Policy impacts on land use and agricultural practices in North-West

India

ACIAR CSE/2006/132

Nick Milham WCCA/FSDC September 2011

What to do when policy seems to have gone wrong?

- when ‘successful’ policy begins to show undesirable outcomes

Profound, policy induced, change- major beneficiary of the Green Revolution

Table 1: Trends in Crop Area in Punjab

Year Crop

1960-61 1980-81 2000-01 2004-05

‘000 ha ‘000 ha ‘000 ha ‘000 ha

Rice 227 1,183 2,611 2,647

Wheat 1,400 2,812 3,408 3,482

Maize 327 382 165 154

Cotton 446 648 474 509

Pulses 903 341 61 40

Oil seeds 185 248 87 91

Sugarcane 133 71 121 86

Total 3,621 5,685 6,927 7,009 Source: Government of Punjab

Policy Environment since the 1960s

Punjab Farming System- highly mechanized- rice/wheat system- input intensive - stubble burning

Water- cost unrelated to use- no restrictions on use

Land- restriction on farm size

Capital- machinery subsidies

Fertiliser- subsidised

Crop prices- MPS

- procurement (rice & wheat)- export restrictions

Energy- large subsidy on electricity- small subsidy on diesel

OUTPUTS

- Excessive water use- Electricity supply problems- Pollution from stubble burning

- High rice and wheat production- Self sufficiency goal- Affordable food for the poor

Favours crops with high water and energy inputs

Price risk removed - lower but secure prices

Favours high N using crops

high intensity land uses

Policy Success

Enormous expansion in productivity food grain production; India now self-reliant in cereals

Low and stable consumer prices (at least until recently)

But!

– productivity now low by world standards– consumer prices may be rising in real terms– water consumption high and groundwater

supplies being depleted– soil fertility declining and fertiliser rates excessive

and rising– energy (electricity and diesel) demand is high– rice stubble largely burned in the field >> air

pollution and on-farm productivity consequences

– subsidy programs very costly to government

How to address the stubble burning problem?

Subsidise technology like the Happy Seeder?

Q: Would it work?

A: Yes!

Q: Is there a better way?

A: Principles, politics and practicality

Add a new program to address the

problems of the existing program?– entrench the existing arrangements

– add to the budget cost to government

– impose efficiency costs on the economy

The Policy Principles Answer:– probably “No”

Modelled impact

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4.50

HS-costS1

HS-costS2

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Scenario

Wheat - HS

Cro

p A

ea

(h

a)

25% subsidy: budget cost ~$AUS1,000 million

Modelled impact

With Subsidies Without Subsidies

Happy Seeder used No YesRice (ha) 3.93 2.28Wheat (ha) 4.2 4.2Maize (ha) 0.27 1.92Soybean (ha) 0 0

Net farm income (Rps) 152,898 132,999

Rice stubble burned (t) 24 0Nitrogen (kg) 533 478Electricity (kw hrs) 1,496 1,557Diesel (L) 1,644 941Water (ML) 81.4 60Casual labour (hrs) 279 635Note: Total farm area 4.40 hectares; total cropped area 4.20 hectares.

Lessons

Changes in policy settings can have very large

effects on farm production systems and their

environmental and social outcomes.

When problems emerge, look closely at existing

policy settings before considering additional

arrangements – a good solution may be there!