Transition from flat to metered electricity tariff in agriculture
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Transition from flat to metered electricity tariff in agriculture

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Transition from flat to metered electricity tariff in agriculture: Who gains and who loses? Evidence from West Bengal, India. ...

Transition from flat to metered electricity tariff in agriculture: Who gains and who loses? Evidence from West Bengal, India.
A. Mukherji, B. Das, N Majumdar, N. C. Nayak, R. R. Sethi, B.R. Sharma & P.S. Banerji
Presented at the International Conference on Water Resources Policy in South Asia, December 17-20, 2008, Colombo. International Water Management Institute (IWMI)

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Transition from flat to metered electricity tariff in agriculture Transition from flat to metered electricity tariff in agriculture Presentation Transcript

  • Transition from flat to metered electricity tariff in agriculture: Who gains and who loses? Evidence from West Bengal, India A. Mukherji, B. Das, N Majumdar, N. C. Nayak, R. R. Sethi, B.R. Sharma & P.S. Banerji Presented at the International Conference on Water Resources Policy in South Asia December 17-20, 2008, Colombo
  • The context of metering
    • Rapid increase in area under groundwater irrigation due to
      • High population density & small land holdings
      • Inadequacies in canal water supply
      • Demand for assured supply of irrigation
      • Flat and highly subsidized electricity
    • This led to
      • Proliferation of electric pumps in 1980s and 1990s
      • Emergence of competitive water markets
      • Benefited millions of small water buying farmers
    • But there are downsides of flat tariff system
      • Flat tariffs remained low and became political tools of appeasement
      • Low flat tariff lead to fiscal deficits for the State Electricity Boards (SEBs)
      • These deficits were over-estimated to hide inefficiency of the SEBs
      • It lead to groundwater overexploitation in hard rock aquifers with low rainfall
      • It benefited the large farmers disproportionately
    Contd…
    • ADB & World Bank agreed to finance restructuring of electricity sector provided
      • SEBs were unbundled (Orissa took the lead)
      • Independent State Electricity Regulatory Commission were formed
      • Proper energy auditing through 100% metering was undertaken
    • Electricity Act 2003 was enacted & all states were asked to meter agricultural supply
    • West Bengal and Uttarakhand are the only states to implement universal metering
    Contd…
  • Objectives of the study
    • How was GoWB* able to overcome traditional pitfalls (high transaction costs & corruption) of metering?
    • To assess the impact of change from flat to meter tariff system on the
      • Electric pump owners
      • Water buyers from electric pumps
      • Overall operation of groundwater markets
      • Electricity Utility
    * GoWB: Government of West Bengal
    • Review of literature
    • Structured/semi-structured interview with various groups of farmers, ABECA*, government officials etc.
    • Three data sets used, two large scale quantitative questionnaire surveys & one qualitative survey
    • Sample size of each survey varied between 137-143 respondents.
    Methodology & Data *ABECA: All Bengal Electricity Consumers’ Association
  • West Bengal: A state that bucks the trend in GW* and electricity * GW- groundwater Punjab, Haryana, Gujarat, Tamil Nadu West Bengal Over-exploitation of GW Under- development of GW (42% development) > 60-80% electric pumps < 20% electric pumps Free/very low flat rate Highest flat rate in India High fiscal deficits due to electricity subsidy Non-existent electricity subsidy
  • Electricity reforms in WB: The high-tech way
    • Introduction of Time of the Day (TOD) meters
    • TOD tariff rates for agriculture
      • ‘ Normal’ hours: 6am-5pm, @Rs. 1.37/unit
      • ‘ Peak’ hours: 5pm-11pm, @Rs. 4.75/unit
      • ‘ Off-peak’ hours:11pm-6am @Rs 0.75/unit
    • Average unit charge (estimated):
      • Rs 1.52/unit as against Rs 2.68/unit in flat system
      • Per hour metered tariff ~ Rs. 6.00
  • Electricity reforms in WB*: The high-tech way Contd… Tamper proof TOD meter (with optical load sensor) Meter Reading Instrument (MRI) for data capture and transfer to computer Engagement of SHG* Introduction of GSM and GIS technology for monitoring *WB: West Bengal *SHG: Self Help Group Photo Credit: Aditi Mukherji
  • Hi-Tech Metering Technology Source: Adapted from Tongia, R., 2004. What IT can and cannot do for the power sector and distribution in India: link to reforms, incentives and management , Working Paper #19, Program on Energy and Sustainable Development, Stanford University.
  • Defining gainers and losers
    • For pump owners
      • Loser if they have pay higher electricity bill for the same number of hours of usage as before, gainer otherwise
    • For water buyers
      • Loser if they have to pay higher price for buying same amount of water & face adverse terms and conditions
    • For electricity utility
      • Loser if they earn lesser revenue from same number of tubewells than before
  • Submersible pump owners Gainers 63% Centrifugal pumps owners Gainers 74% Gainers and losers among pump owners Source: Mukherji 2004 survey
  • Water buyers: Gainers or losers?
    • Losers
      • Water charges increased by 30-50% in response to metering
      • Unwillingness among PO* to sell water due to changed incentive structure
      • Adverse terms of exchange including demand for payments in advance
      • Buyers perceive that water sellers are now providing sub-optimal service
    *PO: Pump Owners
  • Hour: 1500, Energy cost: Rs 9000 Self irrigation Hour: 700 Energy cost: Rs 4200 Saving in electricity bill Rs 6600 Break even point Hour: 1927 Energy cost: Rs 10800 Selling irrigation Hour: 800 Earning: Rs 14400 Profit in flat tariff system Rs 3600/yr/TW Profit in meter tariff system Rs 5400/yr/tw ‘ no gain no loss’ 1050 hr ‘ no gain no loss’ 1300 hr 250 hr Annual flat tariff, Rs 10800 Rs 6/hr Rs 18/hr What happens to the size of GW markets? The Average Scenario: GWM will contract Source: Figure created by Mukherji A. based on data from Mukherji, A. et al. 2009. Metering of agricultural power supply in West Bengal, India: who gains and who loses? Energy Policy, 37(12):5530-5539. 4000 8000 12000 Annual cost of irrigation in Rs O 200 400 600 800 1000 1200 1400 16000 20000 1600 1800 2000 Annual hours of irrigation 22000
  • 4000 8000 12000 Annual cost of irrigation in Rs O 500 1000 1500 16000 20000 2000 Annual hours of irrigation 24000 28000 2500 Annual flat tariff, Rs 10800 Break even point Hour: 1927 Cost: 10800 Total irrigation Hour: 2400 Energy cost: Rs 14400 32000 Self irrigation Hour: 1500 Energy cost: Rs 9000 Selling irrigation Hour: 900 Earning: Rs 16200 Profit in flat tariff system Rs 5400 Profit in meter tariff system Rs 1800 2250 2100 An exceptional case: GWM expands Gainer and loser in meter tariff system Source: Figure created by Mukherji, A. based on data from Mukherji, A. et al. 2009. Metering of agricultural power supply in West Bengal, India: who gains and who loses? Energy Policy, 37(12):5530-5539.
  • Conclusions
      • Same hour of pumping – Less electricity bill
      • Same hour of selling water – Higher revenue
      • Higher bargaining power vis-à-vis water buyers
      • Win – win situation
    Pump owners: Largely winners Photo Credit: Aditi Mukherji
  • Conclusions Water buyers: Losers
    • Increase in water charges by 30-50%
    • Adverse terms & condition of buying water
    Photo Credit: Aditi Mukherji
    • Depends on motivation of water sellers
    • If pump owners only want to recover their electricity bills, then GWM* will contract
    • If they want to earn more profit, GWM may remain same or expand
    Conclusions Groundwater market: Indeterminate Photo Credit: Aditi Mukherji *GWM: Groundwater Market
    • Depends on motivation of water sellers
    • If pump owners only want to recover their electricity bills, then GWM will contract
    • If they want to earn more profit, GWM may remain same or expand
    Conclusions Groundwater market: Indeterminate
  • Conclusions Groundwater use efficiency: Winner
      • Increased adoption of plastic pipes for conveyance
      • Better maintenance of field channels
      • Construction of underground pipelines
      • But will it save water? And is it important?
    Photo Credit: Aditi Mukherji
  • Conclusions
    • Electricity board:
    • Loser (!)
    • Probable loss by Rs 145 million per year under existing meter rates
    Photo Credit: Aditi Mukherji
  • Policy implication
    • Rapid electrification of tubewells to encourage competitive GW markets
    • Relaxation on issuance of SWID* certificate for new TW* installation
    • Give capital cost subsidy for installation of tube wells – target small & marginal farmers
    • Panchayat (village council) intervention in regulating water prices
    *SWID: State Water Investigation Directorate *TW: Tube well
  • Thank You www.iwmi.org Related Publication: Mukherji, A. et al. 2009. Metering of agricultural power supply in West Bengal, India: who gains and who loses? Energy Policy, 37(12):5530-5539. Available online at www.elsevier.com/locate/enpol
  • Rapid increase in groundwater irrigation Source: Government of India data, 1950-2000
  •  
  • Source: Mukherji, A.
  • Comparison of flat tariff in different states, 2006-07 Source: Chart created by Mukherji,A based on data from Mukherji, A. et al. 2009. Metering of agricultural power supply in West Bengal, India: who gains and who loses? Energy Policy, 37(12):5530-5539.
  • Electricity subsidy as percentage of state fiscal deficits, 2000-01 BRISCOE, 2005
  • Increase in water price after metering Source: Graph created by Mukherji et al. based on data from 2 nd CGA 2008 survey.