Hybrid rice- Jharkhand Impact of Private R&D returns and Productivity of Hybrid Rice in India Carl E. Pray Agricultural, Food and Resource Economics Dept Rutgers, the State University of New Jersey pray@aesop.rutgers.edu Presented at the ICABR meetings, Rome, Italy (June 27-29 th, 2011)
The Issues of Current Debate in India and elsewhere in Asia (and Africa??) 1. Yield growth and in some cases actual yields of rice in India, China, and other intensively farmed regions appear to be declining 2. Private sector R&D in Rice has grown rapidly is this R&D actually leading to higher yields on farmers fields? 3. Who benefits from these hybrids? a. Seed companies or farmers or both? b. Can small farmers benefit? c. Can food insecure (i.e. poor, rainfed) regions benefit? 2
Area under hybrid rice in India ( 000 ha) 1995-95 to 2010-11 3500 3000 3000 Area "000 Hec ctares 2500 2000 1500 1000 1400 500 0 10
Rice Research Investment by Private Firms in India Firms with R&D (Number) R&D Expend for rice (Mill. Rs) Share of the Hybrid rice market (%) 1995 2008-09 1995 2008-09 1995 2008-09 15 24 16 625 < 30 95 Source: Pray and Ramaswami (2001); Pray and Nagarajan(2011) ICAR -1989 initiated Hy Rice research support from UNDP MAHYCO Res Foundation -1990-96 Nearly 10 % of total R&D expenses of firms is allocated for rice
Rice Seed Market in India (2008-09) Variety use Area Yield / ha % % Kg/Ha Public/Local varieties 93.7 93.9 4400 Public hybrids 0.2 0.3 6600 Proprietary hybrids 6.1 5.9 5200 Source: Francis-Kanoi Data on Paddy, India (2008-09) Of the total rice market in India - 94 % under OPVs/Local 95 % of the hybrid rice market Private sector Leading firm Bayer (45 % of quantities and value sold) Other lead players include Pioneer, Advanta, Nath, JK Agri, Syngenta, Mahyco and Bioseeds Total hybrids developed till 2008-09 : 28 (Public); 15(Private)
Hybrid rice market share of private firms (2008-09) Qty of seeds Value of seeds % share Rs. Million % share Companies 000 tones 1 Bayer Crop Science 14.7 44.7 2618 43.4 2 Nath seeds 4.2 12.8 662 12.8 3 PHI seeds 3.7 11.2 773 11.0 4 Ganga Kaveri 1.7 5.2 327 5.4 5 Advanta 1.6 4.9 318 5.3 6 Nuziveedu 1.0 3.0 175 2.9 7 Bioseed 0.8 2.4 147 2.4 8 Mahyco Seeds 0.6 1.8 116 1.9 9 Syngenta 0.6 1.8 93 1.5 10 Monsanto 0.4 1.2 77 1.3 11 Emergent Genetics 0.2 0.6 30 0.5 12 Other companies 3.4 10.3 699 11.6 Total 32.9 100.0 6035 100.0 6
Diffusion of proprietary rice hybrids in India Hybrid rice Area out of total rice area Quantity of seed sales States % 000 Tons Value of seeds sold Rs Mill Yield Kg/Ha Start year of hybrid rice Jharkhand 7 2 352 5200 2002-03 Bihar 8 4 735 5100 2004-05 Orissa 4 22 530 4400 2005-06 Maharashtra 3 0.1 72 3700 2004-05 Uttaranchal 1 0.1 4 4200 2002-03 Uttar Pradesh 29 23 426 5000 1998-99 Eastern U.P districts 21 5190 Haryana 20 2 331 6400 2004-05 Punjab 6 2 262 6900 2002-03
Map of India showing Hybrid Rice Growing States Hybrid rice- Jharkhand 8
Diffusion of proprietary rice hybrids in India Major concentrations of hybrid rice are in the eastern states of (eastern) UP, Jharkhand, Orissa, Bihar Cultivated under medium, upland and low land conditions Northern states of Haryana and Punjab Cultivated under low lands and irrigated Adoption in western and southern India is negligible due to Grain quality constraints Agro-ecological no hybrids for shallow low lands, coastal areas, and soils Insufficient yield advantage over existing MVs (<10-15%)
Impacts : 1. Yield Impact in hybrid rice growing regions of India State All rice varieties & hybrids Private Hybrids Varieties Bihar 3909 4400 3600 Haryana 5931 6400 5200 Jharkhand 3481 5100 3100 Maharashtra 3393 3700 3200 Orissa 4200 4400 3400 Punjab 6580 6900 6600 Uttar Pradesh 4600 5000 4300 Eastern U.P 5190 4640 Private hybrids On an average 800 kg/ha than all varieties (OPVs) Public Hybrids yields were found only in Punjab and Haryana Average yields of public hybrids reported are 7100 and 7200 kg/ha respectively. 10
Econometric estimate impact of proprietary hybrids on yields Data source: Francis-Kanoi Marketing Research Firm, Chennai, India syndicated study on rice-paddy in India(2009) 14 major rice states, covering 139 districts and 11,500 farmers Of the 14 states, 7 states only reported hybrid rice acreage 96 different cultivars of rice 58 OPVs and 36 private hybrids, 2 public hybrids OLS estimation with an empirical specification: Yield c,s = f ( Seed rate c,s + Private Hybrids Dummy c,s + Pesticide or Fertilizer cost s + % rice under irrigation s + % of farms under 5 acres s + # of years hybrids grown s ) c= cultivar(hybrids or varieties), s=state 11
Impact of private hybrids on rice yields Variables Definition Coeff Std. Err P > t Use of private hybrids Rice Private Hybrids=1 611.63 220.10 *** (1/0 variable) All Varieties =0 Location effects # Base category is Maharashtra UP, Bihar, Jharkhand, Orissa =1 1630.1 508.1 *** Punjab, Haryana =1 1264.5 490.1 *** Seed rate used by farmers Kg/Ha (- ) 15.30 5.79 ** Cost on plant protection Rs/Ha 1.91 0.51 *** Rice area irrigated out of % (state level) ( - ) 6.72 6.11 NS total area # of times private hybrids Number (-) 81.1 130.92 NS is tried or grown Farm Ownership % farms less than 5 (- ) 6.87 8.99 NS acres Number of observations 96 F(7,88) 31.1 Prob > F 0.0000 R-Squared 0.7403 Adj R-Squared 0.7161 12
Results..yield impact Impact of private rice hybrids on yields is positive The impact of rice hybrids on yields are significant in eastern and northern states than western state of Maharashtra Seed rates are negatively related to yield perhaps because farmers in with better water control are more likely the transplant paddy while in areas with poor water control and in medium and upland regions more farmers broadcast seed using more seeds but get lower yields. Higher pesticide expenditures are positively related to yields but state irrigation levels are not % of small farms in the state is also not significant (but district level results show more robust results) 13
Projected benefits of private hybrids to seed firms and farmers Indicators 2008-09 2011-12(P) 2015(P) Yield Impact Additional output from private hybrids over HYVs a (Mill. Kg) 989 2,565 7,524 Total rice production b (Mill.Kg) 93,000 93,000 93,000 Additional production due to hybrid rice as share of total rice production (%) 1.1 3 8 Seed sales revenue (Firms) Private hybrids area c (Mill.Ha) 1.2 2.9 8.4 Private hybrids seeds produced d (Mill.Kg) 16.5 42.8 125.4 Seed procurement cost e (Mill.Rs) 635 1,881 6,207 Average retail seed sale price of private hybrids f (Mill.Rs) 1,388 3,848 11,913 Net revenue realized by firms g (Mill.Rs) 753 1,967 5,706 Benefits to farmers Additional revenue realized by increased output h (Mill. Rs) 11,868 30,780 90,288 Farmer Increased net revenue to farmers due to using Benefits additional output produced i (Mill.Rs) 11,651 26,933 89,494 14 Assumptions on calculations are explained in the full paper.
Measuring returns to private research on rice Benefits to Society 95 % of hybrid rice area in India is proprietary origin 17 % increase in average yields (900 kg/ha) over the existing HYVs at the national level Additional output gain due to hybrids : 989 million kg (2008-09) worth Rs 12 billion (US$ 266 million) 90 % of these benefits go to farmers Benefits captured by firms Mean seed price paid per kg of hybrids is Rs.74.4/Kg compared to Rs. 30.1/Kg for varieties Capture 7.5 % of the benefits or Rs 753 million (US$ 16.7 million) as net income (not incl. research expenses) in 2008-09 Internal rate of return to private rice research expenditure 7 to 8% 15
Small food insecure farmers benefit from rice hybrid cultivation a. Hybrid rice yields by farm size (Kg/ha) at the district level HYVs/Local Public Private Land size varieties Hybrids Hybrids Up to 2 acres 4228.3 5276.7 5217.5 2.1 to 5 acres 4215.8 5231.3 5213.6 5.1 to 10 acres 4217.0 5985.7 5184.6 Over 10 acres 4266.0 6676.3 5230.8 Total 4230.1 5884.2 5209.5 b. Average yield comparison in food security districts (kg/ha) Food security districts HYVs/Desi Public Hybrids Private Hybrids Total 3969 3303 4937 16
Back to initial issues Hybrids are contributing to yield growth particularly in regions which the Green Revolution missed. Private R&D is providing most of the hybrids and these hybrids have higher yields Who benefits from these hybrids? a. Farmers get 90% of benefits, private firms 7.5% b. Small farmers are obtaining benefits their gains per ha are greater than large farmers c. Farmers in food insecure districts (i.e. poor, rainfed) regions are also benefitting partly due to govt subsidies 17
Assumptions.. e Seed procurement cost at farm-level is Rs.35/Kg plus 10 % distribution cost incurred by firms = Rs.38.5/Kg for 2008-09; We projected Rs.40 and Rs. 45/ kg as procurement costs at farm level for 2011-12 & 2015 with 10% additional distribution costs; f Average retail price obtained by firms across hybrid rice growing states in 2008-09 (Francis-Kanoi data) was Rs.84.2 /Kg; We projected Rs. 90 and 95 as retail prices for the rest of years and revenues were calculated based on the same. g Net revenue = Total revenue from seed sales Seed cost h Total revenue is the price realized per kg of rice output for 2008-09 is Rs.12/Kg ; ; i Benefits to farmer = (Value of increased yield due to private hybrids/ha increased seed cost incurred due to buying hybrids) * area under private hybrids. 18