Punjab was Indian agriculture’s star performer during the Green Revolution’s heyday. The state averaged an agri-GDP growth of 5.7 per cent per annum between 1972 to 1986, more than double the all-India average of 2.3 per cent in the same period. But thereafter, the Green Revolution began to gray. The growth rate of Punjab’s agriculture fell to 3 per cent per between 1987 to 2005 — almost the same as that of the 2.9 per cent growth rate registered by the country in agriculture during this period. Between 2006 and 2015, the state’s agri-growth rate plummeted to 1.6 per cent — less than half the all-India average of 3.5 per cent (see Graph 1). During this period, states such as Madhya Pradesh registered a growth rate of more than 9 per cent in agriculture.
It is not that Punjab has a high value of agri-output per ha that is slowing down its growth rate. The state is nowhere near the top in that ranking (see Graph 2). Getting the state back to a 5 per cent growth path is thus a matter of serious concern. Punjab used to have the highest per capita income amongst the 21 large states of the country till 2003. But it has slipped to the seventh position, and unless there are drastic policy changes, the state is going to slip further.
Punjab is endowed with one of the best possible infrastructures for agriculture in the country. It has the highest irrigation cover amongst all states — 98.5 per cent of its cropped area is irrigated. Almost 80 per cent of irrigation is from groundwater sources, facilitated by highly subsidised power. Power subsidy in the state’s current budget has crossed Rs 7,000 crore. This is much higher than the subsidy provided to any other agricultural input. Much of the large power subsidy goes into the cultivation of rice, a water-intensive crop — it requires 25 rounds of irrigation in a season. The power subsidy, then, is leading to the depletion of the state’s water table. Punjab’s water table receded at the rate of 70 cm per year during 2008 to 2012 — 110 of the 132 blocks have been declared as over-exploited. This is the biggest bane of Punjab agriculture.
Punjab does have advantages in other areas. Almost all villages in the state are connected with pucca all-weather roads. The network of regulated mandis in Punjab is one of the best in the country. A robust and fast-moving procurement system has reduced the market risks of wheat and paddy growers in the state. Almost 90 per cent of the market arrivals is procured at the minimum support price (MSP). But this system has also made Punjab’s farmers risk averse. This is today the biggest bottleneck in farmers diversifying from the wheat-rice cycle, which occupies more than 83 per cent of Punjab’s cropped area.
What can be done to make Punjab’s agriculture sustainable, especially with respect to its groundwater resources, without hurting farmers’ incomes? Diversification from common rice to hybrid maize is one option, which can save power subsidy and groundwater, and yet give farmers almost the same income as paddy. But farmers are reluctant to switch to maize because there is no effective procurement system for this crop. Our suggestion to the Punjab government is to tap the savings in power subsidy — roughly Rs 10,000/ha — which could accrue once farmers switch from paddy to maize. The state could use these savings to cover the risk of maize farmers by promoting feed mills for poultry and silage units for milch cattle and encouraging starch industries that use maize.
With the new GST regime coming into force, the processing industry could be incentivised to prefer Punjab over other states in purchasing agricultural raw material. To help the state regain ecological balance, any losses on account of procurement may be borne by the Centre. Measures have to be taken to offset the reduction in the area under paddy in Punjab (except basmati, which delivers much higher price to farmers). There should be vigorous efforts to increase productivity and procurement of rice in the eastern states which get much higher rainfall and are more suitable for paddy cultivation. Simultaneously, Punjab should promote the use of micro-irrigation, especially for sugarcane and fruits and vegetables.
The dairy and meat industries are other sources of diversification for Punjab’s agriculturalists. The state has the highest yield of milch animals in the country and its per capita consumption of milk is also the highest in the country. But the state processes just about 10 per cent of the milk it produces — Gujarat, in contrast, processes about half of the milk it produces. Punjab needs to incentivise private and cooperative dairies to invest in processing milk and milk products. It should target a 20 per cent increase in processed milk in the next five years. More than 67 per cent of milch animals in Punjab are buffaloes. If the state can eradicate the foot and mouth disease, buffalo meat from Punjab can be sold at premium rates in international markets, ultimately benefiting the state’s dairy farmers.
The state’s farmers should also diversify towards fruit and vegetables. Less than 3 per cent of the cropped area in Punjab is under fruit and vegetables. This needs to go up to 10 per cent over the next five years. However, the government will need to invest in marketing infrastructure for fruit and vegetables, as it did for grains by creating a robust mandi infrastructure. With protected cultivation and an integrated cold chain, backed by a robust food processing industry, Punjab can tap the market for fresh and processed produce in West Asia and Central Asian countries. A modern expressway from Khanna to Kandla could be helpful in the faster transportation of fruit and vegetables.