Rationalizing Energy Subsidies in Agriculture

The report analyzes the energy-irrigation nexus in Haryana, India, where heavily subsidized electricity has led to the over-extraction of groundwater and financial distress for distribution companies (DISCOMs). It quantifies subsidies for wheat, paddy, and sugarcane, finding that electricity subsidies account for approximately 46% of total subsidies. The study recommends spatial targeting of reforms, the adoption of energy-efficient and solar pumps, and a transition toward output-driven subsidy regimes to ensure long-term environmental and economic sustainability.

• Haryana has some of the lowest agricultural power tariffs in India, ranging from INR 0.08 to 0.10 per kilowatt hour in the 2014–2015 fiscal year, which incentivizes excessive groundwater extraction.
• Quantification of subsidies for the three principal crops in Haryana shows that electricity (groundwater irrigation) subsidies represent approximately 46% of total subsidies, fertilizer subsidies account for 41%, and surface water irrigation subsidies make up about 13%.
• Electricity subsidies have created a severe financial burden for distribution companies (DISCOMs), forming approximately 74% of their total revenue gap and 26% of their annual revenue requirement between FY 2010–11 and FY 2013–14.
• Groundwater depletion in Haryana is critical, with 62.5% of analyzed wells recording a fall in water levels and 66.67% of cases showing water depths between 5 and 20 meters below ground level as of August 2012.
• Sensitivity analysis indicates that wheat is the crop most vulnerable to subsidy reforms because it has the lowest profit margins among the three focus crops, whereas paddy farmers are least affected due to higher margins, likely from basmati exports.
• The report suggests that solar pumps are most viable in districts with water tables below 10 meters, such as Rohtak and Jhajjar, where many farmers currently use expensive diesel pumps.
• Replacing inefficient pumps with star-rated energy-efficient pumps could potentially save 35% of energy, with a projected payback period of approximately three years.
• Direct Cash Transfer (DCT) for fertilizers is proposed as a reform but faces significant challenges, including the identification of beneficiaries, the need for rural banking infrastructure, and the complexity of indexation based on volatile market prices.
• The study recommends a shift from an input-driven to an output-driven subsidy regime, where subsidies are integrated into the Minimum Support Price or State Advisory Price rather than subsidizing individual inputs like electricity and fertilizer.

APA

Sharma, S., Tripathi, S., & Moerenhout, T. (2015). Rationalizing Energy Subsidies in Agriculture. International Institute for Sustainable Development. https://www.iisd.org/system/files/publications/rationalizing-energy-subsidies-agriculture-in-haryana-india.pdf

Chicago

Sharma, Shruti, Sagun Tripathi, and Tom Moerenhout. Rationalizing Energy Subsidies in Agriculture. International Institute for Sustainable Development, 2015. https://www.iisd.org/system/files/publications/rationalizing-energy-subsidies-agriculture-in-haryana-india.pdf.

Wikipedia

{{cite report |last1=Sharma |first1=Shruti |last2=Tripathi |first2=Sagun |last3=Moerenhout |first3=Tom |title=Rationalizing Energy Subsidies in Agriculture |publisher=International Institute for Sustainable Development |date=September 2015 |url=https://www.iisd.org/system/files/publications/rationalizing-energy-subsidies-agriculture-in-haryana-india.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{sharma2015rationalizing, author = {Sharma, Shruti and Tripathi, Sagun and Moerenhout, Tom}, title = {{Rationalizing Energy Subsidies in Agriculture}}, institution = {International Institute for Sustainable Development}, year = {2015}, month = sep, url = {https://www.iisd.org/system/files/publications/rationalizing-energy-subsidies-agriculture-in-haryana-india.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }