YIELD RESPONSE MODELING AND DECOMPOSING PRODUCTION IN RICE IN INDIA

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1 Indian J. Agric. Res.., 48 (2) 89-96, 2014 DOI: /j X AGRICULTURAL RESEARCH COMMUNICATION CENTRE YIELD RESPONSE MODELING AND DECOMPOSING PRODUCTION IN RICE IN INDIA I. Sekar Division of Agricultural Economics, Indian Agricultural Research Institute, New Delhi , India Received: Accepted: ABSTRACT India is the second largest producer of rice however rice productivity is the lowest among the top five rice growing countries in the world. Recent price rise of rice commodity and retirement of rice lands for non agriculture purposes necessitate analyzing the yield response and net returns in rice and suggesting measures to improve upon the existing situation in the country. This paper is an attempt to unravel the facts on yield response, returns and production growth in rice using time series data. The study reveals that there has been deceleration in growth rate of rice production and productivity in India. It is important to focus on yield breakthrough technologies to enhance the yield growth in rice. The study used decomposition model to disaggregate the effects of yield and area on production growth and found that yield effect is more in eastern states like West Bengal, Orissa, and Assam and therefore requires special emphasis for promotion of high yielding variety technology in the region. Rice yield response analysis evidently exhibited that irrigation has significant influence on rice yield and hence needs to be accorded top priority in improving the irrigation infrastructure. Net return over C 2 cost is found to be too low and even negative in some of the major rice growing states in the country and hence efforts are required to enhance the profit level otherwise may have an impact on food security. Key words: Decomposition, Net returns, Production growth, Rice, Yield effect, Yield response model.. INTRODUCTION Rice is the staple food crop in India, playing a critical role in food security and livelihood of millions in the country. Green Revolution impact was visible in the Indo Gangetic plains and the spread of modern varieties of rice was quite huge in southern states as well. Increase in irrigated area under rice, better adoption of high yielding varieties and intensive use of chemical inputs have resulted in a manifold increase of rice production. The production of rice has nearly trebled from 1960 to Despite absolute increase in production, the growth rate has declined in many states in recent years. Deceleration in production growth is also visible in all the top five major rice producing countries in the world. In India, the rice production growth was phenomenal during eighties (3.5%) and turned downwards after wards and at the turn of 21 st Century, it is merely 1.5 per cent. With such temporal changes, it is important to unearth the sources of production growth to examine the individual effect of yield and area on production through decomposition process. It is also important to study the yield response and net returns to get a clear understanding on factors determining rice yield. In addition to declining production growth, there is spatial disparity across regions in the country. Some disadvantaged regions continue to register low rice productivity and high fertile regions reach almost a plateau, which puts serious question on sustainability. Eastern region despite contributing large volume of production because of i ts geographical size, the productivity still remains at 2 ton per hectare. There are still location specific productions constraints both biotic and abiotic in achieving the potential yield. If such deceleration in growth trend continues for quite a longer period of time, then it may threaten the food security particularly in the face of population growth and in the context of climate change. To reverse the current trend, revisiting current policies on research and

2 90 INDIAN JOURNAL OF AGRICULTURAL RESEARCH technology development appears to be important besides policies on institution and infrastructure for sustainable rice production. Jha and Kumar (1998) also emphasized sustainable irrigated rice production is one of the thrust areas for rice research. This paper aims at estimating the growth of rice in irrigated areas, disaggregating the sources of production growth, examining the yield response, and discussing the net returns of rice at all India level. MATERIALS AND METHODS Time series data pertai ning to area, production, productivity, costs, and returns were collected from various sources including Agricultural Statistics at a Glance, Directorate of Economics and Statistics, (Govt. of India, 2011) Centre for Monitoring Indian Economy, and Cost of cultivation of Principal Crops, (Govt. of India2009) State wise rice information was collected from different issues of the above sources for the years The yield response model is an additive model estimated using time series data with regressors specified in linear terms. In this linear framework, yield of rice is a linear function of a set of independent variables, which include area under high yielding variety of rice (HYV), net irrigated area (NIA), production lagged one year (PROD, t-1), area lagged one year (AREA, t-1). The variable DUM is a dummy variable with the coding of 1 for data during economic reform period and 0 otherwise. As deceleration in yield growth rate of rice has occurred in later years, it is presumed that this dummy variable is negative. The lagged area and production variables were included in the model to study its influence, however, the expected signs of lagged variables in the model cannot be definitely specified and retained as unspecified. Nonetheless, net irrigated area and high yielding variety variables are hypothesized to be positively related to yield. The model is estimated to clearly identify the impact of these independent variables on rice yield. It is of widespread view that there exists some kind of technology fatigue as far as rice production technologies are concerned and now the response of rice production technologies are more of stabilizing ones. This paper focuses on analyzing the sources of production growth in two distinct periods of pre- and post- economic reform era in maj or rice producing states employi ng decomposition model. While disaggregating the production growth into area and yield effects, it is possible to examine each effect on overall production growth and how it varies in magnitude in different states across the country. It has been reported that growth rate of many agricultural crops including rice has been declining. It is also known that production growth in rice was around 3.5 per cent and after nineties it declined to 2 per cent in India. Therefore, the study attempted to explore the changing pattern of sources of production growth in rice before and after the economic reforms period in India. Minhas (1965) component analysis model was used to decompose and measure the relative contribution of area and yield to the total output change for rice crop. The form is expressed as DQ= DYA 0 + DAY 0 + DADY whereas DQ is change in rice production; DYA 0 is yield effect; DAY 0 is area effect; and DADY is interaction effect. In this additive form, the total change in production is decomposed into three effects viz. yield effect, area effect and the interaction effect. This decomposition exercise is undertaken separately for both pre- and post-economic reform era ie and respectively. RESULTS AND DISCUSSION Growth in irrigated rice in India: Area under irrigated rice has increased tremendously in states like Punjab, Uttar Pradesh, Haryana, and West Bengal over a span of four decades. It is undeniable fact that the importance given to irrigation sector and investments made in irrigation infrastructure development are the prime reasons for augmentation of more area under irrigated rice. In states like Punjab and Haryana where ground water extraction is extremely rampant in places where rice cultivation is more because rice is one of the crops requiring lots of water. In Punjab state, the percentage increase of rice irrigated area is so huge that the irrigated area has grown at a rate of per cent. Haryana is yet another state where area under irrigated rice has been growing at a rate of 9.25 per cent (Table 1). In these two states, rice productivity is well above the national level and implies the correlation between irrigation and productivity. Rice is one of the largest consumers of water, used from the nursery raising stage till harvest. While the major share of irrigation is from ground water source, it raises sustainability

3 TABLE 1: Irrigated rice in major rice growing states in India States Percentage change Growth rate (TE 1970 to TE2008) (%) Andhra Pradesh Assam Bihar Haryana Karnataka Kerala Madhya Pradesh Orissa Punjab Tamil Nadu Uttar Pradesh West Bengal All India issues due to indiscriminate groundwater extraction and falling water table. In Bihar state, area under irrigated rice has grown at a minimal rate of 0.26 per cent, which could be due to the increased share of rainfed rice. Karnataka and Orissa states also witnessed marginal increases in irrigated area. Rice irrigated area has declined in southern states like Tamil Nadu, Andhra Pradesh, and Kerala over the last four decades, which declined at a rate of 1.13 per cent, 0.31 per cent, and 1.81per cent respectively. Madhya Pradesh and Vol. 48, No. 2, Assam states have also shown decline in irrigated area. It was reported that many districts in Tamil Nadu and Andhra Pradesh have experienced significant annual fall in ground water table. Many open wells have turned dry and defunct and tubewells are often with poor supply of water. This is one of the reasons for decline in area under irrigated rice cultivation. In addition, tank irrigated area of rice crop has declined over the years consequent upon poor maintenance of tanks in these states. Traditionally, tank irrigation occupies a sizeable share in total rice area irrigation in these states. However, of late, tank irrigation for rice crop has declined and the traditional tank system of irrigation has deteriorated due to negligence and lack of adequate efforts for its rehabilitation. The same trend is noticed at all India level also. Surface water irrigated area is almost stable over the last four decades starting from 1970 till 2009 while area irrigated by ground water source increased dramatically during the corresponding periods (Figure 1). Optimal extraction of ground water and its efficient use in rice crop may be advocated in order to attain efficient use of water resources as well as to achieve sustainable rice crop production. FIGURE 1: Area under surface and ground water irrigation in India ( 000ha)

4 92 INDIAN JOURNAL OF AGRICULTURAL RESEARCH Many studies reported that one of the main factors limiting future rice production and overall agricultural production would be water. Lal et al. (1998) indicated that rice yield is vulnerable to acute water shortage conditions combined with the thermal stress should adversely affect the rice productivity more severely in North West India, one of the rice growing belt. To produce more rice with decreasing availability of water for rice production is gaining importance for achieving food security (Tuong, 1999). But is appears to be at distant reach as water becoming an increasingly scarce resource and is currently faci ng exorbitant demands from competitive sectors. Global outlook model report predicts that if current water policies continue, farmers will indeed find it difficult to meet the world s food needs. Hardest hit will be the poorest people. Lax in policies and water-related investments may produce a severe water crisis, which in turn lead to a food crisis. Food security could be at stake due to pressure on water in future and hence sustainable use of water through appropriate policies and investments need to be given importance. Decomposition of production growth in rice : It is important to examine the changing pattern of yield and area effects on the overall production growth of rice and hence the analysis was undertaken for two distinct periods of time and the results are presented in Table 2. Overall, the results showed that higher growth registered in the pre-economic reform period and one factor seems to be common in majority of states, which is yield effect contributing overall to the production growth. During posteconomic reform period, it is observed that both area and yield effects contributed to the declined production growth, which varies from state to state. Karnataka, Tamil Nadu, Punjab, Haryana, and Bihar states registered more area effect and in rest of the major rice growing states, the yield effect is found to be more. One striking feature is that yield effect is very high in eastern states like West Bengal, Orissa and Assam. As the significance of yield effect is more pronounced for the decline in growth rate, more efforts are required in these states to promote high yielding varieties of rice for large scale adoption while removing the production constraints. Yield effect is also more in Uttar Pradesh and Andhra Pradesh during post-economic reform period. A typical case is in Punjab and Haryana states, where interaction effect was more during Green Revolution period; however, during economic reform period there was a clear delineation and pronouncement of yield and area effects. Major technology breakthrough came in mid sixties and the technologies that came during and after eighties were of yield stabilizing type, which has not provided any quantum jump in yield and thus lowered the production growth. Since the introduction of IR8 in 1966, no major technological breakthrough was evident even though some early maturing varieties were developed. Intensive rice cultivation, mono-rice cropping or rice based cereal cropping practices might be another reason for decline in yield. For example, reports in the early eighties revealed a yield decline in the intensively cultivated rice plots within research stations in the Philippines. Increased salinity resulting from longterm rice production in irrigated areas worldwide was reported by Pingali and Rosegrant (1996). Rice continuous cultivation in the north of Iran has TABLE 2: Area and yield effects in major rice producing states in India (Percentage) States Pre-Economic Reform Era ( ) Post-Economic Reform Era ( ) Area Yield Interaction Area Yield Interaction Effect Effect Effect Effect Effect Effect Andhra Pradesh Tamil Nadu Karnataka Uttar Pradesh Punjab Haryana Bihar West Bengal Orissa Assam

5 Vol. 48, No. 2, decreased rice production (Malidarreh et al., 2011). Extreme weather conditions such as drought and flood are often experienced in some parts of India may also be responsible for overall reduction in yield growth rate. In addition, biotic stresses can also cause modern rice varieties not to realize its full yield potential. It is estimated that diseases and insects cause yield losses of up to 25% annually. Apart from biotic and abiotic stresses, prices would have had an influence on yield growth. Output and relative input prices are not moving at par. Though international rice prices have declined since 1995 (Calpe 2003), the reversal of price trend after 2008 and increase in oil prices have increased the prices of all commodities including prices of agricultural inputs. All these factors erode the profit level of farmers which is considered as disincentive to the farmers to invest in production inputs, which could eventually impact the yield growth. Yield response of rice: The results of estimated model on yield response of rice are presented in Table 3. Yield response in rice crop is determined by several factors, and for this model, the predictor variables include high yielding variety as a technology variable, net irrigated area as a proxy variable for irrigation infrastructure and lagged area and production. In addition, a dummy variable was included to delineate the effects of two distinct periods, economic reform and Green Revolution periods. The overall R square value is around 0.75 implying that 75 per cent of the variations in the model are explained by the variables under consideration in the model, which indicates a good fit of the model. Among the explanatory variables, net irrigated area is significant at 1 per cent level implying that increasing the area under irrigation would have significant impact on the yield of rice crop, which is concurrent with the results of previous studies. As investment on irrigation infrastructure reduced after nineties, it could have serious implications on rice output. It is, therefore, important to improve upon the existing irrigation infrastructure and complete the incomplete projects which have irrigation potentials to be created. Any deficit in irrigation water to rice crop can have implications on productivity, profitability and livelihood security. The results have revealed that the dummy variable is statistically significant implying that yield response of rice is not better during the reform period in comparison to Green Revolution period. This evidently supports the already stated finding that the growth rate of yield of rice during eighties had been around 3.5 per cent while the growth rate had been decelerating since the early nineties and was around 1.5 per cent during economic reform period. This declining trend in growth rate of rice crop and falling investments in irrigation infrastructure can have impacts on rice production in future. Costs and returns in major rice producing states in India: Cost of cultivation varies among different states in India. In states like Maharashtra, cost of cultivation of rice crop (Cost A 1 ) is more but gross revenue is not on par with increasing cost of cultivation. Farm business income after meeting out the paid out costs is too low (Rs 5210 per hectare) in the state. As seen from the Table 4 that when cost C 2 is included in benefits costs analysis, net income over cost C 2 is negative in many states suggesting rice cultivation in Maharashtra may not be a profitable proposition. Similarly Madhya Pradesh, Jharkhand, Assam and Bihar have also not shown encouraging performances in rice cultivation. States like Orissa, Tamil Nadu and West Bengal also exhibited negative profit margin when cost C 2 is considered. Though these are major rice producing states, rice cultivation is not a profitable venture, which could impede the production growth and therefore it raises sustainability issues in long run production of rice. Barring Punjab, Haryana, TABLE 3: Estimated values of yield response variables Variables Description B Std. Error t Sig. PROD(t-1) Lagged production, one year AREA(t-1) Lagged area, one year DUM Dummy variable for time periods HYV High Yielding Variety NIA Net Irrigated Area R Square Adjusted R Square

6 94 INDIAN JOURNAL OF AGRICULTURAL RESEARCH TABLE 4: Costs and Returns in major rice producing states States Gross Farm Business Net Income Return Cost A 1 Cost C 2 Income over Cost C 2 Andhra Pradesh Assam Bihar Gujarat Haryana Jharkhand Karnataka Kerala Madhya Pradesh Maharashtra Orissa Punjab Tamil Nadu Uttar Pradesh West Bengal Source: Based on data from Directorate of Economics and Statistics, GOI Note: Gross revenue and cost figures are average TE 2008 Gujarat, and Karnataka states, net income over Cost C 2 is too low in rest of the states in India. Besides locati on speci fic producti on constraints, one of the reasons for such poor performance in some of the major rice producing states in the country often cited is in relation with the pricing policy and associated market mechanisms, in particular, the minimum support price (MSP). It is fairly understandable wherever MSP for rice is supported with assured and adequate market system for procurement, profit margin also observed to be more. For instance, Punjab and Haryana are the states where rice productivity as well as profit margin is on a higher side and MSP along with well developed market infrastructure for procurement and storage of grains and established market mechanism favour the farmers to continue with rice production and make constant and consistent efforts to enhance the level of rice productivity. Therefore farmers in Punjab and Haryana would not prefer for a crop shift towards commercial crops even if it is highly profitable for the simple reason that the complement of MSP with well established market mechanism in place for rice. Such assurance is a missing link in several other states of the country and hence investment in factors of production and rice productivity seem to be low. The procurement, distribution, and storage of rice grains in the country are undertaken through the nodal agency, the Food Corporation of India (FCI). The off take of grains is primarily under the targeted public distribution system (TPDS) and distribution is done with different welfare schemes of the Government of India. Though the distribution is spread across the country, the procurement is primarily done in North West region particularly from Punjab and Haryana although the main aim of procurement of rice for maintaining a buffer stock for the entire country. Bihar, eastern UP, and erstwhile eastern states and many other major rice producing states are not adequately benefited from the minimum support price scheme mainly because of insufficient market machinery for procurement. While the efforts are on to enhance the yield level of rice in eastern states because of dominance of rice cultivation in terms of area, supporting MSP with adequate market infrastructure and attracting the marketable surplus through government agencies would create a sense of safety and certainty among farmers in the eastern region and pave the way for enhancing rice productivity and improving upon the overall national production. Another cause of concern is that the divergence between minimum support price and central issue price over a period of time (Table 5). The main objective of fixing minimum support price is providing remunerative prices to the farmers, which is like a floor price. This incentivizes to indirectly hike the whole sale price in the market. Rice is procured in order to distribute to the consumers particularly the vulnerable sections of society at affordable prices and for maintenance of

7 TABLE 5: Minimum support price of paddy (Grade A) in India Year MSP (Rs/Ql.) CIP (Rs./Ql.) APL BPL Note: MSP and CIP denote minimum support price and central issue price respectively. APL and BPL denote above and below poverty line respectively. Source: Ministry of Consumer Affairs, Food and Public Distribution, GOI. buffers for food security and price stability. Minimum support price and central issue price are the two policy instruments to benefit both producers and consumers respectively and are working satisfactorily to stabilize prices and meet out the adversities. Central issue price partly covers the economic cost, which comprises of procurement cost, transport incidentals, and distribution cost. When rice stock reaches the states, the issue prices is still less or zero based on the populist measures adopted by the state governments. Therefore, gap between the issue price and economic cost of procurement is still far more widening. While the economic cost of procurement is so huge and to meet out these expenses, the amount is often diverted from capital account, which may have an effect in long run. In other words, it can have an impact on capital formation in agriculture and total factor productivity in agriculture. Steps are therefore required to increase the profit margin either by increasing the production and price or lowering the cost of production or combination of both. Policy pertinent to market particularly infrastructure needs to be given more importance. To achieve the twin task of enhancing rice production and reducing cost Vol. 48, No. 2, of production, polices need to be reoriented so that sustainability of rice production and food security would be stable. CONCLUSIONS The production growth of rice in India was very impressive during eighties and which was due to the fact that the technologies evolved during that period were of yield enhancing type. However, of late, more particularly after nineties the production growth has declined. While disaggregating the overall production growth into individual effects of yield and area, it is observed that the yield effect is significantly higher in eastern states like West Bengal, Orissa, and Assam particularly during the economic period. Needless to mention, rice is the predominant crop in these states. These states need special emphasis on popularization of high yielding varieties of rice and its large scale adoption. One of the factors determining rice yield is irrigation which has evidently shown significant positive influence on rice yield and it is therefore recommended that the existing irrigation infrastructure and irrigation potential be improved and wherever possible water management and distributional aspects should be given more importance in the country. This will lead to water security and will have greater impact on food security of the country. An examination of net returns of rice revealed that although farm business income of rice production in major rice growing states are fairly better, net return over cost C 2 is quite low in the rice growing belt across the country. This implies a reason for retirement of rice lands and likelihood of unsustainable rice production and signals the need for more emphasis. It is therefore imperative to enhance the yield potential of rice crop with yield breakthrough technologies or develop cost saving technologies or combination of both in the major rice growing regions in the country. This can be achieved by reorienting the policies for supporting sustainable rice production which would pave the way for food security of rice consumers in the country. REFERENCES Calpe, C. (2003). Status of the world rice market in2002.in: Proceedings of the 20th Session of the International Rice Commission, July 2002, Bangkok, Thailand. FAO, Rome, Italy, pp Government of India (2011). Agricultural Statistics at a Glance. Directorate of Economics and Statistics. Department of Agriculture and Cooperation, Ministry of Agriculture, New Delhi.

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