India's groundwater extraction is heavily dependent on diesel pumps, and one reason is the lack of reliable power supply. The widespread use of diesel pumps is an economic problem due to the inefficiency and high cost of said pumps. Could rural electrification improve the situation? We estimate the relationship between village electrification and the counts of electric and diesel pumps in India, 1982–1999. We find that, in addition to increasing the number of electric pumps, rural electrification also greatly increases the number of diesel pumps. While initially surprising, these results make sense in an environment characterized by frequent power outages and constant quality problems. If rural electrification increases the number of electric pumps and promotes irrigated agriculture, the demand for diesel pumps also grows because many farmers need a reliable pump that does not depend on electricity. Without improvements in the supply of electricity through rational power sector reforms, India cannot stop the spread of diesel pumps through rural electrification. For energy and development economists, the results are novel because previous econometric work has largely focused on industrial uses of power.
Financed by the National Centre for Research and Development under grant No. SP/I/1/77065/10 by the strategic scientific research and experimental development program:
SYNAT - “Interdisciplinary System for Interactive Scientific and Scientific-Technical Information”.