Link between farm electricity supply management, farm investments, and farm incomes - evidence from India

Abstract

This paper examines the link between farm electricity supply management in the context of Gujarat's feeder segregation program, “Jyotigram Yojana” (JGY), investments in fixed and variable farm inputs, and net farm income per acre using panel data from the 2004-05 and 2011-12 India Human Development Survey. Estimating panel fixed effects regressions, we find that exposure to JGY is associated with substitution away from diesel pumps, an increase in tubewell ownership, and greater likelihood of irrigating with tubewells. Further, there a positive and statistically significant correlation between JGY exposure and per acre cost of purchased water for irrigation. Consequently, we find a negative correlation between JGY exposure and net farm income per acre. We conclude that in the short-to-medium term concomitant increase in irrigation costs can negate the gains from more reliable but rationed farm electricity. Simultaneous policy measures alongside feeder segregation are thus needed to ensure affordable irrigation and subsequently farmers' welfare.