Free power, irrigation, and groundwater depletion: Impact of farm electricity policy of Punjab, India

Abstract

This paper examines the impact of a change in the policy regime from flat rate to free farm electricity pricing, introduced in Punjab, India in February 1997 using a difference-in-differences framework. Based on village-level data from the second and the third rounds of the Minor Irrigation Census, the study finds a differential increase in the number of electric-operated tubewells and horsepower load of pumps in Punjab as compared to an agriculturally-similar and neighboring state, Haryana, which is taken as the control group. Through these channels, the study finds that the average groundwater depth increased by 1.9 meters more in Punjab as compared to Haryana, which is 22 percent of the baseline average groundwater depth in Punjab. Nationally-representative well-level data on groundwater depths from the Central Ground Water Board shows impact heterogeneity with sharper effect on groundwater depth for wells that are lying closer to the cut-off of about 10 meters where a technological shift from centrifugal to submersible pumps is required to maintain access to groundwater pumping.