Sustainable and Resilient Farming System Intensification in Eastern Gangetic Plain: Lessons Learnt and Way Forward

P K Joshi and Avinash KishoreSouth Asia Regional Office

International Food Policy Research InstituteE-mail: p.joshi@cigar.org; Web: www.ifpri-org

Outline Key characteristics of Eastern Gangetic Plain (EGP) Opportunities in EGP Two case studies

Groundwater and farm mechanization

Conclusions and way forward

I

Key Characteristics of Eastern Gangetic Plain

Key characteristics of Eastern Gangetic Plain

Endowed with best natural resources Abundant water; abundant sun shine;

abundant labour Agriculture is still subsistence and laggard

Low productivity and profitability Concurrent twin problems of drought and

flood High risk in agriculture Highly vulnerable to climate change

High poverty and under-nourishment Home of over 300 million poor peopleIndo-Gangetic Plain

Source: ACIAR

Constraints to Sustainable & resilient intensification Small holdings, scattered land holdings, and low economies of scale

87% in Bangladesh; 90% in Nepal; 96% in West Bengal and 97% in Bihar are smallholder

Poorly defined property rights, including share cropping laws Low investment in agriculture and capital deficit farming systems

Fund allocation rating is low: 3.46-3.8 (1-6 scale) (IFAD) Intensification in capital deficit farming system is low and inefficient

Over-emphasis on cereal-based farming system (rice and wheat) Vulnerable to high risks due to climate, markets and prices Poor governance

Global percentile rating on governance range between 15-45% Weak institutions limits effectiveness of policies at local level

II

Opportunities in Eastern Gangetic Plain

Theory of change: Multi-pronged strategy

Technologies

InstitutionsPolicies

Food Security

Land

Water

Gene

Energy

Promising technologies: huge opportunity

Bridge yield gaps 100-130% in rice, 80% in wheat and 94-

150% in maize

Role of hybrids Example of SCH maize (7t/ha compared

to 2.5-3t/ha); same is rice hybrid

Climate smart agriculture DSR, LLL, stress tolerant varieties

Rice-fallow system 13 million ha area is left fallow

Solar pumps 100% transplanting; non-solar <27% Irrigation cost for nursery preparation

Solar farmers – 186 Rs/ha Non-solar farmers – 451 Rs/ha

57% solar farmers took summer cropscompared to 28% non-solar

Agricultural diversification Share of HVC in total value of Ag output

Bihar: 60% West Bengal: 52%

Promising institutions and policies

Institutions Consolidating farmers

Contract farming reduces transaction costs and increases profits by 20-45%

Industry shares risk by 80% Framer Producer Organizations

Financing agriculture 20% increase in credit increases food

production by 57%; income from crops by 26% ; and saves water by 33%

Groundwater and machine rental markets

Polices High political will Water and energy pricing Trade policy, especially

machines and pumps Agricultural insurance

Improves resilience and increase input use (especially seed and fertilizer)

Convergence of policies and programs

III

Two case studiesGroundwater development and farm mechanization can be

entry point for sustainable and resilient intensification,but there are challenges

Case study 1: Farm mechanization is increasing across EGP

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2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Growth in number of tractors and power tillers in the study districts (2005-15)

Madhubani -All Purnea -All Coochbehar-All Rajshahi -All Rangpur -All

Purnea

Madhubani

Higher tractor density in Bihar in spite of lower cropping intensity (1.42) compared to West Bengal or Bangladesh (1.80)

6.21 6.47 6.76 7.21

9.3210.14

11.83

16.34

18.37

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2004 2005 2006 2007 2008 2009 2010 2011 2012

Hourly Wage (Rs) in Bihar

Year

Hourly Wage (Rs)

Paddyprice

(Rs/q)

Labor used

(hour)

Total wage

bill (Rs)Yield

(Q/ha)

Gross value of produce

Rs/ha

Wage share (%)

of GVP

2004 6.21 504 875 5433 23 11494 47

2005 6.47 478 831 5379 26 12331 44

2006 6.76 531 840 5676 25 13329 43

2007 7.21 632 771 5556 29 18318 30

2008 9.32 726 797 7423 27 19344 38

2009 10.14 856 768 7784 19 16244 48

2010 11.83 968 757 8954 19 18680 48

2011 16.34 830 797 13023 28 22881 57

2012 18.37 977 808 14842 24 23695 63

Rising wage rates and wage-share spurs on farm mechanization

Lessons learnt

• >90 % farmers in our sample used tractors or power-tillers• Machine rental markets are critical for farm mechanization

• Paradigm shift from land rents to machine rents• Rent transfer from small farmers to large farmers, who also own lands

• Existing subsidy regime and credit policies benefiting only those with collateral

• Bangladesh has much less subsidy than India; farmers get cheaper power tiller from China• Bangladesh rents lower by 60% despite high diesel prices• More vibrant rental markets: serves larger area to more farmers; renter has more options• More frequent use, even by sub-marginal farmers

• Opportunity: create machine service providers in agriculture• Use technology to create competitive rental markets in farm machines• Learn lessons from institutional innovations in renting farm machines

• Can India and Nepal learn from Bangladesh in mechanizing their agriculture?

• EGP also need to learn institutional innovations in Western Gangetic Plain

Case study 2: Groundwater irrigation• Rapid increase in groundwater irrigated area in EGP since 1980s

• Universal access to groundwater (capital cost of tapping GW is relatively low)• 97-100% farmers in Bihar and Nepal terai• 71-83% farmers in West Bengal and Bangladesh irrigated their land in last 1 year

• Water is easy to access, but irrigation is expensive• Farmers over-economize on groundwater

• Low yields, low cropping intensity and high vulnerability to droughts or late onset of rains

• Diesel pump-sets are the main source of GW irrigation in Bihar, Nepal terai and Bangladesh; WB moving to electrified pump sets

• Water markets are very important in EGP• Only 2-15% farmers own pumps; majority of farmers get water from others• But water markets are not competitive

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Madhubani Purnea

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Dhanusha Sunsari

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1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014

Rajshahi Rangpur

Bangladesh

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Coochbehar

Diesel pump Electric pumpElectric submersible

West Bengal

Bihar Nepal

Rising pump sets in Eastern Gangetic Plains

Pump rents high despite of rising pump density?

• Question: Why some owners not reducing rental rates to increase capacity utilization; capture local water market?

• Answer 1: Cost structure of diesel pump sets

• Low capital costs: $150 or less• High variable cost: $ 1/hour (fuel) + Hassles

• Not much incentive to expand the capacity utilization and the market-share

• Opposite case with solar and electric pumps

• Answer 2: Water markets are local oligopolies

• Hard to prove, but advent of the Chinese pump-sets suggests so

• Cheaper and more fuel efficient, but charge just about the same rental rate

35.2536.9638.6739.8340.9941.5 42 42.0546.4 47.79

61.959.67

44.12

51.71 51.8454.27

59.0363.6 64.2

66.3

71.7

81.4

90.4

107.9

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2000 2001 2002 2003 2004 2005 2006 2007 2008 2010 2011 2012

Rental Rate of Pump-sets in Bihar and West Bengal (2000-2012)

(Rs/hour)

West BengalBihar

Lessons learnt

• Private investment in tube wells & pump-sets, and water markets have ensured near universal access to groundwater irrigation

• Affordable access to irrigation is still a problem• Water markets in EGP are not becoming competitive

• Unlikely to competitive as long as diesel is the main source of energy

• High cost of irrigation impedes sustainable intensification and make less resilient to drought

• Import restriction on pump sets hurts smallholders, especially in India

IV

Conclusions and Way Forward

Conclusions

• Number of technological, institutional and policy constraints impeding sustainable intensification of EGP

• Water and farm mechanization would be entry point for sustainable intensification

• Machine renting and water markets are evolving but inefficient and imperfect but will play big role

• Machine rents and water prices are not declining despite expanding markets • New phenomenon emerging from land rent to water and machine rent• Conservation agriculture technologies for sustainable intensification are

conspicuous by their absence in the region• Awareness, use and ownership of zero-till seed drills, laser land levelers,

drip/sprinkler systems is very low• Capital subsidy alone won’t be enough

• Institutional innovations and intensive extension effort will help more

Way forward: integration with SDIP policy project

• Key policy and institutional barriers and needed reforms in food, energy and water sectors

• Feasibility of adapting best practices on institutional innovations in strengthening farm machine rental and water markets

• Alternative cost-effective options for diesel for groundwater use(e.g. solar pump sets)

• Risks, coping mechanisms and financing need assessment• Engaging private sector to expand machine rental and water

markets• Enabling policies, and role of credit, subsidies, import and farm services

(including inputs)

Thank you