Experts criticise ‘subsidy regime’, flag falling water table in Punjab, Haryana

Experts pointed out that despite mounting ecological stress, policy distortions, especially subsidies on electricity and fertilisers, continue to incentivise the cultivation of paddy and wheat. These subsidies, while politically sensitive and historically justified, are now widely seen as the biggest barrier to diversification.

Ramesh Chand, a member of NITI Aayog, expressed concern over the structural challenges facing Punjab’s agricultural economy. He noted that while the state had once been a model of agriculture-led growth, particularly during and after the Green Revolution, it has struggled to maintain that momentum in recent decades. According to him, agricultural growth has hovered around 4.6 per cent over the past two decades, but this has not translated into broader economic dynamism.

Chand also highlighted the paradox facing Indian agriculture. He said, “On one hand, the country is sitting on a buffer stock of nearly 71 million tonnes of foodgrains, costing around Rs 35,000 crore annually to maintain and on the other hand, India continues to spend thousands of crores in foreign exchange to import pulses and edible oils. This imbalance is giving us a message that there is urgent need for diversification.”

He added that innovation and research are critical to this transition. However, he lamented that institutions such as Punjab Agricultural University (PAU) lack adequate funding for research into alternative crops and new seed varieties. “If PAU Vice-Chancellor Dr SS Gosal does not have funds to carry out research, what would he do? If the state can charge 3-4 per cent tax on foodgrains, why cannot it set aside an R&D fund of 1 per cent,” he said.

Calling for a forward-looking approach, Chand advocated increased focus on crops like basmati rice, horticulture, and maize. He noted that only 2.3 per cent of Punjab’s cultivated area is currently under horticulture, and expanding this to 10 per cent could significantly boost the state’s economic growth. He also pointed to the potential of maize as a feedstock for ethanol production, noting that ethanol blending in petrol has already reached 10 per cent.

Sukhpal Singh of Indian Institute of Management Ahmedabad described electricity subsidies as a major obstacle to crop diversification. He argued that such subsidies disproportionately benefit farmers with access to tube wells, while small and marginal farmers often remain excluded.

He said that diversification must be understood as a risk management strategy. Farmers, he explained, prefer crops that offer assured procurement, stable prices, and low market risk, conditions that currently favour paddy and wheat. In contrast, alternative crops come with higher uncertainty, making farmers reluctant to shift.

He pointed to the absence of a robust crop insurance mechanism in Punjab. Despite earlier promises by the state government to develop its own scheme after rejecting a central programme, no effective system has been implemented even after more than a decade. Without risk mitigation tools such as insurance, Sukhpal argued, diversification efforts are unlikely to succeed. “We have been saying no to crop insurance on the plea that our crop is 100 per cent irrigated. But there are so many factors. You cannot protect the crop from high temperatures, hail and floods. We have to go for crop insurance.”

Raising concerns about institutional inefficiencies, he questioned how long agencies like the Food Corporation of India could continue to shoulder the burden of procurement across multiple states. “We have been milking one agent y-the FCI. For how long can one agency sustain the entire agriculture produce?” He also criticised Punjab for failing to take advantage of central schemes such as additional MSP packages for alternative crops and the Bhavantar Yojana.

He also pointed to the lack of infrastructure, particularly cold storage facilities in vegetable markets, as a key bottleneck. “We urge farmers to diversify, but fail to provide the necessary ecosystem,” he remarked, adding that commission agents in some cases now earn more per acre than farmers themselves.

Ashok Gulati, a distinguished professor at Indian Council for Research on International Economic Relations and former chairman of the Commission for Agricultural Costs and Prices (CACP), underscored the fiscal burden of existing subsidies. He pointed out that the urea subsidy alone stands at around Rs 1.25 lakh crore and is expected to rise further, while state governments continue to spend heavily on electricity subsidies.

He proposed doubling the central government’s subsidy for non-paddy crops from Rs 17,500 to Rs 35,000 per hectare, stating that farmers would only shift if they are assured incomes comparable to paddy cultivation. “We need to move from a cereal-centric system to a demand-driven, high-value agricultural model,” he said, calling for better market linkages and policy alignment.

Gosal highlighted the adverse impact of continuous rice cultivation on soil health. He noted that paddy not only consumes large quantities of water but also depletes essential nutrients from the soil. He said that while farmers are open to change, they need viable and profitable alternatives.