Withering Punjab Agriculture - USAID

communications [especially cell phones (with 200 million subscribers in February ...... A comparison of traditional production with that under contract farming ...
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Withering Punjab Agriculture Can It Regain Its Leadership?

March 2007

International Food Policy Research Institute (IFPRI) New Delhi

Contact Person at IFPRI Ashok Gulati, Director in Asia, IFPRI, New Delhi Office Email: [email protected] H

Acknowledgements This report is the synergistic product of numerous sources and people. Ralph Cummings Jr., Ashok Gulati, P.K. Joshi and Kavery Ganguly took the responsibility of finalizing this report. Karl M. Rich and P. K. Joshi worked earlier on this report, but left the International Food Policy Research Institute (IFPRI) in July and September 2006 respectively. Their contributions are duly acknowledged. This consolidated report draws on several background papers and studies specifically done for IFPRI. We would like to acknowledge the following papers/studies: ‘Agricultural Diversification in the Punjab: Trends, Constraints, and Policy Options’ by Rajinder Sidhu, P. G. Chengappa, Deepa Dhankar and Karl M. Rich; ‘Input Subsidy in Punjab Agriculture’ by Prem S. Vashishtha and Kanupriya Gupta; and ‘Foodgrain Management: State and Private Sector in India with reference to Punjab’ by Ravneet Kaur. Several other papers and studies conducted by national and international agencies have been referred to during the course of the study, all of which have been duly acknowledged and cited in the report. Documents and data sources published by the Government of India and Government of Punjab have been used extensively in this report. Usual disclaimers apply.


Executive Summary

Punjab agriculture was an undisputed leader in the Green Revolution in India and the Punjab farmer was acclaimed worldwide. But today Punjab agriculture no longer calls the shots, nor does it play the leadership role that others would want to emulate. The Punjab agricultural sector has reached a point where it must make significant changes if it wants to move forward and regain its leadership role. Conversely, if the state does not rationalize incentives, create new institutions and reinvigorate old ones, and increase investments significantly, it will suffer declining income and employment and irreversible environmental degradation. This prospect gives rise to a number of questions: How can the Punjabi farmer again become a role model? Why is the process of change not moving faster and how can it be accelerated in an inclusive manner?

Introduction Punjab has become the breadbasket of India. Agriculture is the prime mover of the economy, contributing a little less than 40 percent of the GSDP in contrast to only 20 percent at the national level. Agriculture is dominated by rice and wheat, which now cover over three-quarters of the cropped area and account for 85 percent of the gross value of crop output. Despite comprising less than 2 percent of the country’s area, the state contributes over 10 percent of national rice production and over 20 percent of national wheat production and a significant portion of grains (38 percent for rice and 57 percent for wheat in 2003–04) to the Central pool for public distribution. Among Indian states, Punjab has the highest yields and lowest costs for rice and the highest yields and among the lowest costs for wheat. As a result, farmers’ incomes in Punjab are higher than in other states. The state has very high density of tractors (106 per thousand ha compared to 22 per thousand ha at the all-India level) and irrigation (90 percent of cropped area compared to 40 percent at the all-India level) and high fertilizer use (double all-India average) with a cropping intensity of 186 percent (compared to the all-India average of 135 percent). It has good infrastructure—roads (with density 1.27, which is one and a half times the all-India density of 0.81), markets (during harvest, farmers can typically find a purchase center for foodgrains within 8– 10 kms of their village, by far the best market density in the country), and communications [especially cell phones (with 200 million subscribers