Abstract: The Indian agrarian economy on the eve of independence was critical in situation. It could be characterized totally primitive, deteriorative and turbulent. During the British imperial regime, no pervasive and conductive measures were taken to boost the agriculture. The partition of country worsened the food situation in the country. This reduced the agricultural production and created difficulties both for food grains and commercial crops. The cultivators were under heavy debt and most of the holdings were uneconomic. In view of this, after independence tremendous efforts were made to boost the economy through agriculture as one of the tools for development. On the recommendations of food grain price committee (Jha Committee), the Government of India started the scheme of subsidies on purchase of various agriculture inputs to facilitate the farmers (Singh, 1994). This paper tries to analyse the impact of free electricity to Punjab farmers on various aspects of economy like Punjab State Electricity Board, Punjab Government and farmers etc. The empirical results reveal that farmers are ready to pay bills for irrigation as uninterrupted supply of electricity is given to agriculture sector. As a result, government should impose flat rates on electricity supply given to agriculture sector. Government should keep aside its motive to please voters or strengthen the vote bank, it should frame rational policy in the favour and welfare of the state.