By Ashok Gulati and Reena Singh,
The Centre and the Punjab government deserve compliments for starting a new scheme of diversifying into crops other than paddy. It gives a Rs 17,500 per hectare incentive for farmers to shift from paddy to less water-guzzling crops in the kharif season. Covering up to five hectares for the beneficiary farmer, the crop diversification scheme has been funded 60:40 by the Centre and the Punjab government, with Rs 289.87 crore for 2024-25. This attempt to shift from paddy to more sustainable agriculture in Punjab is the first baby step in the right direction. But if this has to succeed, a lot more will have to be done.
Haryana already has a similar scheme in place. But so far, the results are not very encouraging. Not much movement out of paddy has been witnessed. The reason is simple — the profitability gap between paddy and its major substitute crops, say pulses, oilseeds, millets, and even maize, is much wider than the Rs 17,500/ha being offered.
Our research at ICRIER titled “Saving Punjab and Haryana from Ecological Disaster: Re-aligning Agri-food Policies” reveals that paddy farmers in Punjab received Rs 38,973/ha in 2023-24 as subsidy from power, canal waters, and fertiliser consumption. This makes profitability in paddy cultivation much higher than in other major competing field crops. Therefore, the incentive of Rs 17,500/ha for switching from paddy is not enough. The minimum amount needed for such a move must be doubled to Rs 35,000/ha. This is not going to be an extra burden either on the state exchequer or the central budget. This is roughly the savings that Punjab and Haryana governments will have in their power subsidy bills and the Centre in its fertiliser subsidy bill. So, it is basically realigning the subsidy policy for a more crop-neutral incentive structure.
Further, this policy of rewarding farmers for switching from paddy should be at least for five years as the savings in the subsidy bill will be almost permanent. The current policy does not make it clear if the Rs 17,500/ha is for a year or more. If it is for just one year, it is a non-starter. Which farmer would volunteer to let profits go down dramatically after one year?
Punjab and Haryana have another special privilege of assured procurement of paddy by the state agencies on behalf of the Food Corporation of India (FCI). If they switch to other crops, say pulses or oilseeds, there is no such guarantee that they will be procured at the minimum support prices (MSPs). So, the Centre will have to come forward and ask the National Agricultural Cooperative Marketing Federation of India (NAFED) to ensure effective procurement of pulses and oilseeds at MSP so that the market risk for the farmers growing these alternative cops is minimised.
Unless these policy tweaks are done, the chances of success with diversification in the Punjab-Haryana belt are going to be meagre.
The benefits of shifting from paddy in this belt are well-known. It will save the soil from degrading, save groundwater depletion and greenhouse gas (GHG) emissions, and promote much needed crop biodiversity.
Paddy requires at least 20-25 irrigations compared to less than four for pulses, oilseeds, millets, etc. A 2023 study by the Central Ground Water Board reveals that 87% of Punjab’s 153 blocks are categorised as over-exploited, critical, or semi-critical concerning groundwater resources, and the groundwater has declined to 10.89 metres below ground level. With GHG emissions of 5 tonnes CO2 equivalent per hectare, paddy cultivation in Punjab is also driving climate change. Fire counts from its stubble is a significant producer of pollution locally, which has direct, negative impacts on health. The successful implementation of this scheme in Punjab and Haryana will have positive impact on the states’ agriculture sustainability and the country at large.
Considering the skewed subsidy towards paddy, it is proposed that farmers should get at least Rs 35,000/ha for switching from paddy for at least five years. This is very much doable as it does not involve extra cost, but it redirects the existing subsidies on power, canal waters, and fertilisers to crops that are more suitable to the ecology of Punjab and Haryana.
What is needed is a bold initiative by the Centre in collaboration with the Punjab and Haryana governments in a 60:40 or even 50:50 ratio. It could be the new deal for farmers of the region, a new beginning by Shivraj Singh Chouhan at the Centre to build trust with them.
Interestingly, even making the purchase of alternative crops at MSP to provide a reliable market for farmers who choose crop diversification is not going to cost extra for the budget. The FCI bought 92.5% of the rice produced in Punjab at MSP during kharif marketing season TE (triennium ending) 2023-24. If this support is redirected to other crops, it could release funds from paddy purchases to purchases of other crops at MSP. Transitioning one million hectares from paddy cultivation could free up paddy procurement cost of roughly Rs 13,150 crore. This amount could then be utilised as a stabilisation fund to ensure agencies like NAFED, Cotton Corporation of India, or FCI purchase pulses, oilseeds, cotton, millets, and even kharif maize at MSP, thereby mitigating market risks for non-paddy crops.
Diversification into alternative crops could also potentially earn farmers up to four carbon credits per hectare. This can open the doors for developing carbon markets in India. In parallel, market-oriented cluster-based approach for high-value horticulture crops could also be prioritised. Farmer producer organisations could be engaged in aggregating, assaying, grading, packaging, branding, etc. for export markets, especially in Gulf countries. Logistics facilities will have to be created with a value chain approach dedicated to high-income export markets.
All this is doable, provided the Centre and Punjab and Haryana join hands for the prosperity of farmers and the sustainability of agriculture.
(Ashok Gulati & Reena Singh, Respectively, distinguished professor and senior fellow, ICRIER.)
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