The Centre and Punjab government deserve compliments for starting a new scheme to diversify agriculture and help farmers shift away from paddy. It gives them an incentive of Rs 17,500 per hectare to shift to less water-guzzling crops in the kharif season. Covering up to five hectares for the beneficiary, the scheme is funded in a 60:40 ratio by the Centre and Punjab government — it will cost Rs 289.87 crore for 2024-25. This is a first step in the right direction. A lot more will have to be done to make agriculture sustainable in the state.
Haryana has a similar scheme in place. But the results have not been very encouraging. The reason: The profitability gap between paddy and its major substitute crops — pulses, oilseeds, millets, and even maize — is much more than Rs 17,500/ha being offered.
Our research at ICRIER, ‘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 in power, canal water, and fertiliser consumption. This makes paddy much more profitable than competing crops. The minimum amount needed to shift away from it would have to be double the amount offered now — Rs 35,000/ha. However, this will not be an extra burden on the state exchequer or the Central budget. This is roughly the savings that the Punjab and Haryana governments will make in their power subsidy bills and the Centre in its fertiliser subsidy bill. In other words, we are talking about re-orienting the subsidy policy towards a more crop-neutral incentive structure.
The policy of rewarding farmers for switching away from paddy should be operational for a minimum of five years as the savings in the subsidy bill will be almost permanent. The current policy does not make it clear whether Rs 17,500/ha is for a year or more. If it is for just a year, the policy would be a non-starter. Which farmer would volunteer to let profits go down dramatically after a 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 farmers in these states switch to other crops, say pulses or oilseeds, there is no such guarantee that their farm produce will be procured at Minimum Support Prices (MSP). The Centre will have to ask NAFED to ensure effective procurement of pulses and oilseeds at MSP so that the market risk for the farmers growing these is minimised. Unless these policy tweaks are made, the chances of success in diversification in the Punjab-Haryana belt are going to be slim.
The benefits of diversifying away from paddy in this belt are well-known. It will save their soil from degrading, save groundwater depletion, reduce greenhouse gas (GHG) emissions, and promote much-needed crop biodiversity.
Paddy requires a minimum of 20-25 irrigations compared to less than four irrigations for pulses, oilseeds and millets. A 2023 study by the Central Ground Water Board on water tables reveals that 87 per cent of Punjab’s 153 blocks are categorised as over-exploited, critical, or semi-critical. With GHG emissions of 5 tonnes CO2 eq per hectare, paddy cultivation here is also driving climate change. Rice stubble burning is a major contributor to pollution. The successful implementation of this scheme will have a positive impact on the agriculture sustainability of the states, and the country at large.
Considering the skewed subsidy towards paddy, we propose that a farmer should get a minimum Rs 35,000/ha for switching away from paddy for at least five years. This does not involve any extra cost, but redirects the existing subsidies on power, canal waters, and fertilisers to more ecologically suitable crops in this belt.
What is needed is a bold initiative by the Centre in collaboration with the two state governments with costs being shared in a 60:40 or even 50:50 ratio. It could be the new deal for farmers of this region, a new beginning by Shivraj Singh Chouhan at the Centre to build trust among farmers.
Purchasing alternative crops at MSP to provide a reliable market to farmers who choose crop diversification is not going to cost the government extra. FCI bought 92.5 per cent of the rice produced in Punjab at MSP during 2023-24. If this support is redirected towards other crops, it could free up funds set aside for paddy purchases. Transitioning away one million hectares from paddy cultivation could free up the paddy procurement cost amounting to roughly Rs 1,3150 crore. This could then be utilised as a stabilisation fund to ensure that agencies like NAFED, CCI, or FCI purchase pulses, oilseeds, cotton, millets, and even kharif maize at MSPs — this could mitigate market risks for non-paddy crops.
Diversification could also potentially earn farmers up to 4 carbon credits per hectare. This can open up the doors for developing carbon markets in the country. In parallel, a 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, and branding for export markets, especially in West Asia. Logistics facilities will have to be created with a value chain approach to high-income export markets.
All this is doable provided the Centre and the governments of Punjab and Haryana join hands.
Gulati is distinguished professor and Singh a senior fellow at ICRIER. Views are personal
