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Government of India (GoI) initially aimed at providing the agriculture power (AP) subsidy through Direct Benefit Transfer (DBT) on the lines of highly successful scheme of DBT for cooking gas, through an amendment in the Electricity Act 2003 during the current Monsoon session of the Parliament. Due to operational difficulties in the scheme, protests by state governments and farmer bodies, the GoI has now decided to tone down the amendment and now the state governments shall transfer the AP subsidy in the respective accounts of tubewell motors maintained by the state power utilities. In most of the states including Punjab, AP consumption on each tubewell is not being metered due to opposition by farmer bodies. Thus the DBT may have to be credited by  the respective state Government to the state utility for each tubewell on per kW/BHP AP tariff rather than the overall AP consumption claimed by the state power utility and approved by the respective State Electricity Regulatory Commission. It will help in better audit and identifying the subsidy going into each tubewell account but falls much short of the original aim of regulating the underground water consumption by metering each tubewell. 

Free AP in Punjab

Free AP was introduced by Govt. of Punjab (GoP)  in 1996 and it covered AP connections up to 5BHP costing Rs. 809 crore to the state exchequer for a partial period of that year . It was extended to cover all AP connections during the year 1997-98 costing Rs.1189 crore which later increased to Rs.1659 crore during 2001-02. AP consumption and its cost came under  scientific regulatory audit of  Punjab State Electricity Regulatory Commission (PSERC) in 2002-03 and it reduced this cost to Rs.1013 crore through its first tariff order for that year. During the period 2002-20, while the AP subsidy bill rose by 5.98 times to Rs.6060 crore , the A.P. consumption has increased  by 1.98 times from 5,820 to 11,521 MU, as PSERC consistently reduced cross subsidization of the AP sector by other categories of consumers as per the mandate of the Electricity Act 2003. While the AP sector’s cross subsidization was plus 30% in 2002-03, it has been consistently brought down and is within 20% for the last few years. 

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During 2002-20, the agriculture sector has consumed 1,65,301 MU free power thereby availing AP subsidy of ₨.59,838 crore, equal to 97% of the combined book value of Punjab State Power Corporation Limited (PSPCL) and Punjab State Transmission Corporation Limited (PSTCL)  standing at ₨.61,755 crore. This AP subsidy was funded partly through Rs. 19,865 crore collected as Electricity Duty (ED) levied by the Government of Punjab on metered power consumed by all non-subsidized categories of consumers. The balance Rs. 39,973 crore of AP subsidy was funded through other resources of the state government thereby giving a serious blow to the development activities in the state. 


In Punjab, 5,575 segregated AP feeders (11kV) supply power to14.5 lac tube wells besides 285 non-segregated mixed-load 24 hrs supply feeders catering the Kandi (sub mountainous) area whose segregation is in pipe line. All of these feeders are being metered at their feeding substations end and feeder wise data of pumped energy is being sent by PSPCL to PSERC. This data is being   cross-verified from Automatic Meter Reading (AMR) data of about 1,500 operational meters available on real time basis out of 3,650AP feeders covered under AMR project and extrapolated by PSERC to audit the AP consumption claimed by PSPCL. 


As per Punjab Agriculture University, in addition to the rain water, per kg produce of paddy cultivation through method of puddle irrigation needs 2462 litre while wheat needs 700 litre of irrigation water. During 2002-20, Punjab has produced paddy (295 million tonne) and wheat (302 million tonne) using 940 trillion litre of irrigation water comprising 235 & 705 trillion litre of canal and underground water respectively. The AP supply  used to pump out underground water being free, is not counted for deciding the minimum support price (MSP) of the grains since this amount, ‘is not spent by the farmer’, as per criterion of Commission for Agricultural Costs and Prices (CACP).Since 85% grain produced by Punjab is sent to other  states through central pool, during 2002-20, Punjab has gifted about 800 trillion litre irrigation water and AP subsidy worth Rs. 50,860 crore to the central pool without getting a penny for its compensation along with 507 million tonne of paddy and wheat. Thus, free AP is neither benefitting the state nor its farmers and is, in fact, their enemy and responsible for the present water and financial crisis threatening the economic survival of the state and the farmers.


The severe shortage of migrant labour due to onslaught of COVID-19 and consistent efforts by the agriculture scientists and administrators, the farmers switched over to Direct Seeding of Rice  (DSR) technique to cover 7 lac hectare out of overall paddy area which was reduced to 21 lac hectare due to shifting of 6 lac hectare area to basmati rice, cotton and maize thereby saving 7 trillion litre of water in comparison to that used during paddy season of 2018.

By giving high incentives for paddy being grown with DSR method, introduction of MSP for basmati and  crop diversification, saving of 33% of irrigation water can be attained. This will reduce the annual underground irrigation water extraction from 36 to 24 trillion litre which be equal to annual water recharge in Punjab and thus stablising the water table at current level. The AP subsidy will reduce from Rs.6060 to 4040 crore thereby relieving the Government of this burden partially. Industrial processing for all the crops  grown in Punjab should be ensured within the state to industrialise it.

Although AP feeders in Punjab are metered yet it does not meet the mandate of Electricity Act 2003 for metering each consumer including.  In 2013, PSERC gave a zero cost solution of outsourced AMR-cum-LT capacitor model to meter each AP consumer which needs to be implemented in the interest of state and meet the mandate of the Act. Free AP should be replaced by direct subsidy in farmer’s account based on the bill he pays for 100% of AP consumed as metered. This will make AP charges to be reflected in MSP and thus get recovered from the consumers of the food grains. These can be pooled back to state account through higher market fees.

Over a period of  next seven years, 12 lac (out of 14.5 lac ) electrically driven inefficient pumps (efficiency33%) be got replaced by energy efficient pumps (efficiency 56%) through Bureau of Energy Efficiency (BEE) by creating Rs. 150 crore Agricultural Demand Side Management Revolving Fund (ADRF) under regulatory oversight thereby attracting Rs.750 crore private investment annually. The total investment of Rs. 6,000 crore in this project shall be recovered in nearly three years through annual AP consumption saving of 35,00MU worth Rs. 1,950 crore.

A royalty @13% on food grains sent for central pool by Punjab should be levied on the pattern of royalty being paid by Punjab on coal used for thermal power generation in the state. This shall generate annual revenue of over Rs. 4,500 crore.

These measures will reduce the peak demand of power during paddy season & cross-subsidization of AP, render present power system capacity sufficient for long and take Punjab out of its present water and financial crisis. All political parties and Kisan unions need to support these steps keeping the economy of Punjab above politics.

About the author:
Virinder Singh

Virinder Singh The writer, Virinder Singh, graduated in Electrical Engineering from Thapar University, Patiala in 1970. He possesses working experience in power sector of five decades and during his career he worked as Chief Electrical Inspector Punjab, Engineer-in-Chief Punjab State Electricity Board, Member Commissioner Punjab State Electricity Regulatory Commission and Lokpal Electricity for the state of Punjab. His areas of interest are power sector reforms, system improvement, electricity laws, regulatory affairs and consumer disputes.

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