Are
a ir
rig
ated
(h
a)
Canals Wells and tubewells Tanks and other sources
Rapid increase in groundwater irrigation
Source: Government of India data, 1950-2000
Source: Mukherji, A.
0
420
850
1512
2160
0
500
1000
1500
2000
2500
Punjab Haryana Gujarat Uttarakhand West Bengal
States
Rs/
HP
/Yea
r
Flat rate tariff (Rs/HP/year)
Comparison of flat tariff in different states, 2006-07
Source: Chart created by Mukherji,A based on data from Mukherji, A. et al. 2009. Metering of agricultural power supply in West Bengal, India: who gains and who loses? Energy Policy, 37(12):5530-5539.
0 20 40 60 80 100
Madhya Pradesh
Haryana
Gujarat
Andhra Pradesh
Karnataka
Rajasthan (Transco)
Tamil Nadu
Punjab
Maharashtra
U.P (Power corp)
West Bengal
Bihar
Percentage
Electricity subsidy as percentage of state fiscal deficits, 2000-01
BRISCOE, 2005
500
850
660
1100
0
200
400
600
800
1000
1200
Aman paddy Boro paddy
Wat
er p
rice
(R
s/b
igh
a)
Flat (2006-07) Metered (2007-08)
Increase in water price after metering
Source: Graph created by Mukherji et al. based on data from 2nd CGA 2008 survey.
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