Subsidies on drip irrigation are distributed through a partnership of India’s central and state governments. The Centrally Sponsored Scheme, released in 2005-06, provides 40% of drip costs, contingent on an additional 10% or more being offered by state governments. There is considerable variation in both the level of subsidy and the delivery of drip subsidies across states. Andhra Pradesh, the state in which this IE will be carried out, has recently increased is subsidy share to 50%, making for a total subsidy of 90%. The overall amount a farmer can receive is capped at levels that depend on land holdings. For the smallest total land holding category (< 10 acres), the cap is 100,000 Rs. per farmer, which allows for a 2 acre drip system, depending on the crop in question and other technical parameters. Farmers who have availed themselves of the subsidy in the past are ineligible to receive additional subsidies for a period of 10 years.
Government certified commercial suppliers can sell drip equipment to farmers at regulated prices and be eligible for the subsidy. In particular, the farmer applies for the subsidy at a local government agency, a process that is often facilitated by the supplier, and involves the submission of documents establishing land ownership and a legal electricity connection for the pump. Once the farmer pays his share (10%) and the application is approved, the drip supplier installs the equipment. Finally, once the government verifies the installation, the remaining 90% of the costs are transferred directly to the supplier.
The intervention was implemented as follows. We offered to pay the farmer’s share of the cost of the drip system (i.e., the 10%, limited to 10,000 Rs. per farmer) and to connect them with a drip company. Jain Irrigation Inc., one of the world’s largest suppliers of drip systems and the one with the largest market share in India, agreed to handle the subsidy application process and the installation of all drip systems and to provide close technical support to participating farmers.