Why Syria Should Not Restore Cheap Energy for Agriculture

Over the past year and a half, Damascus has dismantled two of the most expensive subsidies inherited from the old order. Diesel and gasoline prices were fully liberalized by mid-2025, ending a subsidy that had kept fuel prices in Syria well below market rates. Electricity followed in October, when a single heavily subsidized tariff was replaced by tiered pricing that moved larger consumers closer to the cost of generation. Both were economically significant, and politically unpopular.

Farmers have borne the costs of both reforms. Increased power costs add to the already rising production costs for Syrian farmers, as raw input costs increase and the Syrian pound loses value against the dollar. With production costs rising, the Syrian government's decision to set the 2026 purchase price for a ton of wheat at 46,000 new Syrian pounds — around $330 — sparked protests from farmers claiming that the purchase price means a loss of $70-$170 per ton. While President Ahmad al-Sharaa intervened to meet protesters' demands, issuing a decree to supplement the state purchase price with a bonus of 9,000 Syrian pounds, or roughly $70 per ton, some farmers are still calling for a further increase to $500 per ton to fully cover production costs.

Damascus—and the Ministry of Agriculture in particular—will now need to decide what further support farmers require. When they do, the government should distinguish between measures with predictable costs and subsidies whose expense rises with the consumption of electricity, diesel and water. Rather than restore broad input subsidies, Syria should favor procurement-price adjustments, fixed payments and targeted investment support that protect farm incomes without encouraging greater use of scarce resources.

That distinction is increasingly urgent because many of the proposals now being advanced would move in the opposite direction. Alongside demands for a higher wheat price, farmers and their advocates are pressing for subsidized agricultural inputs. The Syrian Future Movement, in a set of policy recommendations, called for "an immediate support package... by supplying production inputs… at subsidized prices, allocating sufficient quantities of diesel fuel for the agricultural season.” Syria’s Consumer Protection Association has also “called for exempting factories, particularly the agricultural sector, from electricity charges, since agriculture relies on power for pumping water, irrigation, and extraction processes.” Even economists who otherwise defend the broader reform want agriculture carved out: Dr. Abd al-Rahman Muhammad, an economist at Hama University, has argued industrial and agricultural power "should follow a different policy, since power is an input for production, not only consumption." These demands ask Damascus to undo, for agriculture specifically, the reform Damascus just spent real political capital enacting for everyone else.

They should be hesitant to do so. A purchase-price increase is expensive, but its cost is bounded: the state pays more per ton, on a harvest of finite size. By contrast, an uncapped subsidy tied to electricity or diesel consumption becomes more expensive as usage rises. Its final cost is therefore harder to predict, while the lower marginal price encourages farmers to consume more of the subsidized input.

The environmental problem follows from the same design. By lowering the cost of pumping, energy subsidies encourage farmers to irrigate more heavily, install additional wells and cultivate crops that would be less attractive at market prices. The subsidy therefore changes production decisions in ways that increase demand for the scarce resource being subsidized.

India has already run this experiment at national scale, spending roughly 2-2.25% of its GDP on agricultural subsidies. Cheap or free agricultural electricity has supported farmer incomes, but it has also encouraged inefficient groundwater extraction and water-intensive cropping. Correspondingly, India's groundwater withdrawal is greater than that of China and the United States combined.

Punjab shows how those incentives change behavior. In February 1997, the state replaced flat electricity charges with free power for farmers, regardless of usage. A 2021 study comparing Punjab to neighboring Haryana, which retained flat-rate pricing, found Punjabi villages installed more electric tubewells and substantially greater pumping capacity, while groundwater levels fell 16% faster. By 2017, 80% of Punjab’s administrative blocks were classified as critical or over-exploited, and groundwater use had reached 166% of annual recharge, the highest of any state in India.

The long-term effect is self-defeating. While these subsidies are meant to improve farmer income security and boost agricultural yields, they hurt farm productivity by exhausting the very resource required to sustain agricultural production. A national study found that every meter of groundwater decline cuts winter wheat and rice yields by 1–3% and reduces total winter crop production by 4–8%.

Syria has already seen how subsidies can accelerate groundwater depletion. A 2014 study in the Journal of Hydrology found Syria's diesel fuel subsidy — domestic prices as low as 20% of the world market rate — was "an important driving force in groundwater depletion." The study found that Syrian farmers behaved rationally in the short run, allocating artificially cheap water to secure, government-guaranteed crops like wheat and cotton, extracting close to the profit-maximizing amount given the price signal they faced. "The behavior of farmers is not the issue," the authors concluded; "...the issue is government policies that create incentives for farmers to abstract groundwater at unsustainable levels."

Groundwater creates a classic tragedy of the commons: each farmer has an incentive to extract more in the short run, even though collective overuse leaves everyone worse off. From a community perspective, economizing water use improves long-term sustainability. But subsidized power severs the link between individual and collective interest: when the price of pumping no longer reflects the water's real scarcity, there's no signal left to reward the farmer who conserves — only a cost borne by whoever doesn't extract first. Furthermore, Syria’s shaky land tenure system may disincentivize long-term resource stewardship — when landowners perceive a higher likelihood of losing their land, they are less likely to engage in resource conservation.

These incentives are especially dangerous because Syria has little remaining capacity to absorb further groundwater depletion. Syria has one of the highest levels of water stress in the world, withdrawing 124% of its renewable freshwater resources compared to 34% 50 years ago. Withdrawals exceeding 100% of renewable freshwater availability indicate that Syria is relying on groundwater depletion, nonrenewable supplies or reused water to meet current demand. Independent estimates put agriculture's share of Syria's total water use at 87% and 88%. Syria’s water shortage has been amplified by drought. In northeastern Syria, three major drought episodes between 2006 and 2021 reportedly depleted approximately 60% of groundwater reserves. Northern and eastern Syria have experienced a decline in rainfall of up to 40% compared to historical averages over the past two decades. The indicators point to groundwater reserves that are becoming increasingly more difficult to replenish, while the agricultural industry withdraws unsustainable amounts of water each year.

Lower pumping costs are currently contributing to overextraction in Daraa Governorate, illustrating the mechanism in miniature. Daraa received just 151 mm of rain in 2025, down from 293.5 mm in 2024\. Abdulrahman Sharida, an isotope hydrology expert from the province, estimates over 50,000 unlicensed wells are driving groundwater levels down across the region. He traces much of the recent acceleration to a specific cause: solar power, as "a readily available, cheaper energy source to run well pumps," has "contributed to an unprecedented increase in this depletion, bringing us to this catastrophic situation." The episode illustrates the same underlying incentive as subsidized power: lowering the marginal cost of pumping can encourage greater groundwater extraction, particularly where wells are weakly regulated. Sharida’s solution to Daraa’s water crisis is crop change: moving farmers away from water-hungry staples like tomatoes and potatoes toward higher-value, less thirsty crops, "to preserve what water remains."

The lesson isn't that Damascus should refuse farmers aid. It's that not all help carries the same risk. Neither Punjab's free electricity nor Syria's diesel subsidy had deleterious effects because farmers behaved badly. Rather, they had them because farmers behaved rationally. An input subsidy reduces the price signal, leading farmers to use more of any given resource than they would under market prices. When that resource is scarce, like water is in Syria, that short-term benefit to farmer incomes comes at the expense of long-run economic sustainability. Whether the bite shows up first in budget deficits or a water crisis, the state pays either way — and unlike a procurement-price adjustment, its eventual fiscal cost is considerably harder to predict.

If the Syrian government believes it must offer more concessions to farmers than purchase price increases, it should look toward mechanisms that support farmer incomes and investment in farm productivity without favoring specific inputs. Fixed, per-hectare allowances or, since land tenure registration is limited, loans or advances tied to previous wheat deliveries offer input-neutral aid to farmers and could support investments that increase productivity. If Damascus does decide to provide direct electricity or diesel subsidies to farmers, it should favor lump-sum payments or in-kind aid rather than subsidies that scale with input usage. Field research in Mexico shows that decoupling subsidies this way — moving from scaling to lump-sum payments — produces a similar reduction in groundwater extraction to complete elimination, while reducing undesirable political implications. OECD staff economists have reached a consistent conclusion from a broader angle, labeling market price support and payments based on unconstrained variable input use the most environmentally harmful forms of agricultural support, while finding decoupled payments the least harmful.

Damascus has already paid the political cost of reversing unsustainable diesel and electricity subsidies. Reintroducing them for agriculture wouldn't just undo the fiscal savings — it would accelerate Syria's already unsustainable water use, and show farmers, and everyone watching, how the transitional government handles political pressure: that reform bends when challenged. As the Syrian government seeks mechanisms to aid its recovering agricultural sector, it should favor policies that don't distort markets or reward farmers for using more of the water, fuel, and foreign currency Syria can least afford to lose.