Energy Growth Linkage and Strategy for Meeting the Energy Demand in Indian Agriculture

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1 Agricultural Economics Research Review Vol. 26 (Conference Number) 2013 pp Energy Growth Linkage and Strategy for Meeting the Energy Demand in Indian Agriculture Girish Kumar Jha Division of Agricultural Economics, Indian Agricultural Research Institute, New Delhi Abstract The relationship between energy-use and agricultural production has been examined for major states in India. The study has indicated that high-productivity states like Punjab and Haryana use energy more than seven-times as compared to the low-productivity states like Odisha (4 GJ/ha). The paper has demonstrated that the use of energy-intensive inputs is higher on marginal farms than on large farms. The energy-related foresight exercise has suggested that the energy requirement in Indian agriculture will be double of the present consumption level (22 million tonnes of oil equivalent) for achieving 280 Mt of foodgrains production by The enhanced farm energy demand will call for a robust energy policy which should ensure reliable supply of energy to the agricultural sector, particularly to small farmers at affordable cost. The policy should also aim to reduce the amount of carbon dioxide emissions by replacing fossil fuel by renewable energy sources like crop residues and solar energy. The preliminary analysis has indicated that the system of rice intensification (SRI) method is more energy-efficient as compared to transplanted rice. Key words: Agriculture, carbon emission, commercial energy, renewal energy, SRI JEL Classification: Q41, Q47 Introduction Energy has become an important input to agricultural production. In a land-scarce, populous agrarian economy like India, additional production has to be achieved in large volumes by judicious management of energy resources. The economics of energy-use in agriculture has received less attention in most developing countries in comparison to the developed countries, particularly USA, Canada and Europe (Pachauri, 1998). In India, research work relating to energy-use for agricultural activities is largely confined to study on input-output relationship in the production. The structure of energy consumption * Author for correspondence girish.stat@gmail.com This paper is drawn from the research work undertaken as a part of an Institute project entitled Energy use in Indian agriculture in the context of climate change. in the Indian agriculture has changed with a marked shift from animal and human power to tractors, electricity and diesel. The consumption pattern of both direct and indirect energy inputs has revealed that the energy consumption per hectare of net as well as gross cropped area, has increased over time and therefore, the output per unit of energy use has declined (Jha et al., 2012). This shows that the Indian agriculture has become more energy-intensive and implies that energy demand in agriculture will increase sharply in the years to come. But, this aspect has been less studied by the economists. This paper has examined the changing pattern of energy-use with respect to different farm-categories across the regions and has tested the hypothesis of a positive relationship between energy consumption and agricultural productivity using state level data of the country. The broad contour of direct energy demand

2 120 Agricultural Economics Research Review Vol. 26 (Conference Number) 2013 in the Indian agriculture has been projected using the normative approach in the context of agricultural production targets. The paper has also explored the potential of renewable energy sources for meeting the rising demand of commercial energy in the context of global climate change. Data Description The study is mainly based on the secondary data except for computation of environmental footprints of energy inputs using primary data. To study the energyuse pattern in the Indian agriculture, data were compiled from various issues of Cost of Cultivation of Principal Crops in India and Input Survey, published by the Directorate of Economics and Statistics, Government of India, New Delhi. Data on commercial energy-use were obtained from various issues of TERI Energy Data Directory and Yearbook to examine the energy growth linkage in Indian agriculture. Results and Discussion Changing Pattern of Energy-use The cost of cultivation data provided by the Commission for Agricultural Costs and Prices (CACP) clearly indicate that the expenses on farm inputs put together have registered a phenomenal increase since the 1990s. Figure 1 shows the movement of all-states average cost on machine labour in production of rice and wheat since 1980s. It can be observed that the costs have increased at a faster pace during the post-reform era. Table 1 presents the costs on machine labour as a proportion of average cost of cultivation in major rice and wheat growing states of the country. A perusal of Table 1 reveals that the contribution of cost on machine labour has increased tremendously in recent years and accounts for the second largest component after wages, in the operational costs of cultivation. The machine labour charges, which were less than 4 per cent of the operational cost in , rose tremendously to 24 per cent in in the case of wheat. This has been due to widespread mechanization of agriculture, as well as frequent upward revision of diesel prices and electricity tariffs. It is worth mentioning that in states like Tamil Nadu, the average cost of cultivation of rice on machine labour was 11 per cent during 2000s as compared to only 2 per cent in 1980s. Moreover, farmers even in the poorer states depend more on machine labour (Table 1). On the other hand, fertilizer charges which used to be the second largest component of the operational cost, though, increased in absolute terms, its per cent share has decelerated over time. Also there are sizeable inter-state differences in the application of fertilizers (Table 2). In view of the increasing share of energy in the cost of cultivation, agriculture is vulnerable to the rise in energy price. If the direct energy prices increase by 20 per cent and indirect energy prices increase by 10 Figure 1. Trend in costs on machine labour for rice and wheat: (Base year ) Source: Based on data in DES, New Delhi

3 Jha : Energy Growth Linkage and Strategy for Meeting the Energy Demand in Indian Agriculture 121 Table 1. Changing shares of machine labour charges in the cost of cultivation of rice and wheat across selected states during (in per cent) State % of average cost of cultivation Rice Andhra Pradesh Karnataka Odisha Punjab Tamil Nadu Uttar Pradesh West Bengal Wheat Haryana Madhya Pradesh Punjab Rajasthan Uttar Pradesh Source: Based on data in DES, New Delhi Table 2: Changing shares of fertilizer costs in the cultivation cost of rice and wheat across selected states: (in per cent) State % of average cost of cultivation Rice Andhra Pradesh Karnataka Odisha Punjab Tamil Nadu Uttar Pradesh West Bengal Wheat Haryana Madhya Pradesh Punjab Rajasthan Uttar Pradesh Source: Based on data in DES, New Delhi per cent, then the total energy cost would be 4.6 per cent higher than the original cost, considering 16 per cent and 14 per cent shares, respectively in the production cost of wheat. This would represent a direct reduction in farm income. The higher fuel costs would further reduce net returns by increasing the marketing costs. Energy Growth Linkage in Indian Agriculture The total commercial energy-use in Indian agriculture has increased from Mega Joules (MJ) in to MJ in (Jha et al., 2012). Accordingly, the estimated energy intensity per hectare of gross cropped area showed a sharp rise from 2.5 thousand MJ to 16.5 thousand MJ during this period. This clearly indicates that energy intensity per unit of area for various crops has increased manifold. The increase in cropping intensity and shift of area towards energy-intensive crops were mainly responsible for this shift. The gross value of agricultural output in real terms ( prices) increased from ` thousand crores in to ` thousand crores in , but the gross value of agricultural output per thousand MJ of energy declined from ` 9060 in to ` 2788 in and thereafter remained almost stagnant with small fluctuations, perhaps due to weather-induced yield variability. This relationship between energy input and agricultural output is affected by several factors such as soil fertility, water availability, policy framework, etc. In this paper, an attempt has been made to examine the relationship between average foodgrains productivity and energy-use in agriculture for major states of the country. In agriculture, energy is directly used as diesel and electricity for pumping and mechanization, and indirectly in the form of fertilizers and pesticides. A standard procedure was used to convert each energy input into common energy unit, that is, mega joules using the conversion factors available in the literature. Table 3 provides the levels of commercial energy consumption and foodgrains productivity in major states of the country based on data for TE Table 3 clearly shows that, in general, states with higher energy consumption have higher agricultural yields. Energy consumption is one of the highest in the states like Punjab and Haryana as agriculture in these states has become energy-inputintensive since the green revolution period. These states have energy consumption seven-times more than the

4 122 Agricultural Economics Research Review Vol. 26 (Conference Number) 2013 Table 3. Commercial energy consumption and foodgrains productivity: TE State Electricity Diesel Fertilizer Yield (GJ/ha) (GJ/ha) (GJ/ha) (kg/ha) Andhra Pradesh Assam Bihar Chhattisgarh Gujarat Haryana Karnataka Madhya Pradesh Maharashtra Odisha Punjab Rajasthan Tamil Nadu Uttar Pradesh Uttarakhand West Bengal All-India Source: Computed by author low-productivity states like Assam and Odisha (4 GJ/ ha). The energy consumption per hectare is the highest in Tamil Nadu while its productivity is relatively low. This could be attributed to the factors like high requirement of energy to draw out the same quantity of water because of the rocky terrain of the state, diversification in agriculture and free electricity to the farmers. Further, on the basis of national average of energy consumption and foodgrains productivity, the major states of the country were grouped into four categories, viz. low consumption low yield, high consumption low yield, low consumption high yield and high consumption high yield and these have been presented in Figure 2. A look at Figure 2 reveals that the higher productivity in the states of Punjab and Haryana was due to high consumption of energy which is also a proxy for higher diffusion of technology. Moreover, states like Uttar Pradesh and West Bengal still use more of traditional energy to achieve higher productivity. The analysis has clearly revealed that productivity of some of the larger states like Bihar, Madhya Pradesh, Maharashtra and Rajasthan is low as their per hectare energy consumption is low. This clearly calls for investment on energy-related infrastructure in order to achieve the targeted growth of four per cent for the country. Energy-use Pattern and Farm Size The recent agricultural input survey data of the Directorate of Economics and Statistics (DES) indicate substantial increase in the use of tractors and cultivators, especially on small and marginal farms which constitute four-fifth of the total number of operational holdings in the country. The growth rate in the number of farm equipments used between and was computed with the help of input survey data and has been presented in Table 4. There is 54 per cent increase in the use of tractors and cultivators on marginal farms. It reveals that more than half of the agricultural land is mechanically tilled, and three-fourths of them use hired services. Further, the share of hired services is more on small and marginal farms. Hence, an exercise was carried out to examine the changing pattern of energy-use with respect to different categories of farmers across various regions of the country. The indirect energy-use in the form of fertilizers was the maximum in the marginal farmcategory and it declined with increase in the farm-size.

5 Jha : Energy Growth Linkage and Strategy for Meeting the Energy Demand in Indian Agriculture 123 Figure 2. State-wise commercial energy consumption and foodgrains productivity Table 4. Growth rate in the number of farm equipments used between and (in per cent) Farm-size groups Power-operated Wells and Tractors Power-driven Power-driven plant protection irrigation and tillage and harvesting equipments equipments cultivators planting and threshing equipments equipments Marginal (<1 ha) Small ( ha) Semi-medium ( ha) Medium ( ha) Large (10 ha & above) All groups Source: Various issues of Input Survey, Govt. of India The marginal farmers (operational holding < 1 ha) applied 55 kg of fertilizers per hectare area during which was double of the fertilizer-use in large farm holdings (>10 ha). During , the marginal farmers used 2.3- times more fertilizer than used by the large farmers. The disparity in fertilizer-use across farm-size categories was observed in both irrigated and unirrigated lands. There is an increasing trend in the use of fertilizers over time across different categories of farmers, except large farmers in the north zone. This may be due to their better awareness about the benefits of appropriate and balanced use of fertilizers. The results from all India Agricultural Census show that the intensity of tube-wells (number of tubewells/ 1000 ha of operational holdings) was higher on small farms. The intensity of tubewells on marginal farms, which was four-times of that on large farmers in , increased to five-times in (Table 5). A similar disparity was observed in both electric and diesel tubewells. Moreover, the intensity of electric tubewells doubled on both marginal and large farms between and , while the intensity of diesel tubelwells declined or remained stagnant on large farms and increased at a slow pace on small-holdings. This clearly reveals the preference of farmers for

6 124 Agricultural Economics Research Review Vol. 26 (Conference Number) 2013 Table 5. Intensity of tubewells in different farm size categories (No. of tubewells per 000 ha) Period Marginal Small Semi medium Medium Large All Electric tubewells Diesel tubewells Total tubewells Source: Various issues of Agricultural Census, Govt. of India electric tubewells across farm-sizes. It may be due to low tariff for electricity supply for agriculture and soaring prices of diesel. The region-wise analysis has provided the just opposite results in the case of northern region where large farmers have size advantage in farm mechanization and the intensity of electric tubewells was three-times compared to on marginal farmers in These results show higher energy-use both directly and indirectly on smaller farms and reaffirm the inverse relationship between-farm size, inputs-use and productivity in the Indian agriculture (Chand et al., 2011). Energy Demand in Indian Agriculture The increasing use of energy-intensive inputs and its positive correlation with agricultural output will certainly increase the demand for commercial energy in the coming years. This necessitates the study of energy requirement for Indian agriculture. Forecasting the future demand for energy in agriculture is a difficult task due to the very nature of agriculture and shifting energy pattern. The demand for energy in agriculture depends on a variety of factors, such as, rate and pattern of agricultural growth, cropping pattern, adoption of technologies, efficiencies and economics of energy utilization and government policies. In this study, a normative approach has been used for developing futuristic scenario of the energy requirement for the agricultural sector. Here, we have conceived two possibilities for future energy demand under the assumption that every state uses energy at par with either the national average of energy-use or the current energy-use of Punjab. Table 3 reveals that at present, on an average, the country uses 6.37 GJ and 3.04 GJ energy equivalents per hectare from electricity and diesel, respectively. In order to achieve the national average of energy-use for the entire cropped area (192 Mha) of the country, the total energy requirement will be million tonnes of oil equivalent (MTOE) constituting the electricity and diesel demands as MTOE and MTOE, respectively. Under the second scenario, if agriculture of every state uses energy at par with Punjab agriculture (17.97 GJ/ha), the future energy demand will be approximately MTOE, double the requirement under the first scenario. This is obvious because the present energy consumption of Punjab agriculture is twice of the national average (Table 3). The states which are lagging behind the national average in terms of energy consumption, contribute more than half to the total gross cropped area and their productivity is two-thirds of the national average. Hence, their enhanced productivity will add another Mt of foodgrains to national production. Essentially, to achieve the national average of energy-use, the energy requirement in Indian agriculture will be double of the current consumption (21.94 MTOE). This energy demand has not included the energy required for agro-processing sectors. Energy-use and Carbon Emissions Energy consumption based on fossil fuels is closely linked with environmental pollution through CO 2

7 Jha : Energy Growth Linkage and Strategy for Meeting the Energy Demand in Indian Agriculture 125 emission, which is contributing to global climate change. An effort was made to identify the factors influencing the energy-related carbon dioxide emission in the agricultural sector of the country using the complete decomposition technique (Ang and Liu, 2007) between 1990 and In the decomposition analysis, the yearly energyrelated carbon dioxide emission from the agricultural sector was evaluated as the product of the pollution coefficient, energy intensity (energy consumption per unit of output) and the economic activity of the sector. Investigations have revealed that the economic growth was the most important contributor to the escalating emissions of CO 2 from the agricultural sector during the previous decade as against the energy intensity component which was the major contributor during 1990s. The low value of intensity component during 2000s indicates that the agricultural sector has started adopting energy-conservation and energy-saving measures due to increasing awareness about the scope for efficiency gains and its impact on environment. The positive intensity component during the 1990s indicated that the agricultural sector failed to use energy efficiently. In India, the supply of energy to agricultural sector is subsidized. This encourages the farmers to overuse of energy, especially electricity, as a kind of common property resource. This leads to inefficiency in energyuse in the agricultural sector. Further, the negative pollution coefficient during the overall period reflects the improvement of fuel switching that is increased use of electricity as compared to diesel by the farmers. Pathway to Reduce Environmental Footprints of Energy Inputs Resource conserving technologies (RCTs) play an important role in enhancing sustainability and resilience of agriculture in the context of climate change. The system of rice intensification (SRI), a method of rice cultivation, conserves resources such as water and energy in rice production and addresses the challenges of climate change. A discussion approach involving farmers, scientists and extension workers, was used to collect quantitative information on all direct and indirect energy inputs used under the transplanted and SRI methods of rice cultivation. An exercise was undertaken to assess the energy footprints of rice under these two methods of cultivation using the energy indicators such as energy efficiency, energy productivity, etc. and are presented in Table 6. It clearly shows that transplanted rice has lower energy efficiency as compared to SRI. This implies that the environmental footprints would be higher of transplanted rice than of SRI since transplanted rice consumes more energy to generate the same calorie energy than SRI. In other words, SRI method of rice cultivation is more energy efficient. Energy efficiency indicates potential environmental impacts of rice production under different methods of cultivation. These indicators are useful only for the comparative purposes. The actual environmental footprint may be negative or positive, for instance, depending on the fertilizer input rates and net carbon sequestration effect. Strategy to Meet the Rising Demand of Commercial Energy in Agriculture In view of global climate change, volatile crude oil prices and limited supply of fossil fuels, it becomes imperative to promote use of alternative renewal sources of energy to meet the growing demand for commercial energy. The estimated and installed capacity and projected target for the renewable energy sources for the country is given in Table 7. Out of these resources, biomass and crop residues as well as solar energy are increasingly being relied upon in order to utilize clean energy sources and also bridge the demand-supply gap. Table 6. Indicators of energy-use under transplanted and SRI method of rice cultivation Indicator Definition Rice Transplanted SRI Energy efficiency (ratio) Total energy output (kw h) / Total energy input (kwh) Energy productivity (kg / kwh) Grain yield (kg) / Total energy input (kwh) Total energy input (kwh/ha) Both direct and indirect energy inputs (kwh/ha) 7,077 5,294 Source: Computed by author

8 126 Agricultural Economics Research Review Vol. 26 (Conference Number) 2013 Table 7. Estimated potential, installed capacity and target of renewable energies (in MW) Energy source Estimated potential Installed capacity (2012) Projected target (2017) Wind power 49,130 17,353 27,300 Micro/ Mini/Small hydro power 15,399 3,395 - Biomass/Bio-energy 17,538 3,135 5,524 Cogeneration bagasse 5,000 1,616* 3,216 Waste to energy 2, Solar energy MW/km ,035 Source: Ministry of New and Renewable Energy Sources, Govt. of India *Data available for India currently produces approximately Mt of crop residues per year (MNRE, Govt. of India, 2009). Among different crops, cereals generate maximum residues (352 Mt), followed by fibres (66 Mt), oilseeds (29 Mt), pulses (13Mt) and sugarcane (12Mt). Broadly these crop residues are used for animal feeding, soil mulching, bio-manure making, thatching for rural homes and fuel for domestic and industrial use. A large portion of the excess residues, i.e. the total residues generated minus residues used for various purposes, are burnt on farm primarily to clear the field for sowing of the succeeding crop. The estimates suggest that crop residues being burnt in the fields in India are in range of Mt (IARI, 2012). This presents a substantial potential that can be utilized for power generation. In comparison with other renewable energy sources, biomass source is storable, inexpensive, energy-efficient and environmentfriendly. Table 7 shows that an estimated 18,000 MW can be produced from the available biomass. In addition, another 5,000 MW is expected to be produced from the bagasse obtained from sugarcane residues. At this juncture, it is worth mentioning that Kalpataru Power Transmission Limited (KPTL) is successfully generating energy from crop residues in the districts of Ganganagar and Tonk of Rajasthan. In Tonk, the plant utilizes 80,000 tonnes of biomass, mostly from mustard crop, annually and generates 1.5 lakh kwh energy per day (IARI, 2012). The major constraints that are faced while generating energy from crop residues are fluctuations in the supply of crop residues, high transportation costs, low energy content, spread locations and poor infrastructural settings. Over the past few years, India has taken several initiatives towards installation of solar power plants for electricity generation. Under the National Solar Mission, which is a major initiative to promote ecologically sustainable growth while addressing India s energy security challenge, the country aims to contribute to the global effort towards meeting the challenges of climate change and increase its reliance on renewable sources of energy. India receives about kwh solar energy per year. The available annual potential of solar energy is 33,000 MW under the assumption that 1 per cent of area will be exploited at the rate of 20 MW/km 2. Hence both technology routes for conversion of solar radiation into heat and electricity, namely, solar thermal and solar photovoltaic, can effectively be harnessed providing huge scalability for solar energy in India. Off-grid decentralized and low-temperature applications of solar-energy are advantageous to India from a rural electrification perspective and meeting other energy needs for power and heating and cooling in both rural and urban areas. The constraint to scalability will be the availability of space, since in all current applications, the solar power is space-intensive. In addition, without effective storage, solar power is characterized by a high degree of variability. In India, this would be particularly true in the monsoon season. At present, initial investment in solar-based machinery is high as compared to on fossil fuels, hence the government should provide adequate incentives to enable the rapid scale-up of the capacity. The future course of action requires a robust national system of innovation with a long-term vision that closely integrates and coordinates public and private research and development (R&D) expenditure on renewable energy sources with favourable policies to pull these technologies in the marketplace.

9 Jha : Energy Growth Linkage and Strategy for Meeting the Energy Demand in Indian Agriculture 127 Conclusions The study has shown that the costs on machine labour have increased tremendously in the recent years and account for the second largest component after wages, in the costs of cultivation, mainly due to widespread mechanization and frequent upward revision of energy prices. As the majority of Indian farmers are price-takers and lack capacity to quickly pass on the increase in cost through the marketing chain, and therefore, any rise in the production cost will reduce the farm profitability at least in the shortrun. The higher fuel costs increase the marketing cost which further reduce the agriculture sector s net returns. In the long-run, a sustained rise in energy prices may affect input use and production practices. On the output side, it will raise the output prices which have far more serious implications for food security, poverty alleviation and the cost of industrial production. The state-wise analysis of energy-use and foodgrain productivity has demonstrated that energy use in the high-productivity states is seven-times more than that in the low-productivity states (4 GJ/ha). The results have clearly revealed that productivity of some of the larger states like Madhya Pradesh, Maharashtra and Rajasthan is low as their per hectare energy consumption is low. Moreover, the states like Uttar Pradesh and West Bengal still use more of traditional energy. This clearly calls for investment on energyrelated infrastructure in the states having low energy consumption in order to achieve the targeted growth of four per cent. The data from agricultural input survey have shown that marginal farmers use more energyintensive inputs as compared to large farmers, except in the northern region, which reaffirms the inverse relationship between farm-size and productivity in the country. The energy foresight exercise has suggested that the energy requirement in Indian agriculture will be of million tonnes of oil equivalent (MTOE), which is twice of the present consumption level (21.94 MTOE) for achieving 280 Mt of foodgrains production by The study has also indicated that economic growth is the most important contributor to escalating emission of carbon dioxide in the agricultural sector. Enhanced farm energy demand will call for a robust energy policy which should ensure reliable supply of energy to the agricultural sector, particularly to the small farmers at an affordable cost and drastically reduce the amount of carbon dioxide and other greenhouse gas emissions. This can be achieved by replacing the fossil fuels by renewable fuels. Hence, the future trend should be towards using alternative energy sources. The technological breakthroughs are making this transition possible and biomass as fuel for power, heat and transportation has the highest mitigation potential of all the renewable sources. The biggest challenge in using biomass residues is a longterm reliable supply at a reasonable cost. Acknowledgement The author gratefully acknowledges the intellectual inputs received from Dr. Suresh Pal, Head, Division of Agricultural Economics, IARI, New Delhi, during the preparation of the paper. References Ang, B.W. and Liu, Na (2007) Energy decomposition analysis: IEA model versus other methods. Energy Policy, 35: Chand, R., Prasanna, P.A.L. and Singh, A. (2011) Farm size and productivity: Understanding the strengths of smallholders and improving their livelihoods. Economic & Political Weekly, 46: DES (Directorate of Economics and Statistics) Cost of Cultivation of Principal Crops in India (various issues), Government of India, New Delhi. Jha, G.K., Pal, Suresh and Singh, Alka (2012) Changing energy use pattern and the demand projection for Indian agriculture. Agricultural Economics Research Review, 25(1): IARI (Indian Agricultural Research Institute) (2012) Crop Residues Management with Conservation Agriculture: Potential, Constraints and Policy Needs, New Delhi MNRE (Ministry of New and Renewable Energy Resources) (2009) Govt. of India, New Delhi. biomassresources. Pachauri, R.K. (1998) Economics of energy use in agriculture. Indian Journal of Agricultural Economics, 53: Raghavan, M. (2008). Changing pattern of input use and cost of cultivation. Economic and Political Weekly, 28: TERI (The Energy Research Institute) Energy Data Directory & Yearbook (various issues), New Delhi.

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