IMPLICATIONS OF REFORM IN ELECTRICITY SUPPLY 163


used in both Andhra Pradesh and Punjab) or adjusting the supply better to specific crop needs (as proposed by Shah et al. 2003);


3. promoting less water-intensive crops using either restrictions (in Andhra Pradesh, the government stated it would withdraw free electricity for paddy cultivation in the rabi (winter) season but could not implement this policy) or incentives, such as the promotion of crop diversification (which involves in itself a range of contested policy issues, such as contract farming);


4. promoting water-saving practices in paddy cultivation, an option with a considerable potential for saving both water and energy but also posing substantial agronomic challenges and thus requiring agricultural research and extension; and


5. expanding and improving the efficiency of canal irrigation to reduce the need for groundwater irrigation. This option may involve contested policy issues, if potential environmental problems are associated with new large- scale irrigation projects.


As shown in Figure 11.1, another policy option for reducing fiscal stress for the utilities is reducing power theft. In addition, fiscal stress can be reduced by a range of policy options not linked to electricity subsidies. Sev- eral interviewees also emphasized the need to reduce tax evasion, an option that may have positive distributional implications. According to a task-force report submitted to the GoI, at the end of the 1990s tax evasion rates were very high (GoI 2002; Kumar 2002). If there is inequity in the tax system because better-off groups are better able to evade taxes, tax-financed sub- sidies could be targeted to avoid an income transfer from the poor to the better-off. Although interviewees associated with the welfare-state-oriented paradigm recognized the problem of tax evasion, none of them seemed con- cerned with it.


Improving the Quality of the Electricity Supply


To analyze the policy options regarding quality of supply, it is useful to dis- tinguish its economic, technical, and institutional dimensions. With respect to economics, improving the quality of the electricity supply requires considerable investment in the distribution system as well as measures that do not require additional investment, such as increasing efficiency in the maintenance of electricity lines and other equipment. Obvi- ously, measures that increase the revenues of the utilities, such as increased agricultural tariffs, provide incentives for investing in the quality of the electricity supply to agriculture. However, there is no guarantee that increased agricultural tariffs will in fact lead to such investment. As several inter-


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