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8/8/2019 Mukherji 2009 Metering Electricity Supply
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Metering of agricultural power supply in West Bengal, India: Who gains and
who loses?
A. Mukherji a,, B. Das b, N. Majumdar c, N.C. Nayak d, R.R. Sethi e, B.R. Sharma f
a International Water Management Institute, Colombo, Sri Lankab School of Environmental Studies, Jadavpur University, Kolkata, Indiac Central Groundwater Board, Eastern Region, Kolkata, Indiad Central Groundwater Board, South Eastern Region, Bhubaneshwar, Indiae Water Technology Centre, ICAR, Bhubaneshwar, Indiaf International Water Management Institute, New Delhi, India
a r t i c l e i n f o
Article history:
Received 11 February 2009
Accepted 11 August 2009Available online 6 October 2009
Keywords:
Electricity reform
Ground water
India
a b s t r a c t
As a part of the ongoing power sector reforms in India, the state of West Bengal is in the process of
metering agricultural electricity supply. This paper presents a first cut assessment of this initiative.
Results suggest that the majority of the pump owners benefit from the reforms in two ways: first by
having to pay a lower electricity bill for same usage and second through increased profit margins by
selling water. This is because in response to the changed incentive structure, water prices rose sharply
by 3050% immediately after metering. In contrast, water buyers have lost out by having to pay higher
water charges and face adverse terms of contract. Impact of metering on operation of groundwater
markets and volume of groundwater extracted is less clear; they may expand, contract or remain
unchanged, though water use efficiency is likely to go up. At current tariff rates, the electricity utilities
are likely to earn less revenue than before. These findings are context specific and hold good for West
Bengal where high flat tariff had fostered competitive groundwater markets and hence cannot be
generalised for other Indian states.
& 2009 Elsevier Ltd. All rights reserved.
1. Introduction
Indian policy discourse on the most suitable mode of
agricultural electricity tariff has come full circle. Until the early
1970s, all state electricity boards (SEBs) charged their tubewell
owners based on metered consumption. However, as the number
of tubewells increased manifold during the 1970s and the 1980s,
the SEBs found the transaction costs of metering to be prohibi-
tively high as compared to the total revenue generated from the
agricultural sector. In response, during the 1970s and 1980s most
states introduced flat tariffs for agricultural electricity supply
(Shah et al., 2007). The initial idea was to increase the flat tariffover time to keep it in line with the cost of generation and supply
of electricity.
While this solution lowered the transaction costs of bill
collection, it resulted in a set of still graver problems affecting
both the electricity and the groundwater sectors. For one, many
state governments soon started using the electricity tariff as an
electoral tool of appeasement and hence the flat tariffs remained
perpetually low (Dubash and Rajan, 2001). This resulted in losses
to the SEBs estimated at around Rs. 270 billion per year (World
Bank, 2002). Unmetered electricity supply also became a
convenient garb for the SEBs to hide their inefficiencies in terms
of transmission and distribution losses (Sant and Dixit, 1996).
Over time, the SEBs came to treat their agricultural consumers as a
liability. As a result, quality of power in rural areas deteriorated
and some states saw de-electrification and stagnation in
agricultural electricity consumption.1 In other states, where
electricity consumption in agriculture grew over time (Gujarat,
Andhra Pradesh, Punjab, Haryana, Tamil Nadu), the number ofhours of electricity supply came down from 18 to 20h in the 1980s
to as low as 6 to 10h in the 2000s. Rationing, that too of low
quality electricity, soon became the norm.
There were equally serious implications for the groundwater
sector. Since the marginal cost of extracting groundwater was
close to zero, it provided incentive for over-pumping. In many
areas this spawned active groundwater markets. These markets
ARTICLE IN PRESS
Contents lists available at ScienceDirect
journal homepage: www.elsevier.com/locate/enpol
Energy Policy
0301-4215/$- see front matter & 2009 Elsevier Ltd. All rights reserved.
doi:10.1016/j.enpol.2009.08.051
Corresponding author.
E-mail addresses: [email protected] (A. Mukherji), [email protected]
(B. Das), [email protected] (N. Majumdar), [email protected]
(N.C. Nayak), [email protected] (R.R. Sethi), [email protected] (B.R. Sharma).
1 For example, number of electric pumps in Bihar remained stagnant at around
0.18 million from 19761977 to 19971998 (Mukherji, 2008a) as did the power
consumption in agriculture (Mukherjee, 2008).
Energy Policy 37 (2009) 55305539
http://-/?-http://www.elsevier.com/locate/enpolhttp://dx.doi.org/10.1016/j.enpol.2009.08.051mailto:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]://dx.doi.org/10.1016/j.enpol.2009.08.051http://www.elsevier.com/locate/enpolhttp://-/?-8/8/2019 Mukherji 2009 Metering Electricity Supply
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emerged in response to unmet demand for irrigation and the flat
tariff system. However, in arid and semi-arid regions with hard
rock aquifers, flat tariff was directly responsible for over-pumping
and, given the low recharge potential of these aquifers, water
tables declined sharply. This in turn put in jeopardy the
livelihoods of millions of poor farmers dependent on groundwater
irrigation (Moench, 2007). In contrast, in areas of abundant
rainfall and rich alluvial aquifers with adequate recharge during
the monsoon season (e.g. West Bengal, Mukherji, 2007a, 2007b);the flat tariff system did not induce over-exploitation of ground-
water.
Low flat tariff and the resulting electricity subsidy has also
been criticised from an equity perspective. It is often alleged that
much of the agricultural electricity subsidy goes to the rural rich
because they own a major proportion of the water extraction
mechanisms (WEMs) fitted with electric pumps (Howes and
Murgai, 2003; World Bank, 2002). However, this particular
critique of flat tariff is not very well founded as it disregards the
existence of informal groundwater markets. Under a scenario of
active groundwater markets, it is not the landholding size of the
pump owners that matters, what matters more is the total
command area of the tubewell including the area of the water
buyers as we shall see later in the paper. Recent work has shown
that informal groundwater markets are indeed an all encompass-
ing feature in Indian agriculture and as much as 20 million ha land
may be irrigated through these markets (Mukherji, 2008a). In
most cases these markets also had beneficial impacts on water
buyers (Shah, 1993; Palmer-Jones, 2001).
Nevertheless, in view of several criticisms of the flat tariff
system, there is a growing pressure from the electricity utilities
and the international donor agencies such as the World Bank and
the Asian Development Bank (ADB) to revert to metering of
agricultural electricity supply. This is also articulated in the
Electricity Act of 2003 which states that:
No licensee shall supply electricity, after the expiry of two
years from the appointed date, except through installation
of a correct meter in accordance with the regulations to be
made in this behalf by the Authority (Electricity Act, 2003,
Article 55 (1)).
The World Bank and the ADB have also made increase in tariff
coupled with universal metering a pre-condition for financing
power sector reforms in any state. However, several states such as
Haryana (Dubash and Rajan, 2001) and Gujarat (Shah and Verma,
2008) have resisted any attempt to meter agricultural power even
at the cost of foregoing loans from the World Bank and the ADB
respectively. The reason these governments are unwilling to
accept metering in the agricultural sector is the tremendous
pressure from their rural vote-bank. Some of the courageous Chief
Ministers (e.g. Chandrababu Naidu of Andhra Pradesh) who
bought the metering argument had to pay dearly by losingpolitical power and others were wise enough not to even consider
the option. Electricity reforms in India are first and foremost a
political issue (Dubash, 2007).
Thus, while the donor agencies and the Government of India
(GOI) are pushing hard for metering, there are very few takers for
universal metering. The state of West Bengal is an exception in
this regard. As per a memorandum of understanding signed
between the GOI and Government of West Bengal (GoWB) in
2000, the state government has agreed to universal metering of
consumers (http://powermin.nic.in). In the agricultural sector,
metering has been completed in 70% of the cases, and consumers
in few districts such as North 24 Parganas, Nadia and Murshida-
bad have started receiving bills according to meter readings. It is
envisaged that by March 2009, the goal of universal metering will
be achieved (WBSEDCL, personal communication with an official
of West Bengal State Electricity Distribution Company Ltd.).
West Bengal also differs from some other major Indian states
in terms of both groundwater and electricity use (Table 1).
While states like Punjab and Haryana have over-exploited their
groundwater resources, in West Bengal, the level of development
of groundwater is only 42% of the net available resources (CGWB,
2006). West Bengal also has the lowest number of electric pump
sets (only 8.5%) as against 93.5% in Andhra Pradesh and 73.3% inPunjab (GOI, 2003). While electricity is priced at very low rates or
is virtually free in many states, West Bengal has the highest flat
tariff rate in India. Also, unlike other states where the flat tariff has
remained unchanged for a long time, in West Bengal, flat tariff
was progressively increased from Rs. 1100/year in 1994 to
Rs. 8800/year and Rs. 10,800/year in 2007 for submersible
and centrifugal pumps. As a result, fiscal deficits resulting
from agricultural electricity subsidy are almost non-existent
in West Bengal (Briscoe, 2005). West Bengal also has a prolific
groundwater market. That groundwater markets are well
developed in West Bengal means that benefits of electric
tubewells are shared by pump owners and their water buyers.
The two most important arguments against flat tariff, that it
leads to over-exploitation of groundwater resources and fiscal
deficits for the state electricity utility do not hold true in West
Bengal. Metering is often espoused on the grounds that it will help
improve the quality of power supply for agriculture. However,
with an average daily supply of 1620 h, West Bengals farmers
receive relatively good quality electricity. This is also reflected
by low incidences of motor burn-outs and associated costs
(Mukherji, 2007b). The fourth argument that flat tariff leads to
inequity because a lions share of the subsidy goes to the large
land owner also is not true in the context of West Bengal. This
is because of the existence of a prolific groundwater market in
the state which means that the net electricity subsidy enjoyed
by a pump owner does not depend on the size of their own
landholding, but rather on the total area they can irrigate,
including their water buyers land.2
From the above discussion, it would seem that none of the
conditions for which metering of farm electricity is prescribed by
the World Bank or others are relevant in West Bengal. Yet, it is the
state of West Bengal, which has embarked upon the course of
universal metering. The purpose of this paper is to understand the
impact of metering on pump owners and water buyers.
2. Research questions and methodology
Metering of agricultural electricity supply has been recom-
mended on the grounds of efficiency (both financial and
technical), equity and sustainability of the electricity utilities
and groundwater use. On the other hand, it has been discouraged
on grounds of high transaction costs and its possible negativeimpact on groundwater markets. In this paper, we will therefore
try to answer the following research questions:
1. How is the GoWB proposing to minimise the transaction costs
of metering?
2. Who would gain and who would lose under the new metered
tariff regimes?
3. What would be the probable impact of metering on the
functioning of groundwater markets?
2 So, it is perfectly possible that a farmer with 0.5 acres of land can service up
to 15 acres of land under his tubewell, while a comparatively large landowner with
5 acres of land in the absence of any water buyers would service only his own land
and both would have to pay the same tariff.
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4. What would be the probable impact on groundwater extrac-
tion and use?
To answer these questions, a number of methods were adopted.
To understand the current dynamics of metering, the officials of
the now unbundled West Bengal State Electricity Board (WBSEB)
were interviewed. To understand farmers perception regarding
metering, a primary questionnaire survey was administered to
155 respondents in five districts of West Bengal. This is one of the
two surveys undertaken as part of the Groundwater Governancein Asia project and will be referred henceforth as 1st GGA 2008
survey. For understanding the losers and gainers under metering,
data from two additional surveys were used. The first is 2004
survey data collected by the first author of this paper and will be
referred to as Mukherji 2004 survey. This dataset contains
observations from 137 electric pump owning respondents spread
across six districts of the state. The second data set is a qualitative
survey carried out in 2008 in 17 villages spread across three
districts of West Bengal. This will be referred to as the 2nd GGA
2008 survey. The specific purpose of this survey was to see how
water prices and other terms and conditions of exchange in
groundwater markets have changed in response to metering.
Some of the villages were common between 1st and 2nd GGA
2008 surveys and between Mukherji 2004 survey and 2nd GGA2008 survey. Table 2 gives the details of all three datasets.
Together, these three sets of data contain observations from seven
districts in West Bengal and these districts account for more than
75% of the electrical pump sets in the state.
3. Metering in West Bengal: the high-tech way
According to the WBSEB, there were 112,216 agricultural
consumers of electricity in 2006. This was only 1.9% of the total
consumers in the state. Together they accounted for 6.1% of power
consumption and contributed 2.8% of the total electricity revenue.
In order to meter these relatively small numbers of rural
consumers, the GoWB adopted a high-tech way.
The WBSEDCL introduced high-tech GSM cellular modules
based meters in the rural areas. These meters can be remotely
read from a distance of 100 ft or more, and meter readings are
transferred to the regional and central commercial offices in real
time. The re-designed meters are tamper resistant and any
attempt to bypass or tamper with them is reported instantly to
the central distribution office (see Fig. 1).3
Power theft and tampering with meters have been also
declared a serious offence under the Indian Electricity (West
Bengal Amendment) Act 2001 whereby offenders can beimprisoned for up to 5 years or fined up to an amount of Rs.
50,000 in addition to several other punitive actions. The law was
put to effect in July 2002 and from then until July 2003, 2000 raids
and 73 arrests had been made (EEFI, 2002). This shows that in
addition to putting technological solutions to prevent power theft,
the GoWB has also created an enabling legal environment for its
implementation.
Remotely sensed meters solve many of the traditional
problems with metering, viz. tampering, under-reporting and
under-billing by the meter readers in collusion with the villagers,
arbitrary power of the meter readers and the physical abuse that
the meter readers were subject to at times at the hands of the
irate villagers. Meters are now remotely read and reading is
transmitted directly to the commercial office. The meter readerneither knows, nor can tamper with the meter reading. As an
additional safe guard, these tamper proof meters have been
installed on electric poles at a height of 10 to 15 feet and are
covered with a protective iron casing.
In addition, these meters are also time of the day (TOD) meters,
implying that it records consumption of electricity at different
rates based on the time of the day. TOD is a demand side
management (DSM) tool, whereby a certain section of consumers
are discouraged to utilize energy during peak hours when there is
huge demand from other sectors. Like other tariffs, TOD tariffs are
Table 1
Comparison of groundwater and electricity scenario in West Bengal and other states.
Indicators (year) West Bengal Punjab Haryana Gujarat Tamil Nadu Andhra
Pradesh
Source
Level of development of
groundwater (%) in 2004
42 145 109 76 85 45 CGWB (2006)
Number of over-exploited
blocks (%) in 2004
0 (0) 103 (74.6) 55 (50.9) 31 (16.8) 142 (37.0) 219 (19.8) CGWB (2006)
Normal average annual rainfallin mm
2074 780 615 1243 995 5611113 CGWB (2006)
Nature of aquifer Alluvial Alluvial Alluvial Alluvial and
hard rock
Hard rock Hard rock CGWB (2006)
Percentage of electric tubewells
to total tubewells (2001)
8.2 73.3 63.1 54.5 82.5 93.5 GOI (2003)
Agricultural electricity
consumption (MkWh) in
20002001
1360 8200 5171 14507 9066 11,222 Mukherjee
(2008)
Percentage share of agriculture
to total electricity
consumption (20012002)
6.1 35.5 47.2 45.9 28.0 40.5 Planning
Commission
(2002)
Flat tariff (Rs./HP/year) (2007) 17602160 Free 420 850 Free Free Authors
Electricity subsidy as percentage
of fiscal deficit (20002001)
0.8 38 78 56 42 54 Briscoe (2005)
Percentage of households
reporting hiring irrigation
services from others(19971998)
67.2 19.3 38.5 N.A 24.6 33.8 NSSO (1999)
Source: as mentioned in the last column of the table, N.A not available.
3 For this initiative, the WBSEDCL received the PCQuest Best IT Implementa-
tion Award in 2007 in the category of most innovative project (http://www.
cybermedia.co.in/press/pressrelease50.html ).
A. Mukherji et al. / Energy Policy 37 (2009) 553055395532
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also determined by the State Electricity Regulatory Commissions
(SERC) for the respective states and implemented through the
SEBs. The GoWB decided to implement the TOD system. For this
purpose, the meters have been devised with three sectors beingactivated rotationally in three distinctly different time slabs for
agricultural pump sets. These time slots are from 0600 to 1700h
(normal N tariff at Rs. 1.37/kWh); 1700 to 2300 h (peak P tariff at
Rs. 4.75/kWh) and 2300 to 0600 h (off-peak O at Rs. 0.75/kWh).
The cost of the meters is to be recovered from the consumers in
eight equal instalments anytime within a period of 24 months
from the date of installation.
As of now, WBSEDCL has outsourced meter reading to the
manufacturers of TOD meters on a contract basis for an initial two
years. About 300 members from 100 self help groups (SHGs) with
members mostly from backward castes are now being trained by
the WBSEDCL for meter reading, billing, petty repairs, collection of
revenues, mobilization of prospective consumers, etc. (Vidyut
Baarta, 2007). While the details of such a program are not yet
clear, if properly incentivised, this might work similar to the way
village electricians work in rural China (Shah et al., 2004).
4. Who gains and who loses?
In this section, we will look at two sets of data (Mukherji 2004
survey and 2nd GGA 2008 survey) to delineate the losers and
gainers among pump owners and water buyers under the new
metering system. We have defined losers and gainers in a rather
narrow sense. A pump owner is defined to lose out under the new
meter tariff system if s/he has to pay a higher electricity bill for
the same number of hours of operation than s/he was paying
under flat tariff. A water buyer is defined to be a loser, if s/he has
to pay higher water charges for using the same amount of water or
receives a poorer quality of service or adverse terms of contract,
while the electricity utility is deemed to be a loser if the amount
of revenue generated from the same number of agricultural
Table 2
Details of data used.
Mukherji 2004 survey 1st GGA 2008 survey 2nd GGA 2008 survey
Nature of data Quantitative Quantitative Qualitative
Time of survey AugustDecember 2004 JanuaryFebuary 2008 MarchApril 2008
Number of districts
covered
6 5 3
Number of villages
covered
22 15 17
Number of respondents 137 155 143
Number of electric pump
owners
137 108 71
Number of submersible
pumps
65 86
Number of centrifugal
pumps
72 22
Number of pump owners
who do not sell water
7 8
Number of water sellers 130 101 71
Number of water buyers 0 47 72
Name of the districts
covered
Birbhum, Bardhaman, Hugli, Murshidabad, Nadia, N.
24 Parganas
Bankura, Bardhaman, Hugli, Nadia, N. 24 Parganas Murshidabad, Nadia, N. 24
Parganas
Data used for Understanding the losers and gainers under metered
tariff system among the electric pump owners
Understanding perception of pump owners, water
sellers and water buyers regarding metering
Understanding the losers and
gainers among water buyers
Fig. 1. A schematic diagram of a generic IT Power Distribution System that is being used in West Bengal (adapted from Tongia, 2004).
A. Mukherji et al. / Energy Policy 37 (2009) 55305539 5533
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consumers under metered tariff is lower than the revenue
collected previously under the flat tariff regime.
There could be other ways of defining losers and gainers. For
example, a pump owner could be deemed to be a winner if his/her
crop yields increased due to better water management after
shifting to metered tariff even if s/he had to pay a higher
electricity bill. Similarly, if s/he was able to irrigate a larger
amount of land with the same amount of water, s/he could be
deemed to have benefitted under metering. If quality of electricitysupply improved drastically as a result of metering and this in
turn led to savings on part of the pump owner, s/he could be
deemed to be a winner. The same holds true for the water buyers.
For the electricity utilities, if the .... (T&D) losses and theft declined
as a result of metering, they could be deemed to have benefitted
from metering. While a broader definition of winners and losers is
desirable, data constraints prevent us from adopting such
definitions here.4 Some reflections on other definitions and likely
adaptation of farmers are given later.
4.1. The pump owners
Mukherji 2004 survey contains data for hours of operation for137 tubewells. Hours of operation in a year was calculated by
multiplying the hours of operation in a day with number of days
in a particular season of the year when the pumps were reported
to be operational. This was also triangulated with the cropping
pattern and water use data. All these tubewells were subject
to flat tariff which was Rs. 8800/year and Rs. 10,800/year in 2006
2007 respectively.
As has been already mentioned, the GoWB has introduced a
TOD system for metered tariff with three different tariff rates
(Section 3). On an average, a 5 HP pump consumes 3.73 unit of
electricity per hour of operation (at 0.746kWh/HP). Given the
different tariff rates, the average electricity bill works out to Rs.
5.54/h. To this, meter rent at Rs. 22/month per connection has
been added. Based on the number of hours of operation of a pumpin a day and the type of crop grown5 and assuming that the pump
owners would operate their pumps for the same number of hours
under metered tariff as they did under flat tariff, metered bills for
our sample tubewells were calculated.
Under the current meter tariff rates, it was found that out of 65
submersible pump owners, 41 (or 63.1%) would pay a lower
electricity bill under metered tariffs than they were paying under
the flat tariff. This means that according to our definition, 63.1% of
submersible owners in our sample will be gainers under the new
metered tariff, while 36.9% of the respondents would lose out. In
case of centrifugal pump owners, the figures would be 73.6%
winners as against 26.4% losers. Fig. 2a and b show the gainers
and losers for submersible and centrifugal pumps respectively.
Since differential tariff rates are applicable for different times
of the day, it is not possible to arrive at a single break-even point
where total electricity bill under metered tariff will be equal to the
flat tariff. However, our data shows that anyone operating their
submersible pumps for more than 2700 h in a year will certainly
have to pay a higher electricity bill under a metered tariff regime.
This will be 2200 h in a year for centrifugal pumps.
Under the existing tariff rates, the average metered tariff works
out to Rs. 1.48/unit. However, cost of power supply for the WBSEBwas Rs. 3.77/unit in 20012002 (Planning Commission, 2002). It is
to be expected that the West Bengal State Electricity Regulatory
Commission (WBSERC) will keep revising its tariff rates upwards
and would try to bridge the gap between cost of production and
supply of electricity. Quite predictably, as the tariff rate goes up,
the number of losers according to our definition will increase
while the cut-off hour point beyond which operation of tubewells
will prove to be more costly will decline. Since the GoWB has
introduced a TOD system, it is assumed that this system will
continue in years to come. Table 3 shows how tariff rates may be
increased in the future in order to meet the cost of generation,
while Table 4 shows how the percentage of gainers would decline
as tariff rates go up.
4.2. Water buyers
Water buyers would lose out under the new metered tariff
regimes if: (i) price at which they buy water goes up; (ii) if water
sellers show unwillingness to sell water; and (iii) if other terms
and conditions of water sales become unattractive for the buyers.
The 2nd GGA 2008 survey was specifically aimed at capturing
village level changes in terms and conditions of water selling after
metering of agricultural tubewells.
It was found that in all the villages without any exception,
water rates for all crops have increased after the introduction of
the metered tariff. In West Bengal, usually three modes of
payment are found, these are (i) crop and season wise cash
contract (Rs./bigha/crop); contracts for aman and boro paddy areof this kind; (ii) hourly rate (Rs./h) is common for all other crops
and (iii) one time crop and area specific contracts (Rs./bigha/
irrigation) usually found in case of crops with low water
requirement such as mustard, wheat and sesame. Table 5 shows
the increase in water rates for different types of crops after the
introduction of metered tariff.
Table 5 shows that water rates for all crops have gone up by
30% to over 50% in just a year in response to metering. This
increase in water price is not in anticipation of a higher electricity
bill as we have shown that under the current tariff rates, 63% of
submersible owners and 76% of the centrifugal pump owners
would have to pay a lower electricity bill than before. In some
villages, the pump owners also acknowledged that they had
received a lower electricity bill under metered tariff than they did
under flat tariff. According to the water buyer, the reason for
increasing water charges was the changed incentive structure for
the pump owners. Unlike high flat tariff, under metered tariff,
they are no longer under a compulsion to sell and as a
consequence the bargaining power of the water buyer has
declined. A water buyer in a village in Murshidabad district
captured this issue of changed incentive structure when he said:
Till last year, my water seller would come to my house before
the boro season just to make sure that I would buy water from
him for the season. I usually paid at the end of the season. This
year, he increased the water charges from Rs. 800/bigha to Rs.
1200/bigha. I objected. He told me that I can buy water from
him if I want to; otherwise I can go somewhere else because
now that he has a meter, he will not bother much about selling
4 Installation of meters had started in 20062007 and it was only in
20072008 that the pump owners in the districts of Nadia, N. 24 Parganas and
some blocks of Murshidabad district started receiving bills based on metered
consumption. Since we do not yet have data to measure changes in farmers crop
yields and incomes in response to metering, we have adopted a narrower
definition than what would have been ideal.5 Heres an example of the way metered tariff was calculated. Assuming that a
pump owner operated his tubewell for 24h during the boro season, his per day
electricity consumption was Rs. 132.97 (Rs. 19.58 at Rs. 0.75/unit for 7 h, plus Rs.
56.51 at Rs. 1.37/unit for 11 h plus Rs. 106.87 at Rs. 4.75/unit for 6 h). If however, he
operated his pump only for 18h in a day and grew paddy, it was assumed he did
not operate the pump during the peak time from 5 pm to 11 pm and his electricity
bill was calculated based on normal and off-peak tariff. If, however, he operated his
pump for say, 15h in a day and grew potato instead of boro paddy, it was assumed
that he used all 11 h of the normal tariff, plus 2h of off-peak tariff (from 4 am to 6
am when the day starts breaking) and 2 h of peak time (from 5 pm to 7 pm when
there is daylight).
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water. He also asked for an advance of Rs. 300 saying he now
needs to pay his electricity bill every month. (English
translation of an of an interview in Bangla with a water buyer
in a village in Murshidabad on 4th April 2008, 2nd GGA 2008
survey)
Based on our discussions with the water sellers and buyers, we
also found that in all villages, the water sellers were less pro-
active in selling water under a metered tariff than they were
before. In 10 out of the 17 surveyed villages we found evidence
that the water sellers were more interested in leasing land than
selling water to their erstwhile water buyers. A part of the reason
is certainly the buoyant paddy prices since 2006, but the main
reason is the shift to metered tariff whereby the previous
compulsion for selling water just to recover the electricity bill
has been removed. Our interviews with the water buyers also
0.0
5000.0
10000.0
15000.0
20000.0
25000.0
1
Number of submersible tubewells
Electricitybill(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
Number of shallow tubewells
Electricitybill(Rs/year)
Predicted electricity bill under metered tariff
Electricity bill under flat tariff in 2006-07
4 7 10 13 16 19 22 25 28 31 34 37 40 43 46 49 52 55 58 61 64
4 7 10 13 16 19 22 25 28 31 34 37 40 43 46 49 52 55 58 61 64 67 70
Fig. 2. (a) Predicted electricity bill under current metered tariff rates versus electricity bill under flat tariff for submersible pump owners in West Bengal ( N 65), source:
Mukherji 2004 survey. (b) Predicted electricity bill under current metered tariff rates versus electricity bill under flat tariff for centrifugal pump owners in West Bengal
(N 72), source: Mukherji 2004 survey.
Table 3
Some changes that may be made to the TOD tariff in the future.
Time of the day Existing tariff rates (Rs./unit) Enhanced tariff plan A Enhanced tariff plan B Enhanced tariff plan C Enhanced tariff plan D
11 pm6 am 0.75 1.0 1.5 2.0 2.5
6 am5 pm 1.37 2.0 2.5 3.0 3.5
5 pm11 pm 4.75 5.0 5.5 6.0 6.5
Average 1.49 2.46 2.95 3.46 3.95
Table 4
Change in number of gainers and losers and the cut-off point beyond which pumping will become costlier under alternative metered tariff rates.
Tariff rates Submersible pump owners (N 65) Centrifugal pump owners (N 72)
Percentage
gainers
Percentage
losers
Maximum cut-off point in hours Percentage
gainers
Percentage
losers
Maximum cut-off point in hours
Existing (at 1.49/
unit)
63.1 36.9 2700 73.6 26.4 2200
Plan A (at 2.46/unit) 29.2 70.8 1900 50.0 50.0 1800
Plan B (at 2.95/unit) 18.5 81.5 1530 34.7 65.3 1345
Plan C (at 3.46/unit) 7.7 92.3 1250 23.6 76.4 1075
Plan D (3.95/unit) 4.6 95.4 1030 19.4 80.6 930
Source: authors calculations based on Mukherji 2004 survey, for details on different tariff plans see Table 3.
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revealed that in many villages, the water sellers were asking for
advance paymentsa concept unheard of just a year ago.
4.3. Groundwater markets
There were 6.1 million farming households in West Bengal, of
which only 1.1 million households owned water extraction
mechanisms, while another 3.1 million households reported
hiring irrigation services from their neighbours (NSSO, 1999).
There is evidence to show that recent expansion in groundwater
markets has been a direct result of the steep rise in flat rate tariffs.
Earlier when the flat tariff was low (in the early 1990s), pump
owners were more interested in leasing land from the prospective
water buyers than selling water to them (Webster, 1999).
However, work by Mukherji (2007a, b, 2008b) show that in
recent years, high flat tariffs gave a positive incentive to the pump
owners to sell water and in the process recover their electricity
bill and also earn additional profits.
What would happen to the size and intensity of groundwater
market transactions as result of metering of electricity supply?
Earlier, Shah (1993) had found that with switchover from metered
tariffs to flat tariffs in Gujarat in 1986, water rates were lowered
and groundwater markets expanded. In West Bengal, whether
water markets would expand, shrink or remain unchanged is an
empirical question that can only be answered definitively once
metered tariffs are introduced in all places in the state and
pumping and water selling behaviour of the pump owners are
studied and compared with their behaviour under the earlier flat
tariff system. At this point, in the absence of such data, we can
only hypothesize on the impact of metering on the size of the
water markets.
Given that the incentive to sell water to others as was present
under the flat tariff system is missing under the metered tariff
system, those pump owners who were not overly motivated by
profits, yet were under compulsion to sell water just to recover the
electricity bill, would possibly exit from the market. Under this
scenario, water markets would shrink in size. From our 2nd GGA
2008 survey, we found that in four out of 17 villages, area under
boro paddy had declined in 20072008 in response to hike inwater rates for boro paddy. This is in spite of the fact that paddy
prices were at their historical high during this year. In these
villages, the depth of water market transactions would have
certainly gone down. Similarly, we also found that in 10 out of 17
villages, pump owners had shown greater interest in leasing land
from their erstwhile water buyers instead of selling water to them.
In these villages too, both breadth and depth of water markets are
likely to have gone down.
On the other hand, pump owners who were motivated by the
profit they made from selling water, would continue to do so and
get a higher profit margin due to lower cost of pumping and high
water rates under metered tariff as we saw in the previous
section. If pump owners are driven pre-dominantly by the profit
motive, water markets might even expand in the long run or at
least remain constant. Based on the rather simple assumption that
pump owners would try to recover the entire electricity bill
(including for their own consumption) from the water buyers,
three hypothetical cases out of several possible cases are shown
(Table 6). In the first case, the pump owner reduces the hours of
water sold to others, in the second, he sells the same number of
hours as before and in the third, he expands his hours of water
selling. On an average, under the metered tariff, cost of pumping
for an hour is roughly Rs. 6/h, while the price at which water is
being sold works out to Rs. 18/h (1st GGA 2008 survey). Note that
the profit motive does not come into play; here the intention of
the pump owners is only to break-even by recovering the
electricity bill from their customers. These calculations would
obviously change once profit motive is taken into consideration or
if it is hypothesized that a pump owners pumping behaviour
would change in response to meter (see next section).
4.4. Groundwater use
One of the most important assumptions behind marginal cost
pricing of water or electricity is that it would reflect the scarcity
value of water and therefore increase water use efficiency.
Evidence on this however is at best sketchy. The World Bank
(2002) study simulated various scenarios and concluded that with
metering and subsequent improvement in quality of electricity
supply, the current tendency of the farmers to over-use ground-
water would reduce. Venot and Molle (2008) in their study in
Jordan, did not find any evidence of declining groundwater use in
response to marginal cost pricing of water. Kishore and Verma
(2004) did not find any difference in pumping behaviour of
farmers subjected to meter tariff and flat tariff in Gujarat. Thus,
whether or not metering of pumps in West Bengal would lead to
reduction in pumping or increase in water use efficiency is an
empirical question and can be answered only when we have
comparative data in the future. However, data from our 2nd GGA
2008 survey found that there has been no change in gross
irrigated area in any of the villages, though in four villages out of
17, area under water intensive summer boro paddy has declined inresponse. In these villages, it is likely that groundwater extraction
would have reduced, but not so in other villages. However, we did
find evidence that pump owners are trying to minimise seepage
losses by using rubber pipes (in 10 out of 17 villages, rubber pipes
were used for the first time after metering), maintaining their
unlined channels better and in some isolated cases, also by
constructing underground channels. Water use efficiency there-
fore might go up, but whether or not it will lead to conservation of
groundwater is a tricky question. There is also no evidence to
show that quality of electricity supply, which was relatively
satisfactory in the past, has improved in response to metering.
Improvement in quality of electricity supply is often projected to
be the most important positive outcome of metering (World Bank,
2002).
Table 5
Change in water rates after metering.
Crop Unit Water rates under flat rate tariff i n 20 0620 07 Water rates under metered tariff in 20 0720 08 % i ncrease
Min Max Av. Min Max Av.
Aman paddy Rs./bigha 350 800 500 500 1000 660 32.0
Boro paddy Rs./bigha 600 1200 850 800 1500 1100 29.4
Any crop Rs./h 15 40 25.8 25 50 37.0 43.4
Wheat, mustard, sesame Rs./irrigation/bigha 50 200 97.6 100 300 150.0 53.7
Source: 2nd GGA 2008 survey.
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4.5. Electricity utilities
The MoU signed between the GoWB and GOI in 2001 states
that the reform measures are being undertaken with the
objective of achieving break-even in the SEB by March, 2003
and getting positive returns thereafter (http://powermin.nic.in).
According to a statement made to the West Bengal Assembly in
2006, reform measures have led to a turn around in the financial
performance of the SEB from a loss of Rs. 520 crores in 20012002
to a commercial profit of Rs. 81 crore in 20052006 (http://
siteresources.worldbank.org). Note that from 2001 to 2006, the
flat tariff for agriculture increased from Rs. 3350 to 8950/year for
centrifugal pumps and from Rs. 5031 to 10,930/year for sub-
mersible pumps. This increase contributed in part to higher
revenues for the SEB.
According the WBSEB, there were 112,216 electrified tubewells
in the state. Roughly, 20% of these were submersible pumps and
the rest were centrifugal pumps (personal communication with
an official of WBSEDCL). Based on the current TOD rates and the
fact that a submersible tubewell on an average operates for 2160 h
in a year and centrifugal tubewell for 1670 h in a year (Mukherji,
2007a),6 it was calculated that on an average, the WBSEB would
be losing Rs. 1530/year and Rs. 1572/year per submersible and
centrifugal pump respectively. This will translate to a loss in
revenue of Rs. 175 million/year from agricultural pump sets. If
however, the WBSEB progressively increases its tariff as proposed
in Table 5, it will earn additional revenues from the agricultural
sector. Table 7 shows the revenue inflows from agriculture under
current tariff and under several scenarios of future tariff hike.
However, this calculation does not take into account the fact that
in response to metering pumping behaviour of the pump owners
might change, they can either increase or decrease pumping.
5. Conclusion and policy implications
While universal metering is often thought to be a panacea of
all ills in the electricity and groundwater sector, high transaction
costs often impede such an initiative. The initiative of GoWB in
this regard is quite innovative and worth emulating elsewhere. In
terms of design of the program, the GoWB has adopted a hi-tech
approach aimed at reducing the transaction costs of metering.
The introduction of GSM based electronic and remotely read
meters with tamper proof properties takes care of many of the
conventional shortcomings of metering in rural area.
Metering is often advocated on the grounds that it would be
beneficial to farmers and to the state electricity utilities. Our
study found that metering has indeed been beneficial to the pump
owners. Under current tariff rates and assuming unchanged usagepatterns, the majority of the pump owners in West Bengal would
have lower electricity bills than under the flat tariff regime. At the
same time, they have been able to increase the rates at which they
sell water to others by 3050%. Electric pump owners number just
above 100,000 and hence constitute less than 2% of the
agricultural households in the state. They also happen to be
larger and wealthier farmers (Mukherji, 2007a).
Water buyers have lost out under the new metered tariff
system in several ways. First, they now have to pay a higher price
for buying water. Second, their bargaining power vis-a-vis the
water sellers has declined considerably and as a result they are
now being forced to buy water at disadvantageous terms and
conditions. This has happened because the pump owners no
longer need to sell water to cover high and fixed electricity costs.
Table 6
Impact of metering on the size of groundwater markets.
Cases Hours of operation of a
submersible pump under flat
rate tariff
Electricity bill under current
metered tariff of Rs. 6/h
Number of hours of water to be sold to
recover the meter bill at Rs. 18/h
Expansion, contraction or no change in hours
of water sold after metering
For
self
use
For selling
to others
Total
Case
1
800 700 1500 9000 500 Contraction by 200 h
Case
2
1200 600 1800 10800 600 No change in hours sold
Case
3
1500 600 2100 12,600 700 Expansion by 100 h
Table 7
Loss or gain in revenue from the agricultural sector under metered tariff as compared to flat tariff under present tariff rates and future tariff rates.
Tariff rates Loss () or gain (+) in Rs. per submersible
tubewell/year
Loss () or gain (+) in Rs. per centrifugal
tubewell/year
Overall loss () or gain (+) in revenue for
the WBSEB in million Rs./yeara
Existing (at 1.49/unit) 1530 1572 175.4
Plan A (at 2.46/unit) +1710 +932 +122.1
Plan B (at 2.95/unit) +5739 +4047 +492.1
Plan C (at 3.46/unit) +9767 +7161 +862.1
Plan D (3.95/unit) +13,795 +10,276 +1232.1
Source: Mukherji 2004 survey for average hours of operation of tubewell data. Also see Table 3 for details of each of the tariff plans.
a This assumes that there are 112,216 electric tubewells in the state of which 20% are fitted with submersible pumps and 80% with centrifugal pumps.
6 While calculating the electricity bill under the current TOD rates, it was
assumed out of every 100h of operation, 57h are during the night time off-peak
rates of Rs. 0.75/unit, 40 h are during the normal daytime tariff of Rs. 1.37/unit and
3 h are during the evening peak tariff of Rs. 4.75/unit. This is based on detailed
analysis of around 20 electricity bills under meter tariff from April 2007 to March
2008.
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This unwillingness of the pump owners to sell water is manifested
in their eagerness to lease land from the erstwhile water buyers. If
this occurs, it will make the current water buyers increasingly
dependent on the market for procuring food grains for self-
consumption or push them out of farming. Water buyers
constitute 50% of the rural farming households (NSSO, 1999) and
often belong to the poor and marginal sections of the society.
Under the existing electricity tariffs, even the state electricity
utilities are likely to lose out in terms of revenues. This thereforeputs in to question the claim that metering by itself can improve
the incomes of the SEB. Another justification for metering, that is,
it will lead to better energy auditing can be effectively taken care
of through metering at the transformer level without metering
individual agricultural consumers and this could have been done
at a lower cost. That the largest section of the rural community,
namely, the water buyers has been negatively affected by
metering also calls into question the assertion that metering will
improve the lives of Indias farmers (World Bank, 2002).
Marginal cost pricing through metering might lead to
improved water use efficiency and this will be a positive outcome.
However, whether or not it will lead to water savings is a
debatable issue. More debatable is whether or not conservation of
groundwater should be the prime policy objective in a state that is
flush with groundwater and steeped with poverty and where
groundwater may be used for poverty alleviation (Kahnert and
Levine, 1993). Metering and therefore proper auditing and
accounting of energy supply is also thought to ultimately improve
the quality of electricity. However, as mentioned earlier, farmers
in West Bengal receive relatively high quality electricity supply
and during our survey, we did not find any evidence that quality
has further improved after metering.
Given that the GoWB has already invested millions of rupees in
metering and that the lending agencies also insist on it as does
Indias national policies, it is unlikely that metering will be
revoked. Under such a scenario, what are the policy options that
might soften the blow to the poorer water buyers?
The GoWB needs to take steps to accelerate the pace of
electrification of tubewells in the state. This will enhance
competition in the water markets and in response, water prices
might decline. On the positive side, metering of electricity would
encourage many small farmers to invest in tubewells who earlier
might have been reluctant to invest fearing that they would not be
able to recover the high flat tariff through selling water. Under
metering, they would have to pay for only as much as they
consume. However, as per the current government policies,
getting a new electricity connection for a tubewell is a cumber-
some process involving permission from the State Water Inves-
tigation Directorate (SWID) (Mukherji, 2006). Besides, with
phasing out of all capital subsidies since the late 1990s,
construction of electric tubewells has become a costly affair
requiring anything from Rs. 50,000 to 150,000 per tubewell. The
GoWB should relax the stringent SWID regulations and alsoprovide capital subsidy to the small and marginal farmers for
construction of tubewells. This will reduce their dependence on
water markets for accessing irrigation.
The panchayats (local governments) can play an important role
in regulating water prices in the market. Earlier, the very incentive
structure inherent in the high flat tariff induced competition in
the market and monopoly tendency among the water sellers was
kept under check (Mukherji, 2007a). However, under metered
tariff and changed incentive structure, pump owners would try to
increase their profit margins by increasing the water price as we
saw earlier. In view of this, the panchayats can act as regulators by
setting the maximum price at which a pump owner can sell water
in the village. In some villages in West Bengal, panchayats already
play a regulatory role (see Mukherji, 2007c) but this needs to be
carefully replicated at a larger scale keeping in mind issues of
corruption and local elite capture.
This paper is the first of its kind that examines the impact of
metering on agricultural groundwater users. In doing so, it
contributes in two important ways. First, it questions the
orthodoxy that universal metering is impossible in India because
of high transaction costs involved (Shah et al., 2007). This paper
shows that modern IT technologies offer new possibilities for
overcoming old problems and the GoWB has indeed adopted suchtechnology to great success. Second, it also questions another
orthodoxy that now prevails among the donor agencies and
researchers, viz. that metering will improve the lives of Indias
farmers (World Bank, 2002; Ruet, 2005). This paper shows that it
need not necessarily be so in a region where farm sizes are
extremely small, groundwater resources are abundant and
competitive groundwater markets which benefit the small and
marginal farmers have developed in response to high flat rate
tariffs. All these conditions prevail in West Bengal and it is here
that metering, by changing the dynamics of the competitive
groundwater markets has benefited electric pump owners at the
cost of majority of water buyers. However, this paper in no way
generalises its finding by claiming that metering will have similar
negative impacts elsewhere. Indeed, in regions of large land
holding, over-exploited groundwater resources, absent ground-
water markets, free or low flat tariff regimes (e.g. Punjab,
Haryana), metering might as well be the best policy option. The
findings of this study thus are context specific and in itself is an
indicator of how generic policy prescriptions such as universal
metering are not always likely to produce desirable outcomes
unless they are put into the right context.
Acknowledgement
The authors are grateful to the Challenge Program on Water
and Food (www.waterandfood.org) for funding the Groundwater
Governance in Asia Project (www.waterforfood.org/gga/ ). This
paper is an output from the project.
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