Risk in Punjab Agriculture: Current Status and Emerging Issues

Transcription

1 Risk in Punjab Agriculture: Current Status and Emerging Issues RS Sidhu and Kamal Vatta Department of Economics and Sociology, PAU, Ludhiana Introduction Despite having less than 2 percent of the country s area, Punjab state is the largest surplus state in India in terms of foodgrain, contributing 11 percent of national rice production and 20 percent of national wheat production in and a significant portion (34 percent for rice and 75 percent for wheat) of grains to the central pool for Government distribution (Ministry of Agriculture, Government of Punjab). Despite a fall in its share of GSDP from 46% in to just 31% in , agriculture and livestock remain a significant source of income for workers in the state and employed 39 percent of the state s population in 2001 (GSO Census Data). Moreover, overall growth rates in state GDP are tied to the performance of agriculture. Punjab agriculture is dominated by a rice-wheat production system accounting for almost 80% of the cropped area and over 85% of the gross value of crop output. The specialization in these two food grains can be attributed to the large-scale adoption of high-yielding technologies, favorable policies, and massive investment in the irrigation and power sectors. The predominance of this cropping system was responsible for alleviating poverty and bringing prosperity to the state during the 1970s and 1980s. Table 1: Key indicators of the Punjab State Indicator / Parameter Units Year of quotation Punjab Geographical Area 000 Ha ,036 Population Million Population Density Per Sq. Km Literacy Rate % Number of main cultivators Total no. of villages 000 numbers Net Sown Area 000 Ha ,174 Total Cropped Area 000 Ha ,861 Area under cultivation % Cropping Intensity % Gross Irrigated Area 000 Ha Fertilizer Consumption Kg/Ha of cropped area Tractors Numbers ,200 Foodgrain Production Million Tonnes Area under Foodgrains Million Ha Area under Fruits & Vegetables 000 Ha Sources: Statistical Abstract, Punjab, 2008

2 After independence in 1947, Punjab was divided between India and Pakistan, with the eastern part retained in India. In 1966, the state was further subdivided into the states of Punjab and Haryana, while some hilly tracts formed state of Himachal Pradesh. The present Indian Punjab has 20 districts. On the basis of agro-climatic conditions, we divide the state into three regions: Zone I, the sub-mountainous region; Zone II, the central belt; and Zone III, the south-western cotton belt. Zone I (Sub-mountainous region), known as the Kandi region, has undulating topography comprising about 17 percent of the total area of the state. This zone has particularly abundant rainfall that averages more than 1,100 mm per annum. As the water table is deep and the soil is rocky, the sinking of tube wells and pumping out of water is very costly. Because of heterogeneity in agro-climatic conditions, the cropping pattern of the area is more diverse relative to the other zones and comprises crops like wheat, rice, basmati rice, maize, oilseeds, fruits, and vegetables. Zone II, the central region, is also known as the sweet water region and comprises about 47 percent of the area of the state. Average annual rainfall in this region is about 760 mm. It is highly productive and has a tight-knit system of irrigation, mainly through the use of tube-wells. The main cropping system in Zone II is the rice-wheat rotation. The water table in this region has been falling at an alarming average rate of 0.94 meters per year during The steep fall in groundwater is due to the massive increase in the number of tube wells from 192,000 in to 1,276,200 in that has inexorably been fuelled by power subsidies. The falling water table and declining soil fertility threaten the sustainability of the production environment of this region. Zone III, the south-western region and popularly known as the cotton belt, comprises almost 36 percent of the cultivated area of the state. This region is endowed with deep and brackish groundwater and sandy soil. It is much dryer than the other two zones. The average annual rainfall of this region is 360 mm. Over the last decade, there has been a fall in the area under cotton that is attributed to a decline in its productivity. At the same time, the increase in area under rice has increased salt accumulation on the soil surface due to the continuous use of underground water which is brackish and has led to water logging of the soil.

3 Table 2: Summary of the Agro-Ecological Zones of the Punjab Zone Provinces Zone I Guradaspur, Hoshiarpur, Nawar Shahar, Rupnagar, (sub-mountainous region) Mohali Zone II Amristar, Taran Taran, Kapurthala, Jalandhar, Ludhiana, (central region) Fatehgarh Sahib, Patiala, Moga, Sangrur, Barnala Zone III Firozpur, Faridkot, Muktsar, Bathinda, Mansa (south-western region) Trends in Punjab Agriculture A striking feature of cropping patterns in the Punjab over the past two decades is the rapid growth in the area under paddy. Between 1980/81 and 2008/09, the gross cropped area (GCA) under paddy jumped from 17.5 percent to about 35 percent (Table 3). Much of these gains in rice came at the expense of other crops, such as cotton, maize, and other crops. Table 3: Area and production of wheat and rice in the Punjab, selected years (1970/ /09) Crop Unit Wheat 000 ha 2,299 2,812 3,273 3, % GCA Mill. Tons Rice 000 ha 390 1,183 2,015 2, % GCA Mill. tons Source: Punjab Statistical Abstract, Various Years Table 4 provides some selected statistical indicators of the agricultural sector in the Punjab at different points in time. The table reveals strong increases in productivity in wheat and rice that slowed considerably between 1990/91 and 2008/09 compared to Green Revolution and post-green Revolution periods. For other crops, productivity fell for cotton, pulses, and oilseeds between 1970/71 and 1980/81, but rebounded strongly during the 1980s before slowing in the 1990s. The state currently ranks first in terms of the yield/productivity of rice (4000 kg/ha) and wheat (4,400 kg/ha) in the country. Area growth, particularly in HYVs, has been impressive. On an aggregate basis, the cropping intensity in the state has increased from 140 percent in to 188 percent in

4 Table 4: Growth in productivity and use of inputs in the Punjab Year Yield in kg/ha Area under HYVs (000 ha) Whe at Rice Cot ton Pulses Oilse eds Whea t Rice Fertilizer Use Total in 000 kg nutrien ts Nutrients (N+P+K) kg per ha of cropped area Irrig a-ted Area (%) Pestici des use kg in technic al grade ,23 1, , N/A ,73 2, ,757 1, ,71 3, ,271 1,906 1, *Refers to the year NSA Refers to the net sown area T T ( ) The growth in productivity and production was ushered by the trio of high yielding seeds, irrigation, and fertilizers supported by farm mechanization and institutional and infrastructural development. The consolidation of land holdings was completed in 1968, which brought fragmented land holdings together and facilitated the adoption of new technology and the expansion of tubewell irrigation through private capital investments. This resulted in a significant increase in the irrigated area in the state, which rose to 98 percent of net sown area by from 59 percent in In addition, the number of tubewells increased from 192,000 to 1.25 million, of which more than 75 percent are electrified, while the share of tubewells in irrigated areas grew from 41 percent to 76 percent during this period. The extensive irrigation system has provided the impetus for the large scale adoption of high yielding varieties; indeed, the entire area of wheat and rice is now under high yielding varieties. It has simultaneously made multi-cropping systems feasible due to the short duration of crops.

5 NIA as % of NAS Large-scale mechanization was introduced and played an important role in expanding cropped area, productivity, and production in the Punjab. The use of chemical fertilizers also registered tremendous growth. The use of fertilizers rose from million tons of nutrients in to million tons in On a per-hectare basis, fertilizer use increased from 38 kg to 225 kg of cropped area. The use of technical grade plant protection measures (fungicides, insecticides and pesticides) increased from 3,200 tons in to 6,970 tons in , though it declined later to 5760 tons in Minimum support prices and assured markets for produce have further contributed to the profitability of the rice-wheat system. Can risk be defined in a conventional manner in Punjab agriculture? One of the major contrasts of Punjab agriculture from that in rest of the country is that it is almost entirely under assured irrigation. Currently, 98 per cent of the cultivated area in Punjab is under assured irrigation. It becomes very difficult to define or measure the extent of production risk prevalent in Punjab agriculture in such a situation. Trends in Irrigated area in Punjab The yield levels are seldom affected by even a significant fall in rainfall due to larger dependence on ground water which mitigates the negative impacts of any such fall. The variability in the productivity of grain crops especially the most important crops of wheat and rice is very less. This becomes evident from the instability indices* calculated for major crops of paddy and wheat from to (Table 5). The value of instability indices for paddy and wheat was always below 0.10 and the instability in yields of these two crops was found to have declined sharply

6 after The instability in the productivity of these two crops was low across all the districts/regions of the state. Almost similar was the case with the yields of sugarcane and potato with their overall instability indices coming out to be 0.07 and 0.09, respectively over the period to Table 5: Instability indices for major agricultural crops in Punjab Crop to to to to Overall Paddy Wheat Maize American Cotton Desi Cotton Sugarcane Potato *Instability indices have been calculated as standard deviation of ln(x i+1 /(X i ) where X i is the yield for a given period. The variation in productivity of American and Desi cotton was higher and increased during the recent times. The production risk in case of cotton is estimated to have increased in recent one and half decade. The continuous flooding of rice fields has created favourable conditions for breeding and perpetuation of pest epidemic for sensitive crops like cotton. Yet, introduction of Bt cotton has revived the productivity again, but mealy bug appears to be emerging as an important pest for cotton during the previous two years. Thus, we may conclude that the conventional measure of risk as yield variability indicates the absence of any risk in the production of food crops in Punjab and Punjab agriculture seems to be a highly productive, input intensive and assured kind of economic activity. Despite all, there are many kinds of unconventional risks emerging in the agrarian economy of Punjab, which if not estimated and addressed properly may pose a severe challenge to its sustainability and hence food productivity as well as the farm incomes. This risk may further endanger the food security position of the nation and may increase the vulnerability of the poor in the country. Unconventional Risks in Punjab Agriculture

7 In recent years, the climatic changes have become more frequent impacting production system. The changes are in terms of decline in rainfall, rise in temperature during the periods of critical growth especially that of wheat and rise in humidity levels causing more frequent and severer incidences of insect-pest attacks and diseases. Declining Rainfall: Punjab state normally (on long term basis) receives more than 600 mm of annual rainfall, most of which is received in the months of July, August and September, brought by southwest monsoon originating from Bay of Bengal. However, during the decade of 2000, average annual rainfall has declined less than 450 mm during Not only has the precipitation fallen, it has also become irregular with uneven spread over space and time. The frequency of drought has gone up; we had drought years in 1987, 1997, 2002, 2007 and 2009, which clearly demonstrates that the frequency of droughts has gone up lately. It has however been observed that the droughts do not have any major direct impact on crop production and productivity in the state. It is usual while the production in the rest of the country declines during the drought years, the production in Punjab increases owing to assured access to the ground water. Record production of 8.8 million tones of paddy during 2002 and 9.1 million tones in the last year strengthens this argument. The respective production of wheat during these years was also 15.5 and 15.6 million tones. However, the droughts have significant social and economic adverse impacts on the Punjab economy. The drought conditions necessitate increased use of diesel to pump out the ground water which pushes up the cost of cultivation of paddy. Consequently, the expenditure on irrigation increases. Due to deficient rainfall during the months of July, August and September 2009, additional power estimated to be worth Rs 450 crore and additional diesel oil amounting to Rs 300 crore were used to lift groundwater for saving paddy crops. Deficient rainfall further engenders the sustainability of ground water resources which is already being over-exploited to maintain the current levels of rice production for the food security of the nation. In the drought of 2009, the water table went down more than one metre in central districts f the state (compared to around 70 cms in the previous year during the same months). The droughts, therefore, necessitate the increased investments in irrigation. Farmers are increasingly opting for the submersible pumps than the centrifugal pumps due to drought conditions and falling ground water. It is estimated that during drought years,

8 the water level recedes more depending upon the deficiency in rainfall and the investments on deepening of tubewells and submersible pumps go higher. The increased diversion of electricity from industrial to agriculture sector to save the farm production severely harms the industrial output, profits and hence the industrial employment. This has its own socio-economic implications. Over-exploitation of Ground Water Resources: Despite the positive benefits created from the rice-wheat system, the Punjab presently faces a number of problems that threaten its sustainability. The most important is the over-exploitation of its ground water resources, due in large part to the growth in GCA under paddy. Table 6 shows the water table depth in central Punjab over time and highlights that the share of area in which the water table is greater than 10 meters rose from just 3 percent in 1973 to almost 93 per cent in The exploitation of groundwater resources has gone up to such an extent that water demand (more than MAF) has exceeded the ground water availability (29.64 MAF). Compounding this has been a reduction in state rainfall by nearly 35 percent from 1980 to Table 6: Per cent area under critical water-table depth in Central Punjab, 1973 to 2004 Year Percentage area >10m Percentage area >15 m Percentage area > 20 m Source: Agricultural Statistics, Department of Agriculture, Punjab, Chandigarh The declining ground water has major economic implications for Punjab farming. The fall in the water table necessitates larger amounts of power required to lift the same amount of power. It has resulted into a steady increase in the expenditure on irrigation (at prices) from Rs 446 per ha in to Rs 819 per ha in In the drought year of , this expenditure scaled the peak of Rs 1379 per ha. Such expenditure is expected to further jump in the drought year of 2009 for which the cost estimates are not yet available.

9 Rs/ha 1600 Trends in cost of cultivation at prices Source: Cost of Cultivation Data The decline in ground water has resulted into an increased consumption of power by the agricultural sector. This is evident from the following figure that power consumption in the state has increased annually at 1.34 per cent from million kilowatt hour in to million kilowatt hour in However, such growth was almost 7 per cent per annum after (Table 7). The power subsidies to the agricultural sector in Punjab have grown at even higher rate of 7-8 per cent per annum. The amount of power subsidy was just Rs 385 crore in which reached as high as Rs 2800 crore during These trends indicate not only towards rising cost of production but also towards the unsustainable increase in power subsidies. Withdrawal of these subsidies may further increase the cost of production of the farmers hitting the economics of this crop. Table 7: Trends in power consumption and power subsidy in Punjab Year Power Consumption Power Subsidy (Rs crore) (million Kilowatt Hours)

10 NA NA 2800 CGR overall CGR after NA means not available The declining water table in the Punjab has raised serious doubts about the sustainability of the rice-wheat crop rotation, which has been manifested in terms of stagnating productivity in the state. A study by Singh and Hussain (2002) showed that total factor productivity (TFP) for rice was negative (-1.77 percent per annum) during to , with the component of technical change occurring at a very slow pace (0.89 percent p.a.). In the case of wheat, although TFP was positive (1.24 percent p.a.), the growth in technical charge was also slow (1.01 percent p.a.) during to (Table 8). The authors further found that for both paddy and wheat, environmental degradation (sustainability) contributed negatively to TFP, with its contribution much larger in paddy (-5.04 percent p.a.) than in wheat (-1.58 percent p.a.). Table 8: Decomposition of TFP in the Punjab Crop Period TFP Technolog Technical Sustainabilit Growth y change y Rice to Wheat to Source: Singh and Hossain (2002). Variability in Temperature: Similarly, the variability in temperature especially in winter months of January to March has increased and the minimum and maximum temperatures have gone up. The following figure also gives a rising trend in the growing degree days during these three months which seem very crucial for wheat cultivation. It implies that the amount of heat accumulating in the environment during these months has steadily gone up over the period of time.

11 Trends in GDD during Jan-March period These changes have seriously impacted the agricultural production system in terms of economic and physical impacts. The impact of rise in temperature has started appearing in wheat productivity, which fell from 2001 to 2005 continuously. Simple regression analysis has not established any impact of change in the temperature on wheat yield during these crucial months. It calls for some more sophisticated techniques which can dig deeper in any such relation which is being hypothesised during recent times. * Growing degree days have been calculated by using Baskerville-Emin (BE) method with base temperature of 20 degrees celsius Recent Trends in Wheat Productivity Falling Diversity in the Cropping Pattern: As already discussed in Table 3, the cropping pattern in Punjab has experienced a concentration of two food crops, paddy and wheat, over the past five decades. Paddy and wheat which occupied about 47 per

12 Rs/ha Diversification Index cent of the gross cropped area in the state during are being cultivated on almost 80 per cent of the area. While the area under wheat remained relatively constant between 40 to 44 per cent, the area under paddy increased from less than seven per cent to almost 35 per cent during this period. The diversification index followed a continuous decline after and is around 0.58 now. Trends in Crop Diversification in Punjab Rising Cost of Cultivation of Major Crops There has been a steady increase in the cost of cultivation paddy, wheat and cotton at prices in the state. The cost of production of paddy, wheat and cotton increased at 0.30 per cent, 1.32 per cent and 2.80 per cent per annum during the last two and half decades. However, the cost of production of paddy and cotton increased at a much faster rate of 2.1 per cent and 3.74 per cent after Such faster increase in the cost of cultivation is in line with the arguments of rising costs due to decline in water table. Trends in the cost of cultivation of paddy, wheat and cotton in Punjab (at prices) Paddy Wheat Cotton

13 Amount in Rs % share The area under cotton reached its peak during the early nineties but then followed a significant decline. The increase in incidence of American bollworm attacks caused a sharp rise in the cost of cultivation of the cotton crop due to increased expenditure on insecticides. The share of expenditure on pesticides was below 8 per cent in which peaked to more than 25 per cent in Expenditure on Cotton Crop in Punjab Insecticides Total cost Share Even the increased expenditure on insecticides could not help in preventing a huge fall in cotton productivity as it fell down from the peak of 636 kg/ha in to 179 kg/ha in The introduction of Bt cotton helped in checking this downward trend in cotton yields after , though the decline in expenditure on insecticides has been registered just recently. The total insecticide consumption in the state has fallen from 6900 tonnes of technical grade material in to 5760 tonnes of technical grade material during This success may be attributed to the introduction of bt cotton in the state during this period

14 kg/ha Trends in productivity of American cotton Risk in High Value Crops: As has already been discussed in Table 3, there is very little risk in the production of food crops and other major crops of the state. The risk is relatively higher in the cotton crop. The major crops where risk is prevalent to a higher extent are the horticultural crops such as fruits and vegetables. Despite high risk in the production of these crops, even higher marketing risk is involved which is a major deterrent for achieving diversification in the state. The instability indices for the monthly prices of different vegetable crops in Jaladhar and Ludhiana districts of Punjab for a period of have been given in Table 9. Table 9: Instability in prices of major vegetable crops in two markets of Punjab Crop Ludhiana market Jalandhar Market Index Max Price Min Ratio Index Max Min Ratio Price Price Price Potato Onion Cauliflower Tomato Bhindi Peas Chilly The table also depicts the maximum as well as minimum average monthly price for these crops in the two markets. There is a clear case of very high instability in the prices of vegetables in these markets. In addition to the instability, the difference between minimum and maximum prices of these crops has been large indicating very high market risk involved with these crops. The high instability in the production/productivity as well as prices of vegetables and fruits points towards the

15 opportunity to develop economically viable insurance products for such crops for the farmers. The economic viability should not only be in terms of the payable premium but must also be from the insurance providers point of view. This will pave the way for a significant diversification of the cropping pattern away from food crops towards high value crops which will also give a boost to the farmer incomes. Conclusions The Punjab state is a major agricultural state which is important from national food security point of view as well. However, there has been a recent slow down in agricultural growth and large scale degradation of soil and water degradation has been witnessed. The emerging ground water fall and other important climatic changes have the potential to adversely affect the production system of the state, which may further endanger the national food security objective. However, the risk in Punjab agriculture cannot be defined in a traditional manner as almost entire cultivated area is under assured irrigation. Thus, the impact of climatic extremes gets mitigated by increased dependence on ground water resources in the period of extreme events. The unconventional risks emerging in Punjab agriculture are rapid fall in ground water due to decline in rainfall, unfavourable changes in temperature during critical periods of growth of wheat and increasing incidences of insect-pest attacks on the cotton crop due to rise in humidity caused by continuous flooding of paddy fields. It has a significant impact on the cost of production of paddy and cotton due to increased expenditure on irrigation and insecticides and temperature is also expected to negatively influence the wheat yields. Despite all this, the variability in yields of paddy and wheat is very low and their production still seems to be risk free. Cotton is an important crop where the production risk appears to have increased during the recent period. On the other hand, the production and marketing risk in almost all the vegetable crops as well as fruits grown in the Punjab state seems to be very high and has discouraged the large scale adoption of these crops by the farmers resulting into a decline in the extent of crop diversification. Addressing the issue of risk in cotton, fruits such as kinnow and major vegetable crops may change the entire scenario of crop production in the state. This will not only diversify the cropping pattern, reduce the production and marketing risk but will also bring a substantial improvement in the farm incomes.

16 Future Action: There is a need for deeper investigation of wheat yields and temperature. There seems enough scope for insurance mechanism in cotton, fruits and vegetables. The future activities of the project will explore the attitude of the farmers towards insurance in cotton, potato, kinnow and some other important vegetables, their preferences for premium and an economically viable insurance package for these farmers.