Karnataka govt finds power subsidy misuse of Rs 5,000 crore

Bengaluru: At least Rs 5,000 crore of taxpayers' money being used to subsidise irrigation pump (IP) sets is gobbled by rich farmers who don’t need the aid and those not even involved in agriculture, an internal analysis of the Karnataka government has found.

This sensational discovery makes a strong case for some tough decisions given that successive governments, irrespective of the party in power, have been wary of reviewing subsidies fearing backlash. 

IP sets get free electricity in Karnataka, thanks to the huge government subsidy, which has risen 121 per cent from Rs 10,118 crore in 2016 to Rs 22,387 crore in 2023. 

There are 34.17 lakh electricity connections for IP sets, up from 20 lakh in 2012. Approximately 1.2 lakh IP sets are added every year.


According to the government, subsidy for IP sets is primarily meant for small and marginal farmers who own less than five acres of land. There are 23.35 lakh electricity connections for IP sets belonging to such farmers. 

"...data indicates that wealthier farmers with larger holdings and multiple pump sets receive disproportionate benefits," the analysis said. 

Authorities have "alarmingly" found that 5.68 lakh beneficiaries linked to nine lakh IP sets are not listed in the farmers’ database — the Farmer Registration & Unified Beneficiary Information System (FRUITS). "This suggests that affluent farmers or non-agricultural users may be misusing the subsidy," the analysis said. 

Further, the analysis found that 6.55 lakh Aadhaar numbers linked to 10.97 lakh IP sets are missing from the KUTUMBA database, the comprehensive citizens registry. "This absence suggests potential misuse by affluent families or non-agricultural entities," it said. 

What's more? Around 6.9 lakh farmers with multiple IP sets — from two to five or more — are receiving the subsidy. 

Also, there are 2.7 lakh Above Poverty Line (APL) families with 4.32 lakh IP sets receiving the subsidy. 

All this data came out after the finance department got the energy department to link with Aadhaar all IP sets receiving free power. This was in line with a directive by the Karnataka Electricity Regulatory Commission (KERC). 

"The sharp rise in subsidy costs places a significant burden on Karnataka's finances, limiting the state's ability to fund other development initiatives," the analysis said.

The analysis also warned against over-extraction of groundwater due to unchecked electricity usage. "Farmers with multiple pumpsets further contribute to groundwater depletion," it said. 

Besides recommending a more comprehensive audit, the analysis asked the government to consider limiting subsidies to one or two IP sets per family. Stricter limits on subsidies for farmers with large landholdings or high income levels is another option. 

A tiered subsidy model has also been suggested: small farmers receive a higher subsidy while wealthier ones pay more towards electricity costs. 

Energy Minister K J George was unavailable for comments.