India usually talks about its groundwater crisis in terms of water shortages: uneven rainfall, falling water levels and climate change. Electricity is discussed separately, mainly in terms of farm subsidies, tariffs and the finances of power distribution companies.
Significantly, the two are closely linked. For crores of farmers, electricity is the cost of getting groundwater. A pump uses electricity to bring water up for irrigation. But the electricity bill does not always increase when more water is pumped. In some states, farm electricity is free. In others, farmers pay a fixed or heavily subsidised rate.
This creates a basic problem: water becomes harder to find, but the cost of pumping it does not necessarily increase. When pumping costs very little, using more groundwater can make economic sense for an individual farmer.
1960s–early 1970s: Agricultural pump sets are mostly metered and charged by consumption; some states (e.g., Punjab) begin experimenting with flat-rate tariffs as early as 1968.
1970s–1980s: As tubewells multiply, many states shift to flat-rate tariffs.
Late 1980s–1990 (Tamil Nadu): Tamil Nadu moves to universal free electricity for all agricultural connections by 1990.
Mid–late 1990s (Punjab): Punjab introduces a free-power subsidy for small farmers around 1996–97, then quickly expands it to all agricultural tubewells regardless of landholding.
Early 2000s (Punjab): Punjab temporarily imposes charges on agricultural connections in the early 2000s, then restores free supply after political pressure.
2003 (Gujarat): Gujarat launches the Jyotigram Yojana, separating agricultural feeders and providing assured, rationed farm power (about 8 hours/day) while improving supply for other consumers.
2024 (groundwater): Annual groundwater extraction is 245.64 bcm, with agriculture accounting for 87% (213.29 bcm); overall extraction stage is 60.47%. Of 6,746 assessment units, 751 are over-exploited, 206 critical, and 711 semi-critical.
2024–25: States spend about ₹1.89 lakh crore on power subsidies across all sectors.
2025–26 (Punjab): Punjab budgets roughly ₹10,000 crore for agricultural power subsidy.
Looking only at national averages can be misleading. The 2024 Central Ground Water Board assessment estimated annual groundwater extraction at 60.47%. But groundwater is a local resource. A national average that looks comfortable can exist alongside serious local problems.
The 2025 assessment classified 751 assessment units as over-exploited, 206 as critical and 711 as semi-critical. Agriculture accounted for about 87% of annual groundwater extraction.
There has been some improvement nationally, but it should not obscure regional stress.
The latest 2025 assessment puts annual groundwater extraction at 247.22 BCM and the national stage of extraction at 60.63%. The number of over-exploited assessment units has fallen compared with earlier assessments, but Punjab, Rajasthan, Haryana, Delhi and Tamil Nadu continue to have particularly high concentrations of stressed units.
There is no single, annually updated national measure of total agricultural water consumption comparable to the electricity-consumption data.
The National Commission for Integrated Water Resources Development estimated that irrigation accounted for 83.3% of India's total water use in 1997-98. NITI Aayog continues to describe agriculture as the country's dominant water user.
Groundwater provides a more precise measure of one part of the problem. In 2024, agriculture alone accounted for 213.29 BCM of groundwater extraction.
Not in any robust official form.
Agricultural electricity use and groundwater extraction are not the same thing. Electricity used in farming also serves purposes other than pumping groundwater, while groundwater can be pumped using diesel pumps or other sources of energy.
Dividing the 2022-23 agricultural electricity consumption of about 243,250 GWh by the 2024 agricultural groundwater extraction of 213.29 BCM would produce roughly 1.14 kWh per cubic metre, but that would not be a valid national electricity-to-groundwater efficiency measure because the two figures refer to different years and electricity consumption is not exclusively attributable to groundwater pumping.
The better measure is therefore the relationship between electricity prices, pumping hours, pump efficiency, groundwater depth and crop water requirements.
There is no single date when India introduced an agricultural electricity subsidy.
The broader policy emerged during the Green Revolution. Agricultural electricity was initially metered, but from the 1970s states increasingly moved towards flat-rate and unmetered tariffs as electric tubewells proliferated and the cost of metering became difficult to recover.
The policy subsequently evolved into free electricity in several states.
The historical record is more complicated than a single “first state” claim.
Tamil Nadu introduced free electricity for small and marginal farmers in 1984 and extended free supply to all agricultural connections by 1990. Punjab introduced free agricultural electricity in 1997, initially for smaller farmers and then for all agricultural tubewells.
The important policy shift was therefore gradual: from metered tariffs, to flat rates, to highly subsidised electricity and finally, in several states, zero-price electricity.
There is no single, clean official national figure for agricultural electricity subsidies across all states.
The often-cited ₹1.89 lakh crore figure for 2024-25 represents states' total power subsidies across different consumer categories. It should not be presented as the subsidy given only to farmers.
The scale is clearer at the state level. Punjab, for instance, has budgeted ₹7,715 crore for agricultural power subsidy in 2026-27. Its total power subsidy allocation is ₹15,550 crore, including domestic and industrial consumers.
With metered electricity, farmers pay more when they pump more water. With free or fixed-rate electricity, the cost of pumping for another hour is very low or even zero.
This can encourage greater use of groundwater. Research by Reena Badiani-Magnusson and Katrina Jessoe found that lower electricity prices are linked to higher groundwater extraction. They estimated the price elasticity of groundwater extraction at about –0.18. This means that when the price of electricity falls, groundwater extraction tends to increase, although the effect varies from place to place.
The problem becomes bigger when electricity subsidies are combined with crop and procurement policies.
Paddy is often cited as a major reason for groundwater depletion in India. But farmers do not grow paddy simply because electricity is free. Paddy is attractive because farmers have assured procurement, established markets, machinery, access to inputs and relatively predictable returns. Cheap electricity makes paddy even more attractive by lowering the cost of irrigation.
A similar pattern can be seen with sugarcane. This shows how different government policies can work together. Electricity subsidies are only one part of the picture. Procurement policies, crop prices, credit and agricultural infrastructure also influence what farmers grow.
It is therefore misleading to say that farmers are simply choosing the “wrong” crop. Farmers generally respond to the returns offered by the existing policy system. But the cost of declining groundwater is borne by farmers and communities over time.
The Central Electricity Authority's 2023 review recorded free agricultural electricity in states and Union territories including Andhra Pradesh, Karnataka, Puducherry, Punjab, Tamil Nadu and Telangana. It also recorded fixed-rate agricultural electricity arrangements in states including Haryana, Maharashtra, Rajasthan and Uttar Pradesh.
The debate over agricultural electricity usually focuses on the financial side: subsidies paid by governments and losses borne by power distribution companies.
There is another, less visible cost: the environmental cost. The financial cost of using groundwater does not reflect the damage caused by its overuse. These environmental costs are often not included in the overall financial accounts.
The financial cost alone is substantial. India's states spent about ₹1.89 lakh crore on power subsidies in 2024-25, according to the Comptroller and Auditor General's review of state finances. The main uses were support for power distribution companies and cheaper electricity for farmers and households.
Rajasthan had the highest state-level energy subsidy spending, followed by Karnataka, Madhya Pradesh, Uttar Pradesh and Maharashtra. Separately, official Central Electricity Authority data put annual electricity consumption by agriculture at about 2,43,250 gigawatt-hours in 2022-23.
As water tables drop, farmers may have to deepen their borewells, use larger pumps and consume more electricity to lift the same amount of water. Well yields can fall, and equipment costs can rise. Communities also become more vulnerable to drought.
With groundwater levels falling, farmers increasingly need deeper wells and more powerful or submersible pumps to lift water. In Punjab, the combination of free electricity, declining water tables, expanding tubewell infrastructure and the shift towards submersible pumps have together increased the link between electricity use and groundwater extraction.
Punjab’s groundwater extraction has remained substantially above annual recharge in large parts of the state. The 2024 state assessment classified 19 districts as having over-exploited groundwater units, one as critical and none as semi-critical at the district level under that particular classification. The situation continues to deteriorate, as farm electricity is free in this state.
The state experimented with the Paani Bachao, Paisa Kamao scheme, which effectively offered farmers a financial incentive to save electricity rather than simply charging them for it.
The Standing Committee on Water Resources noted that subsidised electricity had contributed to over-extraction of groundwater and observed that restricting free electricity could reduce groundwater misuse. It also noted that states such as Punjab, Haryana, Telangana and Tamil Nadu provided completely free agricultural power. The Ministry of Jal Shakti's groundwater guidelines have similarly advised states to review policies that provide free or subsidised electricity to farmers.
The Centre's approach has increasingly shifted from simply reducing the subsidy to changing how agricultural energy is supplied. The major vehicle is PM-KUSUM (Pradhan Mantri Kisan Urja Suraksha evam Utthaan Mahabhiyan), which promotes solar pumps and solarisation of agricultural feeders.