‘End free power, give cash incentives to farmers & fix trust deficit’

Agriculture in Punjab and Haryana has been going through a difficult phase, with climate change affecting crop production and farmers still finding safety in the minimum support price (MSP)-protected wheat and paddy. In this episode of The Tribune Newsroom, NITI Aayog Member Ramesh Chand and Distinguished Professor, Indian Council of Research in International Economic Relations, Ashok Gulati, spoke to The Tribune’s Deputy Editor Ruchika M Khanna and reporters and senior editorial staff of The Tribune Group on why horticulture crops were the best way forward for farmers and why the government should replace power subsidy with cash incentives. Excerpts from the interview:

Ruchika M Khanna: How do you see the next phase of growth in agriculture?

Ashok Gulati: Let me first say that the country has to salute the farmers of Punjab and Haryana for giving the nation food security. The Centre and the state came together to do this, and today we have very comfortable stocks, we are giving free food to over 800 million people. We are also the largest exporter of rice in the world. But if you want to increase the farmers’ income and ensure sustainability in the production process, then I think they need to switch gears.

Today we do not need more of rice, but more of protein, vitamins, fruits, vegetables, fish, chicken, meat and eggs. New type of value chains need to be put in place to give Punjab and Haryana a different direction. The soil is getting damaged, while the water table in the state is depleting at the fastest rate in the country, by almost 1.7 feet a year. Besides, greenhouse gas emissions in rice cultivation are almost five tonnes per hectare and biodiversity is also being lost.

What is the model of sustainable agriculture that the NITI Aayog wants to profess for both Punjab and Haryana?

Ramesh Chand: We should promote balanced approach. While sustainability is important, we cannot ignore growth and agriculture, especially in Punjab, where there is scope to use agriculture as an engine of growth.

In fact, the slowdown in Punjab agriculture began in early 90s when we started with the reforms like liberalisation. Before that time, the growth rate of agriculture was four to six percent, but since then it has continuously decelerated and now it is below two percent. Punjab is missing something because of which its growth rate in agriculture is decelerating and that is affecting the overall growth of Punjab economy too.

However, we should not promote growth mindlessly as natural sources like water are important. Besides, there are quality issues as well as issues related to too much increase in the concentration of two crops, which has implications on ecology, disease, pest, etc.

It is not that if we keep promoting growth of agriculture, it will be anti-sustainability. In Punjab and many other states, free power supply is provided for agriculture. I am suggesting that the amount of subsidy that given to the power sector, it should be given to farmers on per hectare basis. Put metres on the tubewells, and then whatever electricity is used by a farmer, he or she should pay for that electricity.

Are you recommending doing away with free power subsidy?

Chand: Replacing, not doing away. This is a very fine distinction, but it must be maintained. If you only say free power should be removed, farmers will not accept it, and the government will also lose a lot of goodwill.

So, what we are suggesting is that the mode of paying power subsidy be changed from free power to direct benefit transfer to farmers, making payment on per acre or per hectare basis. So, that whatever income they were earning from that power it remains and they can earn more income by making judicious use of water.

Do you agree that the power subsidy is the bane of agriculture is, and is the reason why farmers not going ahead with crop diversification?

Gulati: There is a state policy of free power, and then there is a bigger subsidy from the Centre for fertilisers. Urea is almost 85 to 90 per cent subsidised. So, you have created an incentive structure, in which crops that are water intensive and fertiliser intensive gain because of this massive subsidy.

The subsidy on fertiliser is going to be Rs 2 lakh crore this year. Subsidised urea is damaging your soils and also damaging your environment, because the plant does not consume more than 40 per cent of the nitrogen that you are applying, the rest is going in the environment.  If it is causing environmental damage to soil, water, air and biodiversity, you need to fix that as Ramesh Chand said, ‘Directly give subsidy for power and fertiliser to the farmer’.

So, what is the alternative to paddy?

Chand: The diversification will be guided by three things. Firstly, we need to ensure that growth does not stop. If you tell farmers that you grow pulses in place of paddy, immediately per hectare production drops to half. Second is sustainability and third, in the case of Punjab, particularly, is employment. Diversification has to be designed around these three goals. As the first step, we need to move from two per cent area under high value horticulture crops to 10 per cent of the area.

Gulati: At the end, you need to have higher income for farmers. You have to ensure that the farmer gets the maximum share of what the consumer is paying for these high value crops.

You have to literally move from the plate to the plough, that is you have to first find the markets and then link up the story backwards. People in the country need more of protein. The fastest growing sector in the country within agriculture is fishery. In Sirsa district of Haryana, farmers who started shrimp farming are earning five to six times than what they were earning from paddy. Poultry is another good option.

Do you agree with the farmers’ demand for a legal guarantee for MSP on crops?

Chand: Prices cannot be assured through legal means…It has been tried, and it has failed. If you want to do it using legal means, the government will be required at some stage to buy 100 per cent of the produce that comes into market…Those are very awkward kind of things. The MSP has two purposes: To ensure that farmers get proper price from traders and proper profit margin. But the market has much stronger power that the MSP to benefit farmers.

Do you support contract farming in Punjab? Were the three farm laws good or bad for Punjab?

Gulati: Contract farming is already going on in Punjab, even if the Punjabi farmer opposed the three laws. If you legally open up the system, then you can be a part of the pan-India system because neither the markets are perfect nor the legality of the MSP. You should remember that only 10 per cent of the produce and 10 per cent of the farmers sell their produce at MSP. Markets are not perfect, and that’s where the value chain approach has to be there.

Sanjeev Bariana: How perilous is the situation of groundwater depletion in Punjab and Haryana?

Gulati: According to the latest central groundwater report for the period between 2000 and 2022, water table has gone down by 11.9 metres (roughly 1.7 feet decline per year). The depletion rate in Haryana is marginally faster than even Punjab. Almost 90 per cent of the water is used for agriculture and much of that story is because of paddy, which requires almost 22-23 irrigations as compared to pulses, which will be three irrigations. That’s where we need to talk about replacing free power and giving money directly to the farmers.

Geetanjali Gayatri: Is natural farming as economically viable as traditional farming?

Gulati: We worked on natural farming for almost two years. I have personally visited dozens of farmers who are doing natural farming. Now in natural farming for fruits and vegetables, there are some good results in terms of productivity.

But in the ICAR’s institute at Modipuram, we found the productivity going down by 50 per cent and 29 per cent. You can't afford that. So, whether it will be successful in case of wheat and rice, I would say jury is still out. The bottom line is a farmer should be free to do the way he/she likes. You have to create incentives that are crop neutral, because you are giving so much, subsidy worth two lakh crore rupees on chemical fertilisers.

If you are really wedded to natural farming, first thing is rationalise your subsidy on chemical fertilisers.

Atish Gupta: Is there a bid to corporatise agriculture?

Gulati: This is a false narrative. Everyone has a role in food chain. Someone has to process the food produced by farmers. Corporates are not coming to plough the fields, but to create storage, process the foods, sell the produce and even export them. Punjab has failed to attract private investment in this sphere.

Kewal Tiwari: We make policies for crop diversification, but how do we convince farmers to adopt this?

Chand: There is a huge difference between perception and reality. It is perceived that not much growth is happening in agriculture and not much is being done by the government. But maximum positive development has happened in farming in the past decade.

Mohit Khanna: If we are to promote cash crops, will it be easy to immediately create a supply chain? Will farmers agree to shift from paddy?

Chand: We are not saying that stop growing rice. We are talking of bringing solutions for the problems created by rice. We are saying adopt DSR technique for rice cultivation so that greenhouse gas emissions are reduced. I have said that area under rice be reduced by 10 percent in a decade.

Harvinder Khetal: You mentioned direct transfer of benefits to farmers on a per hectare basis so that there is scale neutrality. What is the formula you are recommending?

Chand: Farmers will get cash incentives…The total annual power subsidy in the state of Rs 8,000 crore will be divided by gross cropped area and farmers will be paid according to that. It can be adjusted for different crops.

Renu Sood Sinha: Does MSP regime impact crop diversification?

Chand: Yes, it is affecting diversification because it affects relative prices.

Jyoti Malhotra: Punjab’s farmers laid siege to Delhi five years ago for about a full year. What do you think are the lessons that the Centre has learned? Do you think that there was a lack of communication at that point of time?

Gulati: For any major policy change that you want, you have to create a narrative and explain it to the stakeholders. Otherwise, there are many who would like to twist that. So, if negative narrative has to be suppressed, a dialogue needs to be held frequently.

Is there a dialogue?

Gulati: When this new agriculture minister came, and I had a meeting with him. He asked, “What are the things that we should be doing?” I told him that firstly you have to earn the trust of the farmers because there is a huge deficit of trust, particularly in Punjab. So, on that basis, he started having a weekly meeting, ‘Tuesday Darbar’. So, people started coming. I think this communication has to be there, particularly at present.

Chand: In fact, the discussions between the Centre and states on market reform started around 2002-03. Those discussions were happening at secretary level and finally at minister level and I was present in large number of meetings where agriculture ministers and the Union Agriculture Minister were present, where their opinion was sought. A sort of consensus was built that we must undertake the APMC reforms.

But when the farm laws were being discussed, the thinking was that rather than doing it in piecemeal, it is better you do everything in one go. There were resolutions by all states supporting them. The second thing, regarding taking farmers into confidence, is that they do not always speak in one voice.

(Watch the full video on The Tribune’s YouTube channel)