III. CONTEXT

III. CONTEXT

FARMERS

Rajasthan’s agricultural output is among the highest in India, and its people rely on

agriculture for their livelihoods. In terms of total production, Rajasthan is first among Indian states in millet and mustard, second in groundnuts, third in pulses and soybeans, and fifth in wheat. 38 It also boasts India’s second-largest herd of livestock. In terms of income, agriculture comprised 25 percent of Rajasthan’s Gross State Domestic Product (GSDP) in FY 2019-20. No fewer than 5.4 million households—some 60 percent of the state’s population—are engaged in farming and depend on the sector for their livelihoods. Of these, approximately 50 percent are classified as ‘small’ or ‘marginal’ farmers, meaning they own less than two hectares of land.39 Rajasthan’s agricultural sector is thus a crucial check against poverty and food insecurity.

Rajasthan owes its agricultural success to decades of expanded groundwater irrigation

infrastructure (Figure 1). After India achieved its independence in 1942, GoI and Government of Rajasthan (GoR) promoted rapid construction of the state’s groundwater irrigation infrastructure through government programs.40 These efforts, combined with a lack of alternative irrigation sources in Rajasthan and the advent of the Green Revolution, increased massively the amount of groundwater drawn for agriculture. Today, agriculture soaks up 83 percent of Rajasthan’s water resources, and 73 percent of the state’s irrigated land depends on groundwater. Rajasthan’s farmers have capitalized on increased access to groundwater by expanding cropping area, growing irrigated dry season crops such as wheat and oilseeds, and growing high-value horticultural crops.41 In 2018, farmers planted 2.8 million hectares of wheat and 4.11 million hectares of oilseeds, 99.6 percent and 64 percent of which were irrigated, respectively.42 In arid western Rajasthan, area irrigated by wells increased from 136,000 hectares in 1951, to 651,000 hectares in 1981, to 1.56 million hectares in 2005. Groundwater became a major driver of changes in land use, as even rocky and gravelly wastelands were transformed into irrigated croplands.43

Gross Irrigated Area ('000 hectares)

15000

10000

5000

0

1957

1961 1965 1969 1973 1977 1981 1985 1989 1993 1997

2001 2005 2009

2013 30000

20000

10000

0 Foodgrain Production ('000 metric tons)

1957 1961 1965 1969 1973

1977 1981

1985 1989 1993 1997 2001 2005 2009 2013

Figure 1: Foodgrain Production in Rajasthan Increased groundwater-sourced irrigation has been a primary driver of increases in agricultural output in Rajasthan over the past six decades. 44 According to the Ministry of Agriculture, gross irrigated area increased from 1.7 million hectares in 1957 to 9.7 million hectares in 2014. In the same time frame, foodgrain production increased from 4.9 million to 20.8 million metric tons. 73 percent of irrigated land in Rajasthan uses groundwater.

In Rajasthan, farmers’ power supply is unreliable, limited, and provided at inconvenient hours

of the day, affecting their ability to irrigate as desired. GoR’s goal is for farmers to receive at least six hours of electricity every day, but erratic supply, load shedding, and blackouts mean they often receive less.45,46 Official figures may also underestimate the impact of outages on agricultural users by omitting unofficial blackouts: In 2017, unofficial load shedding was so severe that farmers served by the Jaipur Discom could not pump long enough to keep crops alive.47 Unpredictability of supply may cause challenges for farmers with electrified irrigation pumps who would like to control the timing and quantities of irrigation. Furthermore, the electricity that is supplied to farmers often comes during the nighttime, causing inconvenience to farmers who would prefer to irrigate in the daytime.

WATER

Upkeep to the legal regime has not kept pace with expansion of groundwater. Under Indian common law, landowners may draw as much water as they desire from beneath their land, even if they deplete the water resources of their neighbors by doing so. 48 This rule, called the rule of ‘absolute dominion,’ originates in English common law and entered the Indian legal system during the colonial era.49 While the Indian Constitution vests states with the power to legislate over this background rule, to date GoR has not exercised this power.

Though GoR has not addressed this fundamental legal barrier to sustainable groundwater management, policies have been passed to attempt to conserve water, most notably the 2010 State Water Policy. The policy ‘discourages’ “[t]he current ethos of uncontrolled groundwater extraction as an ‘individual right,’ favoring an “ethos of community responsibility for the long-term sustainability of the aquifer as a community resource,”50 but absent legal reform proper, this admonition is not binding on landowners. Indeed, the policy specifically states that the “extraction of groundwater will be… regulated through appropriate legal framework, ”51 language that seems intentionally vague.52 In the absence of overriding legislation, the ‘appropriate legal framework’ must be interpreted as the aforementioned common law rule of absolute dominion.

No legal mechanism exists in Rajasthan for communal management of common groundwater resources. Water User Associations have been formed successfully in some areas to manage surface water resources, but this model has had mixed results and has not been applied to groundwater. In 2016, GoR launched the Mukhya Mantri Jal Swavlamban Abhiyan program with the goal of resolving Rajasthan’s water scarcity problem. This program has included participatory water budgeting exercises in rural areas, 53 which could be an important step toward communal management of groundwater. However, the results of those exercises have not yet been widely implemented.54

Absent legal barriers, unchecked irrigation has led to overexploitation and severe depletion of Rajasthan’s groundwater resources. Farmers perceive groundwater as a private resource and have an incentive to draw as much as possible without regard for the effect on overall supply.55 Groundwater development, defined as the ratio of annual groundwater draft to recharge, increased

from 36 percent in 1984 to 137 percent in 2011 as Rajasthan’s population grew and farmers drew more water for irrigation.56 74 percent of Rajasthan’s water blocks57 are categorized as overexploited,58 which implies more water is being extracted than recharged, and the Ministry of Water Resources observes that Rajasthan’s water level has dropped between one and three meters annually. 59 Equally troubling, eight percent of Rajasthan’s wells have gone dry60 and the continued spread of technologies such as borewells and more powerful pumps threatens to make the problem even worse. 61

Figure 2: Status of Groundwater Blocks in Rajasthan 74 percent of Rajasthan’s groundwater blocks are classified as overexploited.62 The aquifer on which it sits is considered to be the most depleted major aquifer in the world.63

Electrified irrigation pumps and subsidized electricity have exacerbated the groundwater

crisis. As a result of significant subsidization, farmers in Rajasthan pay only ₹0.9/kWh to power their electric irrigation pumps.64 These low rates have almost certainly increased agricultural production and rural incomes in Rajasthan, as they have across much of India.65 However, most experts believe these subsidized tariffs have also led to over-extraction of groundwater in India’s western states.66 At their low, subsidized marginal cost of pumping water, farmers do not have incentive to conserve water, despite declining marginal benefits from successive rounds of irrigation. 67 Especially in the arid west of the state, with its relatively lower water table and more frequent droughts, the proliferation of electrified tubewells, which can extract water from greater depths, has enabled farmers to extract more water than was previously possible.68

The quantity and size of electric pumps in Rajasthan are both increasing, enabling farmers to draw even more groundwater. The number of electrified pumps in Rajasthan rose from seven lakh in 2003–04 to 11 lakh in 2012–13, an increase of 57 percent. Over the same period, electricity consumption from pumps grew 329 percent, from 4,274 GWh to 18,325 GWh. 69 Since the number

of hours of electricity supplied to farmers remained fairly constant over that period, these numbers indicate increases in both the number and size of pumps. With these pumps, farmers can draw more water from greater depths.

Rajasthan’s groundwater crisis is already hurting farmer livelihoods. In western Rajasthan, areas that previously transitioned from rainfed to groundwater-irrigated agriculture are now transitioning back to rainfed agriculture as their wells have dried up, with major economic and livelihood consequences. Aside from the obvious downsides of returning to a reliance on scant and unpredictable rainfall for livelihoods, this pattern also leads to increased erosion and soil depletion because traditional soil-conserving agricultural techniques were abandoned in the initial switch from rainfed to irrigated agriculture.70 Increased water scarcity limits types of crops farmers can grow, control over timing of irrigation, and control over quantity of water applied; in one survey in southern Rajasthan, 73 percent of farmers listed water scarcity as the main constraint to their agricultural productivity.71 Economic analysis of water scarcity in other parts of India suggests that the drying up of wells results in long-term declines in farmer incomes and wealth.72

Marginalized groups are disproportionately affected by increasing groundwater scarcity. As water tables fall, costs of extracting water increase because more expensive technology is required for extraction. Wealthier farmers are more likely to be able to afford increased well construction costs and are thus less impacted than poorer farmers. This increases monopoly power of wealthier pump owners in groundwater exchanges, which means water buyers might pay exorbitant prices or lose water access. 73 Groundwater is also a buffer against frequent droughts in Rajasthan, which can cause scarcity of food and drinking water for marginalized groups. During one drought in 2016, 13,500 villages did not have access to drinking water and relied on tankers supplied by the government. Water scarcity has also been linked to malnutrition and distress migration in rural Rajasthan.74

DISCOMS

Discoms are being squeezed by high cost of supply, distribution losses, and insufficient revenue recovery.

Figure 3 As shown in

Figure 3, both average revenue (ARR) without subsidies (shown in blue), and average cost of supply (ACS – the total height of the stacked bar) have increased over the past decade. Taken together, the ARR, the estimated subsidy (which includes the GoR tariff subsidy and revenue grants under UDAY – shown in green), and the remaining Discom revenue gap (shown in orange) total the ACS. The revenue gap has shrunk over the past few years since the most recent Discom bailout in 2015. Nevertheless, persistently high costs and revenue shortfalls prior to (and even after) subsidies remain high, creating an unsustainable pattern.

Figure 3: Rajasthan Distributed Sector Costs, Revenue Gap, and Losses The Rajasthan distribution sector average cost of supply and aggregate technical and commercial (AT&C) losses are shown for fiscal years 2009-10 through 2018-19. Average cost of supply is broken into regulated revenue, estimated subsidy, and remaining revenue gap.

While Discoms throughout India are mired in debt, electricity provision in Rajasthan is complicated by physical realities like an arid climate and relatively low population density. Low density makes for increased distributional losses and higher grid maintenance costs. In addition, the state’s lack of conventional, low-cost electricity resources such as coal and hydroelectric power has led to higher prices locked in through long-term power purchase agreements.75

Agricultural electricity burdens are higher in farming states like Rajasthan, where tariffs are low and government- and cross-subsidies are high. Low tariffs are cross-subsidized by higher tariff consumers, such as industrial or commercial users, and by government subsidies. Agricultural electricity revenue at the nominal tariff is 26 percent less than the estimated cost of supply, while the rate for nondomestic consumers is about +35 percent.76 Cross-subsidization incites high-tariff consumers to flee to lower cost options, like self-generation or power exchange markets, which also widens revenue gaps and requires higher cross-subsidization for remaining consumers.77 Measures that reduce the need

for cross-subsidization and direct subsidies improve the sector’s sustainability.

In Rajasthan, farmers consume over 40 percent of all electricity, and GoR subsidizes about 85 percent of the nominal tariff for metered agricultural consumers.78 GoR’s energy spending was 8.3 percent of its 2020-2021 budget and 12.2 percent of the previous year’s actual spending. For 2020-21, over 75 percent of GoR’s energy budget is reserved for power tariff subsidies.79

Revenue shortfalls lead to chronic debt to the public banking sector, and a cycle of bailouts have strained state finances without significantly improving Discom finances. The most recent bailout, approved in November 2015, was the Ujwal Discom Assurance Yojana (UDAY) scheme. 80 The state assumed 75 percent of its Discoms’ debt from 2015-2017, and utilities underwent efficiency improvements to lower aggregate technical and commercial losses and narrow the gap between ACS

and ARR.81 UDAY and large agricultural electricity subsidies have together caused Rajasthan to direct an average of 10 percent of its annual expenditure toward energy subsidies and grants. Discom debt restructuring under UDAY comprises 50-60 percent of the state’s total interest payments, significantly straining the fiscal health of GoR.82 In addition to assuming Discoms’ debt, Rajasthan has also provided grants to improve Discoms’ performance and finances, with funds allocated to increase the capacity of nearly 1,500 substations and support distribution and siting for distributed generation. 83 Most recently, in 2019-2020, GoR provided a ₹14,722 crore grant to Discoms to bolster their finances.84 These bailouts have been preceded by and paired with other distribution sector reforms, which are described in Appendix F.

POLITICAL ECONOMY

Rajasthan’s politicians advance the irrigation and water access interests of their bases, often

at the expense of other groups. 85 In Rajasthan, much like the rest of India, farmers are a focal point of electoral politics.86 Agricultural livelihoods are at the forefront—a small farmer in Rajasthan earns approximately ₹42,000 per year, while a large farmer earns a somewhat larger ₹55,000. 87 The shared pressures of low incomes and a large population base unite the farm sector on issues like loan waivers and electricity subsidies that affect all livelihoods equally. There is no such unity on issues of irrigation, however, which pit farmers requiring access to a scarce resource against one another. For those without access to water—historically disadvantaged groups, those in tribal areas, or those belonging to lower castes—it can be challenging to argue for and obtain greater access to water. For this rival resource, one’s group’s gain comes at another’s loss.

Irrigation issues have been and will remain a perennial subject of electioneering.88 Rajasthan has switched party control multiple times, such that neither the Bharatiya Janata Party (BJP) nor the Congress Party has the political capital to alienate farmers. As such, neither are likely to impose tariffs, reduce subsidies, or price water, as elected officials understand that access to water is a critical matter of lives and livelihoods in communities that have historically been denied access to irrigation

Rajasthan has had a long and fraught history with vote bank politics. Political leaders across states and elections have long proffered loan waivers and power subsidies to lock in the large farming vote bank. In one example, when contesting the Delhi elections in 2019 the Congress Party promised an electricity subsidy should it win. Similarly, in Rajasthan’s 2020 election, the incumbent chief minister announced a further 2300 crore electricity subsidy for farmers contingent on his reelection. Politicians do not always follow-through on election promises: as of June 2020, farmers in Rajasthan reported they still had not received electricity subsidies promised by the government in power in 2018.89 Access to, quality of, and subsidies for electricity have figured prominently in politicians’ electoral promises in recent years. Consequently, these issues have come to shape the electricity priorities of the states and central government alike.90