At a time when the government is trying to build a consensus on the decontrol of diesel prices, subsidy towards the fuel will rise, thanks to deficient rainfall and the prospects of a drought in some parts of the country. The finance ministry is planning to provide a few hundred crores of rupees in diesel subsidy to the affected states as the demand for the fuel is expected to rise, with farmers using pump sets to irrigate fields.
This could be the highest ever grant towards additional diesel subsidy in drought and deficit rainfall-affected areas. The subsidy was first provided in 2009 after the country suffered its worst drought in more than 30 years, pulling down the overall food grain production by nearly seven per cent and pushing up food inflation to a whopping 16 per cent.
“Diesel subsidy will be provided to drought-hit states. The amount could run into hundreds of crores of rupees, depending on the extent of damage to crops,” said a finance ministry official on the condition of anonymity. The official added the exact quantum of the relief to be given would be decided after details of all the affected districts were received.
So far Punjab and Haryana have asked for the subsidy, where diesel and power demand has gone up sharply in the past few weeks. Mostly, paddy is cultivated there during the kharif season, which requires a lot of water. The two states together produce around 20 per cent of India’s annual rice output. Diesel consumption has also gone up in the two northern states because the groundwater level has dropped.
“There are three parties most affected by drought-like conditions — farmers, agriculture labourers and consumers. The government should give diesel and power subsidy to farmers and transfer a part of drought relief as direct compensation to farmers,” said eminent agriculture economist and chairman of the Commission for Agriculture Costs and Prices (CACP) Ashok Gulati.
In 2009, subsidy to the tune of Rs 22 crore was provided, against the provision of Rs 100 crore in the revised Budget estimates of 2009-10. Bihar had claimed the diesel subsidy then. Most other states did not claim it as the help arrived too late.
Diesel consumption grew 11 per cent or 667,000 tonnes in June 2012, much higher than the expected 150,000 tonnes.
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Overall, rainfall has been around 21 per cent below normal till July 27, with very little chance of a strong recovery in the coming months either. Rains in July have been around 16 per cent below normal.
Large tracts of farmland in Punjab, Haryana, western Uttar Pradesh, Gujarat, Maharashtra, Karnataka and Rajasthan are in severe need of water. In Punjab and Haryana, no area has been left unsown, as almost 90 per cent of the total arable land is irrigated. But poor rains have pushed up demand for diesel to run power-driven pump sets.
According to the latest data from the department of agriculture, the total acreage under kharif crops is around eight per cent less than the previous five years’ average.
“Though in general, the water table in the northwestern parts of the country, including Punjab, Haryana, Rajasthan and some areas of Gujarat, has been falling at a fast pace, the trend might have been accentuated in the past few months,” an official from the Central Groundwater Board said.
An empowered group of ministers on drought is scheduled to meet on Tuesday for the first time since 2009.