Recently, the Centre and the government of Punjab devised a plan to incentivize farmers with Rs 17,500 per hectare, covering up to five hectares per beneficiary, to shift from paddy cultivation to less water-intensive crops. The aim is to conserve resources and promote sustainable agriculture by encouraging crops like pulses and edible oils.

Current Initiatives

• Punjab Scheme: Farmers are offered Rs 17,500 per hectare to switch to less water-consuming crops. The scheme is funded in a 60:40 ratio between the Centre and the Punjab government and covers up to five hectares per beneficiary.
• Haryana Scheme: A similar scheme exists, but the incentives provided haven’t bridged the profitability gap between paddy and alternative crops like pulses, oilseeds, and millets. 
• However, the results have not been promising, as growing paddy is more beneficial due to the higher subsidies provided, such as free water, electricity, and procurement assurance. For example, recent research at ICRIER shows that Punjab farmers received Rs 38,973/ha in 2023-24 as subsidies for power, canal water, and fertiliser consumption.

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The Challenges

• Profitability Gap: Paddy farmers in Punjab received Rs 38,973/ha in subsidies (power, canal water, fertilisers) in 2023-24, making paddy far more profitable than alternative crops.
• No Market Guarantee: There is no guaranteed market for alternative crops, which discourages farmers from switching.

Benefits of Diversification

• Environmental Impact: Diversification could help mitigate groundwater depletion, as paddy requires a minimum of 20-25 irrigations compared to less than four irrigations for pulses, oilseeds, and millets. 
  • Over 87% of Punjab’s blocks are over-exploited or critical in terms of water levels, according to a 2023 study by the Central Ground Water Board. Shifting to less water-intensive crops will contribute to long-term sustainability.
• Reduced Greenhouse Gas (GHG) Emissions: Paddy cultivation produces 5 tonnes of CO2 equivalent per hectare, contributing to climate change. 
  • Rice stubble burning, a major contributor to pollution, especially in winter, could also be reduced. 
  • Successful implementation of this scheme would have a positive impact on agricultural sustainability in both the states and the country at large.
• Prevention of Soil Degradation: Shifting away from paddy will also help prevent soil degradation.

Recommendations

• Subsidy Re-alignment: To make diversification feasible, the incentive should be at least Rs 35,000/ha, double the current amount. This would not add any additional fiscal burden but would redirect existing subsidies from paddy to other crops. 
  • For example, the subsidy currently provided for paddy cultivation could be saved and redirected to support other crops through smart planning.
• Long-term Implementation: The incentive program should run for at least five years to ensure stable savings in the subsidy bill and allow farmers to transition without significant profit loss.
• Market Assurance: Farmers benefit from assured paddy procurement by the Food Corporation of India (FCI). To encourage diversification, similar procurement guarantees for pulses and oilseeds should be provided through agencies like NAFED at Minimum Support Prices (MSP), otherwise, farmers may be reluctant to grow these crops due to fears of not being able to sell them at MSP.
  • Purchasing alternative crops at MSP to provide a reliable market for farmers who choose diversification will not add extra costs for the government. 
  • For example, the FCI bought 92.5% of the rice produced in Punjab at MSP during 2023-24. Redirecting this support towards other crops could free up funds set aside for paddy purchases. 
  • Transitioning one million hectares from paddy cultivation could free up approximately Rs 13,150 crore in paddy procurement costs.
• Stabilisation Fund: The savings from reduced paddy procurement could be used to create a stabilisation fund, ensuring that agencies like NAFED, CCI, or FCI purchase pulses, oilseeds, cotton, millets, and even kharif maize at MSPs. This would help mitigate market risks for non-paddy crops and more farmers will be encouraged to shift to other crops.

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Conclusion

A well-coordinated effort between the Centre and state governments, like Punjab and Haryana, supported by restructured subsidies and market assurance, can effectively shift farmers away from water-guzzling paddy to more sustainable alternatives. The long-term benefits include environmental conservation, financial savings, and enhanced agricultural sustainability.

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