Refundable Power Subsidy for Agriculture in Andhra Pradesh, India
The Government of Andhra Pradesh launched the Free Agricultural Power Scheme in 2020 to provide nine hours of free power daily to 17.55 lakh agricultural metered connections across the state. The subsidy is credited directly into farmers’ bank accounts and paid to DISCOMs through standing instructions to support a reliable power supply for farmers. Building on this initiative, researchers from J-PAL South Asia are partnering with the Department of Energy to pilot a Refundable Power Subsidy Scheme designed to encourage farmers to conserve electricity and groundwater while maintaining access to subsidized power.
Under the proposed model, each farmer receives a fixed monthly power entitlement in kilowatt-hours based on historical consumption. Power use below this entitlement is rewarded with a rebate of INR 3 to INR 7 per unit saved, while consumption up to nine hours each day remains free under existing policy. The refundable component introduces a financial incentive for conservation, reduces distribution losses, and may help lower the government’s subsidy expenditure. The model also strengthens the rationale for investments in smart metering infrastructure.
The scheme is being piloted through a randomized evaluation across the districts of Srikakulam, Eluru, and East Godavari in collaboration with the Andhra Pradesh Eastern Power Distribution Company Ltd. (APEPDCL). Farmers are randomly assigned to a program group and a comparison group to assess the scheme across different terrains and groundwater conditions. Administrative billing data and feeder energy injection data, supplemented by periodic farmer surveys, will be used to measure consumption patterns, awareness, and implementation challenges. The pilot, launched in June 2023, will run for at least 12 months, with J-PAL South Asia serving as the monitoring and evaluation partner. Findings will inform the Government of Andhra Pradesh’s decision on potential expansion of the scheme across the state.