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In Punjab polls, an opportunity for agri-reform

Punjab needs to switch from supply-driven agriculture, based on wheat and rice, to a demand-driven system. Election manifestoes and campaigns could begin a much-needed conversation.

Written by Kavery Ganguly , Ashok Gulati |
Updated: January 17, 2022 9:37:10 am
While fruits and vegetables account for 7.4 per cent of the value of the output of agriculture and allied sectors, livestock accounts for 31.5 per cent and fisheries less than 1 per cent. (Illustration by C R Sasikumar)

Lately, Punjab politics has been making headlines, not always for the right reasons. The security lapse during the prime minister’s visit and the infighting within political parties signal that all is not well in the state. At the same time, all parties have made the betterment of the farming community their campaign plank in the upcoming assembly elections. The agitating farmers have launched their own party. It is no secret that Punjab, once the frontrunner of Indian agriculture, is struggling to retain its dynamism. While Punjab ranked at the top of major Indian states in terms of per capita income during 1967-68 to 2002-03, it has slipped below the 13th position and will keep falling in this ranking if business as usual continues.

Policies that once empowered farmers in Punjab to usher in the Green Revolution are fast losing relevance. Strong political will and rational policy choices with a futuristic outlook are needed, not populism, if Punjab is to retain its crowning glory — agriculture. That Punjab needs to diversify towards high-value agriculture was advised by S S Johl, the wise man of Punjab, way back in 1986. But not much seems to have moved on that front.

Punjab’s agricultural growth rate, at 5.7 per cent, was more than double the country’s average of 2.3 per cent during 1971-72 to 1985-86. This has reversed between 2005 and 2019 with Punjab at 1.9 per cent and India at 3.7 per cent (see graph). The latest NSSO-SAS data for 2018-19 reveals that on the criteria of agricultural household income, when normalised on a per hectare basis, Punjab ranks 11th amongst major states. And if one uses the landholding size as given in the Census of 2015-16 (3.62 hectares), Punjab slides to the 21st position.

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With almost 85 per cent of the gross cropped area under wheat and rice, agriculture is least diversified in the state. Guaranteed MSP for wheat and paddy, backed by assured procurement, free power and highly subsidised fertilisers, has disincentivised diversification. Mandi transactions cost about 8.5 per cent of the MSP, the highest in the country, making Punjab wheat and rice less competitive. On the environment front, nearly 80 per cent of the blocks in the state have overexploited water reserves and in many other places, the water table is depleting at the rate of nearly a meter a year. Soils are getting degraded, and stubble burning makes it worse.

But the political economy around wheat and rice is so intense that any effort to address its distortionary impact is met with fierce opposition by vested interest groups. However, there is still a glimmer of hope to recalibrate Punjab agriculture towards higher, sustainable growth. While fruits and vegetables account for 7.4 per cent of the value of the output of agriculture and allied sectors, livestock accounts for 31.5 per cent and fisheries less than 1 per cent. The state has the highest per capita availability of milk but it can process less than 20 per cent of it. This needs to be augmented. It is also a significant player in seed potato and with the right package of practices, traceability systems, and infrastructure, the market for Punjab seed potato can be strengthened. Alternative marketing channels for fruits and vegetables such as direct marketing, contract farming, and exports have been in place but these models need to be scaled up with the right ecosystem.

By adopting a “markets first” approach, Punjab can ensure that farmers benefit from higher sustainable net returns. Punjab needs to switch from supply-driven agriculture to demand-driven agriculture. The demand for fisheries, poultry, dairy, and fruits and vegetables is increasing way faster than the demand for wheat and rice. Time-bound incentives in the form of freight subsidies for exporters of high-value agri-produce, tax exemptions for the processing of perishable commodities for value chain players would be more rational than the overloaded subsidies of urea and free power. Rationalising mandi charges to not more than 3 per cent will attract private sector investments in building efficient value chains. Promoting mega parks for value addition in fruits and vegetables, milk, and other livestock products through medium and small enterprises will strengthen its competitiveness.

Punjab should leverage the start-up revolution that is unfolding in India, and use technology to ensure optimal utilisation of resources, expand markets, and augment farmers’ income. Geo-tagging of farms can address concerns related to long-term leasing of land that is critical for large-scale investments and enable vibrant agricultural land markets. The digitalisation of markets will generate real-time information on input sales, market arrivals, transactions, and payments and allow transparency in marketing practices. Innovations in supply chain management, be it automated grain silos or state-of-art herd management will not only optimise the use of resources but also bring in traceability of farms and animals, early monitoring and prevention of disease outbreaks, and contain value chain losses. As value chains develop and cater to international markets, compliance with food safety standards and norms need to be adhered to. Initiatives such as Innovation Mission Punjab can nurture the local ecosystem of start-ups, farmers, other private players, and the government to create efficient value chains.

To unlock the financial resources needed to reboot agriculture in Punjab, the state government needs to take some bold steps in consultation with the Centre. It should rationalise its fertiliser subsidy regime by moving towards cash transfers on a per hectare basis and free up fertiliser prices. If that’s not possible, then urea should be included in the nutrient-based subsidy scheme. Also, bring soluble fertilisers under subsidy, which will enhance fertiliser use efficiency through fertigation. This will also help reap environmental gains. Food subsidy can also be rationalised through direct cash transfers replacing PDS, as Punjab is a grain surplus state. The bottom line is that Punjab needs to almost halve its area under common paddy to promote crop diversification.

Both environmental and financial sustainability concerns related to business-as-usual farming in Punjab call for a rebooting strategy. But will any political party take up these issues in its manifesto?

Ganguly is senior research fellow and Gulati is Infosys Chair Professor at ICRIER

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