The Political Economy of Agricultural Policy Reform in India

IMPLICATIONS OF REFORM IN ELECTRICITY SUPPLY 179

The reasons for political resistance to metering are less straightforward. Because metering was abolished more than a decade ago, farmers feel a sense of entitlement here, too. In addition, resistance to metering implies a far- reaching lack of trust: farmers assume that metering is only the first step to a price increase, especially if electricity is currently free. Unlike the electricity subsidy, metering does not involve a clash of core beliefs and central policy beliefs: it is a disagreement over causal beliefs (regarding the link between volumetric electricity pricing and water consumption) and factual beliefs (regarding the significance of the transaction costs involved in metering). The attribution of power theft to the absence of metering may in fact be a politi- cal reason not to introduce metering, especially if those who benefit have political influence. However, the introduction of metering on a sample basis in both states has already reduced the possibility of disguising power theft by attributing it to the agricultural sector.

The Shift to Targeted Subsidies. Proposals for targeting electricity subsidies to poor households, rather than abolishing them, play an important role in the policy debate.4 Obviously, the political resistance to this option will be lower than to abolition of subsidies. However, because it is the larger farm- ers who will experience income losses from a shift to targeting, this option also faces political challenges. With regard to belief systems, this option has the important advantage of representing a middle ground between groups associated with the market-oriented paradigm and those associated with the welfare-state-oriented paradigm. The latter object to targeting mainly on the grounds that effective targeting is not possible. If such objections can be overcome, the welfare-state-oriented paradigm would in fact argue against providing subsidies to all farmers, independent of their income level, espe- cially if the tax system—through which such subsidies are financed—is in- equitable. The feasibility of effective targeting clearly requires more research and experimentation.

The Privatization of the Power Sector. Under the market-oriented paradigm, the privatization of power generation and distribution is widely considered to be the first-best option for reforming the electricity sector. Because electric- ity is acknowledged to be subject to the natural monopoly problem, however, regulation is accepted as necessary. The political challenges regarding privati- zation of the power sector can be summarized as follows:

4 In 2009, the Indian government established the Unique Identification Authority of India, which has the mandate to develop a Unique Identification (UID) card with biometric features. These cards are expected to improve the administrative feasibility of targeted subsidies considerably.

Page 1 | Page 2 | Page 3 | Page 4 | Page 5 | Page 6 | Page 7 | Page 8 | Page 9 | Page 10 | Page 11 | Page 12 | Page 13 | Page 14 | Page 15 | Page 16 | Page 17 | Page 18 | Page 19 | Page 20 | Page 21 | Page 22 | Page 23 | Page 24 | Page 25 | Page 26 | Page 27 | Page 28 | Page 29 | Page 30 | Page 31 | Page 32 | Page 33 | Page 34 | Page 35 | Page 36 | Page 37 | Page 38 | Page 39 | Page 40 | Page 41 | Page 42 | Page 43 | Page 44 | Page 45 | Page 46 | Page 47 | Page 48 | Page 49 | Page 50 | Page 51 | Page 52 | Page 53 | Page 54 | Page 55 | Page 56 | Page 57 | Page 58 | Page 59 | Page 60 | Page 61 | Page 62 | Page 63 | Page 64 | Page 65 | Page 66 | Page 67 | Page 68 | Page 69 | Page 70 | Page 71 | Page 72 | Page 73 | Page 74 | Page 75 | Page 76 | Page 77 | Page 78 | Page 79 | Page 80 | Page 81 | Page 82 | Page 83 | Page 84 | Page 85 | Page 86 | Page 87 | Page 88 | Page 89 | Page 90 | Page 91 | Page 92 | Page 93 | Page 94 | Page 95 | Page 96 | Page 97 | Page 98 | Page 99 | Page 100 | Page 101 | Page 102 | Page 103 | Page 104 | Page 105 | Page 106 | Page 107 | Page 108 | Page 109 | Page 110 | Page 111 | Page 112 | Page 113 | Page 114 | Page 115 | Page 116 | Page 117 | Page 118 | Page 119 | Page 120 | Page 121 | Page 122 | Page 123 | Page 124 | Page 125 | Page 126 | Page 127 | Page 128 | Page 129 | Page 130 | Page 131 | Page 132 | Page 133 | Page 134 | Page 135 | Page 136 | Page 137 | Page 138 | Page 139 | Page 140 | Page 141 | Page 142 | Page 143 | Page 144 | Page 145 | Page 146 | Page 147 | Page 148 | Page 149 | Page 150 | Page 151 | Page 152 | Page 153 | Page 154 | Page 155 | Page 156 | Page 157 | Page 158 | Page 159 | Page 160 | Page 161 | Page 162 | Page 163 | Page 164 | Page 165 | Page 166 | Page 167 | Page 168 | Page 169 | Page 170 | Page 171 | Page 172 | Page 173 | Page 174 | Page 175 | Page 176 | Page 177 | Page 178 | Page 179 | Page 180 | Page 181 | Page 182 | Page 183 | Page 184 | Page 185 | Page 186 | Page 187 | Page 188 | Page 189 | Page 190 | Page 191 | Page 192 | Page 193 | Page 194 | Page 195 | Page 196 | Page 197 | Page 198 | Page 199 | Page 200 | Page 201 | Page 202 | Page 203 | Page 204 | Page 205 | Page 206 | Page 207 | Page 208 | Page 209 | Page 210 | Page 211 | Page 212 | Page 213 | Page 214 | Page 215 | Page 216 | Page 217 | Page 218 | Page 219 | Page 220 | Page 221 | Page 222 | Page 223 | Page 224 | Page 225 | Page 226 | Page 227 | Page 228 | Page 229 | Page 230 | Page 231 | Page 232 | Page 233 | Page 234 | Page 235 | Page 236 | Page 237 | Page 238 | Page 239 | Page 240 | Page 241 | Page 242 | Page 243 | Page 244 | Page 245 | Page 246 | Page 247 | Page 248 | Page 249 | Page 250 | Page 251 | Page 252 | Page 253 | Page 254 | Page 255 | Page 256 | Page 257 | Page 258 | Page 259 | Page 260 | Page 261