The Great Free Power Debate: Subsidise farming, not farmers, say experts
‘Plug trust gap, don’t pull the plug’: Started two decades ago, free power to Punjab farmers has since become a volatile issue linked to the politics of competitive populism. Here’s what experts say about it now, in light of report by farm panel.punjab Updated: Jun 09, 2018 10:14 IST
Rationalisation, not reduction, of subsidy for free power to farmers is the need of the hour, but trust deficit is an obstacle that policymakers have to surmount to bring farmers on board — this was the consensus among two leading experts, a farmers’ leader and two policymakers at a roundtable, The Great Free Power Debate, organised by Hindustan Times on Thursday.
The Rs 5,300-crore subsidy is under the spotlight after the Punjab State Farmers’ and Farm Workers’ Commission, in its draft policy, recommended withdrawal of free power to farmers who own more than four hectares of land or pay income tax. Though a politically sensitive issue, power subsidy, which has been ballooning since 1997 when the then chief minister Parkash Singh Badal made electricity free for all farmers, has taken its toll on the state exchequer.
Farmers’ commission chairman Ajay Vir Jakhar, additional chief secretary (development) Viswajeet Khanna, farm economist Sardara Singh Johl, Institute for Development and Communication director Pramod Kumar and Bharatiya Kisan Union (Rajewal) president Balbir Singh Rajewal dissected the problem threadbare in the 80-minute discussion moderated by Executive Editor Ramesh Vinayak.
HT (to Jakhar): What is the rationale behind your recommendation (for no free power to farmers who own more than 4 hectares or pay income tax) when there is a feeling that agriculture is no longer profitable?
Vision statement of the policy is to increase income of those dependent on agriculture on a sustainable basis while preserving ecological balance. This suggestion is not to rationalise power subsidy. That’s not the first objective. The most important objective is groundwater, as 110 of 149 blocks are in the dark zone. On average, we are drawing out 172% of water in comparison to recharge. There are blocks where withdrawal is 200%. In Sangrur, a suicide-prone area, it’s 185%. If we continue like this, we will have no water in 20-25 years. We don’t have a choice. Are we going to think about ourselves or are we going to think about future generations?
(To Johl) You have opposed free power to farmers. Has the time come for that?
It is not now that the time to withdraw power subsidy has come; it came 20-25 years ago. I will make two statements. First, no farm sector survives without power subsidy, whether it is US, Europe or Japan. Second, so long as we are hooked to production of rice (paddy) in Punjab, which is not a suitable place for it, diversification can’t come and water balance can’t be ensured. I’m happy the farmer commission finally has a person who deals with policy. Earlier, the chairman and others were experts, but they did not touch policy. We can differ, but the commission is going in the right direction.
As for water, farmers need subsidy. Subsidy on power can be converted into investment subsidy. If you want to give subsidy and save water, my answer is that you decide what subsidy you want to give and then divide it by the cultivated acreage. Put this money directly into the account of the farmer and make him pay based on a meter. Flat rate subsidy is more harmful than free electricity because there is still some consciousness. But once you pay, there are no holds barred in its usage. Also, when the farmer pays, his cost of production will be counted. MSP will go up and he has also got the subsidy. There will be double gain.
(To Rajewal): Has free power benefited farmers in any way in the last 21 years?
Farmers are a soft target. We are often accused of water wastage or overuse. Is there any study that tells us this? How much water is wasted in urban areas? What about the mandatory provision of water harvesting in new houses in urban localities? We have to start with a study on which sector uses how much water. To say that just because farmers use flood irrigation system they are responsible for overexploitation of underground water, is not the right thing.
As for power subsidy, income tax is only given by employees or those who have any other source of incomes. Agriculture is not viable. Free power should be continued. But I think the government has made up its mind on billing farmers for power. This is just the beginning. They will gradually impose other conditions. I do not support this.
(To Kumar) Is free power a productive subsidy? What is the alternative?
I’ll preface it with three things. One, in developing countries, subsidy issue has to be seen vis-a-vis agriculture, not vis-a-vis farmers. Second, the issue of environment does not confine to power subsidy. The issue here is that of sustainability
of agriculture sector and within that where power subsidy stands. Third, the credibility is at stake. The moment they take any initiative, there is a feeling that they are going to withdraw it. I agree with Prof Johal that agriculture should be subsidised. There should be consensus.
If one looks at data, agriculture is subsidised the world over — 48% in Japan, 26% in US, 32% in European Union, and 2% in India. People who consider power subsidy to farmers as fiscal mismanagement, I think, do not understand what agriculture stands for. To my mind, subsidy should be increased in Punjab and other parts of India. People say withdraw the Rs 6,000 crore rupees and spend it on education; I think it’s a misnomer.
(To Kumar) Has free power proved to be a good subsidy or bad subsidy?
Free power has to be rationalised, but it not be withdrawn. Agriculture has to be globally competitive. Dividing farmers into those who pay income tax or don’t is also an absolute misnomer. Public investment in agriculture needs to be increased. It has declined from 0.5% of GDP in 2004 at constant prices to 04% in 2011-12.
(To Khanna) How far can the state continue this kind of subsidy, given the precarious fiscal position?
The fiscal situation is well known. Subsidy going to PSPCL (Punjab State Power Corporation Limited) is delayed many times. It not only causes problems in the fiscal situation of the state, but also causes problems in running of power utilities. The core issue is the water problem. The impact of growing paddy has its own consequences. We are dealing with stubble burning that is causing serious health problems. This kind of Rs 6,000 crore-plus every year only for free power — there are other power subsidies other than agriculture — may not be sustainable any longer.
(To Jakhar) How hopeful are you that the draft policy will be accepted?
It is a tricky question. We have put this draft into public domain, something that has not been done anywhere in the world before. The farmers will create pressure. There are farmer unions who do not want subsidy taken away.
But majority of farmers fall into the category of less than four hectares — they are not being taxed here. We realise this is not the best option, but it is the only option. Nowhere are we saying that agriculture doesn’t need to be subsidised. We are only saying we have limited means.
The biggest point in policy is governance reforms. If you want facilities to be given, we need to generate funds from those who already have enough. Farm unions talk about government employees getting 20 times what an average farmer is earning. Why shouldn’t he be taxed? Average farmer income over 15 states is Rs 15,000 a year. In Punjab, it is nearly Rs 2.5 lakh. About 90% of all government employees must be earning Rs 5 lakh a year or more. They have to pay their share and look after their brethren who are poor. This is called food politics.
Khanna: Of our farmers, 60-66% are marginal and small. There are 13.5 lakh pumps supplying water; over 3 lakh applications pending. All marginal and small farmers don’t have pumpsets. Where do they getting water from? Government is supplying free power, but water pumped out using free power is being sold.
(To Johl): Do you think free power has been a hindrance in diversification?
Yes, when you pay farmers first and then ask them to pay the electricity bill, there is no burden on them. There is a limitation in this suggestion related to income tax payees. If a clerk has two acres of land, he will have to pay for power; but a big farmer who has 3,000 acres and grows potatoes does not pay the tax.
Jakhar: In draft policy, there are two conditions — one is that those who pay income tax and those who own more than four hectares of land!
Kumar: How much will it save?
Jakhar: It is not a matter of saving. That is not the correct word. We will generate around Rs 1,000 crore, which is about 120% of the agri budget of the state.
Johl: As for other sectors, they must be taxed. All efforts must be made to make people pay for water. People waste a lot. Rajewal is right. But this does not mean you do not rationalise farm subsidy. Water should be priced heavily in urban areas. If we are rationalising subsidy to save water in farming, we need harsher measures for urban sectors. As for diversification, free power has come in its way. In a shift from wheat-paddy, market uncertainty and risk increase. Rationalising subsidy will help diversification.
If we rationalise power subsidy, can we say it will help diversification?
Johl: Certainly will.
Rajewal: It pains me to hear that we are considered beggars and seen as if not contributing to the society. We pay market and purchase fees on our produce; GST on purchase of machinery. We are the largest chunk in society as consumers and pay taxes on what we buy. Why are we projected as a burden on the government?
Jakhar: I have not projected things like that. There is no disagreement on the fact that farmers are contributing.
Rajewal: Then don’t say we are a burden on taxpayers.
Is loan waiver a solution?
Rajewal: Punjab government filed an affidavit in the high court that they have waived off Rs 827 crore. The announcements were made for political benefit; we never demanded it. Now calculate the increase in power tariff, and compare it with the waiver!
Is there any chance of a broader political consensus on rationalising subsidy?
Kumar: We must accept that food security is linked to food sovereignty. Farmers are making major contribution towards food sovereignty. We can’t tell them to continue producing while we do not help them. Here comes the issue of subsidy. The agriculture sector should be subsidised and not individual farmers. Don’t give subsidy through power sector; it can be given by way of direct benefit transfer. The government had earlier introduced productivity bonus.
Why could that not work?
Kumar: Government then found it might not be successful as other parties will oppose it. Now, in the draft, why are we making an emotional appeal to farmers who are under stress that subsoil water will vanish if they continue to take subsidy? I suggest subsidy via some other route, then talk of saving environment.
What’s wrong in subsidy in other ways?
Rajewal: Credibility of those in government is in question. Farmer feels the government will withdraw all subsidies.
Is it possible that Akalis and Congress reach a consensus on the issue?
Johl: National and international and experts have suggested in the past but (Shiromani Akali Dal patron and former chief minister) Parkash Singh Badal said he would not stop free power. My feeling is that the future will not forgive (Congress leader and current CM) Capt Amarinder Singh and Badal for starting desertification of the state. Some policy had to be made; because underground water has gone so deep. If they are not willing to accept this, what can be done? There is a contradiction that the government wants to save water yet wants to give free power.
What is going to be the fate of this report (by the farmer commission)?
Khanna: It has been discussed at various levels, is now in public domain as a conscious decision by the government through the ’ commission. We hope it initiates discussion among stakeholders; then it will go to the cabinet and hopefully to the Vidhan Sabha ultimately.
Jakhar: The report has been work of the commission and not of the government. We will take suggestions from all farm bodies and make changes, if needed.
Will you be able to build a political consensus and convince the Akalis?
Jakhar: I have written to all the MLAs, deputy commissioners, secretaries, asking if there are suggestions.
Johl: We should waive off capital cost and make farmers pay the running cost. Farmers never wanted free power; they want quality power.
How true is this theory that farmers don’t want subsidy?
Rajewal: The scenario has changed now; we used to pay bills in the 1980s, but now farmers are in a bad shape.
Kumar: We have a consensus here that subsidy should be rationalised, and all political parties may also agree with the condition that the government now will not withdraw the money it is giving in subsidy. Second issue is of trust deficit; political leadership needs to establish its trust to give subsidy via other means.
How open are we to private investment, because CM says that’s the only hope?
Khanna: The effort towards on private investment always goes on in terms of creating infrastructure such as cold chains and logistics. It is essential when you are trying to diversify. Horticulture sector has grown over the years, and returns are higher than wheat-paddy but value addition is missing, as the food processing industry is not there. Government is creating food parks to invite investment. This is a comfortable situation for small and marginal farmers that the MSP is available, as long as it is — I don’t how long. We must foresee the future scenario. Infrastructure is a complex issue because there are other issues involved. We are a border state. At the same time, our neighbouring states are getting incentives; and investment to our state is frozen. We want that investment should support diversification.
Johl: You cannot expect private investment to come without public investment. As public investment shrinks, private investment shrinks too.
Khanna: Public investment is there in different forms of transportation, cargo houses and warehousing.
Johl: I have said the income problem of farm sector cannot be solved within the sector. Small and marginal farmers have to be turned into part-time farmers. Take jobs to doorsteps of the farmers.
(To Jakhar) Your draft blames bad governance for farmer suicides. Can you elaborate?
I think subsidy is an important topic that everyone wants to come to. Primarily my one-year experience with the government is that the major problem Punjab faces is quality of governance at all levels. The draft also focuses on that. I will give examples — 80% greenhouses have failed, zero conviction on seed violation, just 17 convictions in case of (spurious) pesticides; we don’t have 50% strength of agriculture department and extension officers; Sangrur has the maximum number of suicides, and we have 15% of sanctioned posts here. This is where the role of the farmers’ commission comes. I think electricity subsidy is one part of it; there are other issues to address.
Kumar: I find one contradiction in the draft — you rightly said that we want governance to be fixed; and then we are getting into fiscal issues. We should deal with governance issues and then say we don’t need power subsidy but subsidy in another form.
Jakhar: I agree that we need subsidy to agriculture sector, rather more that what we are already giving. Also, we need to engage people in vocations other than agriculture in villages itself.
People have credibility issues with the government. So, what if the farmers’ commission assures farmers that they will get direct benefit transfer?
Jakhar: There has to be political consensus; we may give options to the government when we submit a final report. I can’t guarantee anything on its behalf.
Johl: Agri economy is not separate from rural economy; deal with both together.
(To Johl) Knowing your experience, do you think suggestions on power subsidy will get past the political consideration?
Johl: The commission has tried to make a beginning; let’s see what happens,
Khanna: The government has started working on a pilot project, ‘Pani Bachao Paise Kamao’ (save water, make money) on 990 agriculture tubewells in Fatehgarh Sahib, Hoshiarpur and Jalandhar districts. We will affix meters on these tubewells and if farmers use less power than the total average we will pay the balance amount to their accounts.
Johl: Don’t link subsidy or help to horsepower; make it on basis of area cultivated. Any subsidy linked to power of the tubewell will not be successful.
Rajewal: You want to make farmers earn money fast, then check the sale of spurious milk which is selling 40-45% in the state and has affected the dairy industry severely. Only the government can stop it. Dairy sector has huge scope for employment.
(Text by Navneet Sharma & Gurpreet Singh Nibber).