1

have jumped over 70 per cent; there is no surprise then that the diesel price squeeze on small-scale irrigation is heading towards a crisis in all the countries of south Asia but this is particularly visible in eastern India and the Nepal terai where the ratio of rice to diesel price has turned particularly adverse as evident in Table 1.

Of even greater significance for the poor is the response of pump rental prices to the rise in diesel prices because the poorest strata of India’s peasantry depend on water markets to secure their irrigation. Because water markets are natural oligopolies [Shah 1993], pump owners use diesel price increases to raise their pump rental rates in tandem with every major rise in diesel prices despite the fact that pumps themselves have become cheaper during 1990-2007. Figure 1 shows the changes in the nominal price of diesel versus the price of pump irrigation in Mirzapur, Uttar Pradesh. Between 1990 and 2007, diesel prices here have risen from Rs 46/l to Rs 34.8 but the rate buyers incur per hour of pump irrigation has increased from Rs 23-25 to Rs 90-95 per hour, far larger than that needed to cover the increase in fuel cost. Another characteristic of this relationship has been the downward stickiness of pump irrigation prices. Every time there is a big increase in the diesel price, the pump irrigation price tends to jump. However, the reverse is never the case.

As a result, pump rentals relative to farm produce prices – which is what matters to the marginal farmers and sharecroppers

– have risen even faster than diesel prices relative to rice and wheat prices. In Deoria, eastern Uttar Pradesh, a marginal farmer could buy an hour of pump irrigation for the farm gate price of a little over 3 kg of rice and wheat in 1990. Today, this ratio is 10 kg of wheat and 12 kg of rice (Figure 2).

Table 1: Farm Gate Rice Price Relative to Diesel Price in South Asia

Diesel Price: Farm Gate Kg of Rice Needed February 2007 Rice Price: to Buy a Litre February 2007 of Diesel

India (Indian Rs) 34.0 6.4 5.7 Pakistan (Pak Rs) 37.8 11.8 3.2 Bangladesh (Taka) 35.0 9.0 3.9 Nepal terai (Nepal Rs) 57.0 10.0 5.7

Source: Field research results by IWMI researchers.

12.00

Irrigation charges (Rs/Hr) 8.00

1990 1995 2000 2005

kg of wheat to buy one 1 litre of diesel kg of wheat to pay for one hour of pump irrigation

6.00

60

4.00

2.00

40

0.00

20

0

199019971997199820002001200420062007

kg of rice to buy 1 litre of diesel kg of rice to buy one hour of pump irrigation

Table 2: Cost of Irrigating Acre of Sugarcane in Village Akataha, Deoria, Eastern Uttar Pradesh

(Rs per acre)

Diesel Pump Electric Pump

I Withering Water Markets?

Most social impacts of the energy squeeze on smallholder irrigation (and the agrarian poor) work out through groundwater markets. Around 1990 and before, when diesel was one-eighth its price today, and farm power supply better than today, electric tubewell owners were natural oligopolists forced to behave in a highly competitive market [Shah 1993]. Flat electricity tariff, which reduced their marginal cost of pumping to near-zero levels created a powerful incentive for them to maximise pump irrigation sales, and in the process, pare down the prices. Diesel pump operators were able to offer some competition because diesel prices were low and their portability allowed diesel pumps to irrigate areas that electric tubewells could not reach. Numerous field-based studies showed that such local groundwater markets emerged as the mainstay of ultra-marginal farmers and share croppers, especially in eastern India and Bangladesh. In Bangladesh, Fujita and Hussain (1995) noted that thanks to pump irrigation markets, “the economic value of land...has decreased in a relative sense” in farm income generation and “opportunities for the landless and near-landless to climb the social ladder [have] expanded greatly”. In Uttar Pradesh, Niranjan Pant (2005) wrote: “...the smallest farmers with landholdings up to 0.4 ha are the largest beneficiaries of the groundwater markets as 60 per cent of the farmers of this category irrigated their wheat crop by water purchased from the owners of private water extraction devices...” Shah and Ballabh (1997), based on a study of water markets in six villages of north Bihar, concluded that these had opened up new production possibilities for the poor, which left them better off than before, and thereby imparted a new dynamism to the region’s peasant economy. Even Wilson (2002), otherwise critical of profiteering by water sellers in Bihar, wrote: “extension of irrigation through hiring out (mobile diesel pump sets) to small and marginal holdings is in fact the major factor accounting for the further increase since 1981-82 in cultivated area irrigated at least once to approximately 73 per cent in 1995-96. Those hiring in pump sets are overwhelmingly small and marginal cultivators; they cultivate an average of 1.35 acres (compared with an average of 3.89 acres cultivated by pump set owners)...” Most recently, Mukherji (2006) in an extensive study of water markets in West Bengal reaffirmed their myriad benefits to the agrarian poor. Water markets, and indeed groundwater irrigation itself, have been a source of much succor to the agrarian poor. Studying rural poverty ratios across the Indian states over five points between 1973-74 and 1993-94, Narayanmorthy (2007) concluded that, “there is a significant inverse relationship between the availability of groundwater irrigation and the percentage of rural poverty...”

With soaring diesel prices and shrinking power supply to tubewells, this happy situation has rapidly changed for the worse. Pump irrigation markets, which boomed during the 1980s and 1990s and probably served more area than all public irrigation systems in India [Mukherji 2005] are shrinking rapidly, and so is the size of the groundwater irrigation economy itself. During the 1980s and 1990s millions of farmers in northern and eastern India purchased diesel pumps often as stand-bys for their increasingly unreliable electric pumps. Now these have come full circle; diesel becoming unaffordable, especially for water buyers, the preference for electric tubewells has increased. However, electric tubewells are unable to meet these expectations because electricity supply as well as connections are dwindling.

In eastern India, Nepal terai and Bangladesh, electric tubewells are few and far between. Where we find some, two impacts follow: first, their owners find their monopoly power enhanced, which they use to increase their share in groundwater markets and irrigation surplus. Second, they are able to moderate the energy squeeze on marginal farmers, especially when the power supply situation is good and tubewell owners pay flat electricity tariff. We found this to be the case in Uttar Pradesh (UP), West Bengal and Orissa. Where they are found in significant numbers, electric tubewell owners have driven diesel pump owners out of business. So unequal is the competition that even owners of diesel pumps prefer to purchase irrigation from electric tubewell owners rather than use their own diesel pumps (ibid). In UP, a 5 hp electric tubewell connection is a cash-cow for its owner: it entails a monthly charge of Rs 410 but can generate up to Rs 9,000 per month as gross income from water sale, a highly profitable proposition. In Birbhum, West Bengal, our researcher wrote, “...by charging such a high price for electric pump irrigation, the submersible owners are getting their own irrigation free of cost and, on top of that, they make some profit as well.” Here, the flat tariff paid by electric submersibles increased from Rs 5,460 to Rs 8,950 per year between 1990 and 2007. In response, irrigation rates charged for boro rice too doubled from Rs 450 to Rs 900 per bigha. This rise was much smaller than the rise in the cost of purchased diesel pump irrigation. This has diverted the diesel pump owners’ business to electric tubewell owners and served to strengthen their monopoly power. While electric submersible owners make merry, it is also increasingly the case that marginal farmers of Bengal can grow boro rice only if they can tie up irrigation with an electric shallow/mini-deep tubewell owner.

The succor private electric tubewells can provide to the poor is limited by West Bengal government’s policy, which seems designed to minimise new connections for electric tubewells and ensure that the poor do not get them. To promote boro irrigation, the government initiated a scheme to issue temporary seasonal connections. In 2003, temporary connections were offered to Birbhum farmers for boro rice at Rs 7,000 for three months. In our study village, seven diesel pump owners took advantage of this. The next year, the tariff was jacked up to Rs 18,000, which put paid to the boro season electrification. Permanent connections are preferred by all but take three to four years to get approved and cost a prohibitive Rs 1.25-1.3 lakhs for poles, 11 KV cables, a 10 KW transformer and an electronic metre. The only farmer in our study village could afford such a mini-deep connection had seven acres of his own land and five acres of neighbouring land to command.

The ability of flat-tariff paying electric tubewells to moderate the impact of the diesel price squeeze is undermined by three factors: (a) inadequate supply of new electricity connections for irrigation; (b) the prohibitively high cost of installing new connections; and (c) low amount and quality of power supply to agriculture. We found new electricity connections easily and quickly available in Uttar Pradesh but the demand was subdued because the farmer had to pay for the cost of laying the cable, poles and transformer, too – which may add up to Rs 1,00,000 or more. In Kalahandi villages in Orissa, we found electricity supply plentiful, and electric tubewell costs one-seventh of what it costs to operate a diesel pump of comparable output. However, an electric pump 500 m away from the village may cost Rs 40,000 in cables and poles besides the cost of the well, pumpset pump house, starter, etc. As a result, in our study village, we found that only six large farmers owned electric pumps while small farmers managed with either their own or rented diesel pumps. The large farmers are able to earn Rs 30,000-35,000 per year (net) from their tubewell in crop-sharing contracts, which implies a decent rate of return on their capital investment. However, the entry-barrier in the form of high capital costs keeps smallholders from this benefit. In West Bengal, even if the farmers were willing to incur such high costs, connections were hard to come by in many areas primarily because of the state water investigation department (SWID)’s sometimes exaggerated concern about over-exploitation of the groundwater resource.

II Return to Rainfed Farming

III Sharecropper under Siege

Leasing small parcels of land for a fixed annual rent has been an important way for the landless to employ family labour to ensure food security. In Simra, in such ‘nagdi batai’ (or cash tenancy) contracts, a landless family leases in a hectare of land from an absentee land owner for a cash rent of Rs 14,000-20,000 per year, and cultivates it with purchased pump irrigation. But this form of tenancy is on a decline because the landless and marginal farmers, 75 per cent of Simra’s households, find it increasingly difficult to make their tenancy viable. In Kendradangal, our Birbhum village, we were told that for marginal farmers with diesel pumps, leasing in land for boro rice cultivation was very common until 2000. However, with rising diesel prices, this practice has all but disappeared; in 2006 only three marginal farmers leased only six or seven bighas for boro cultivation. In the Kaya village of Murshidabad, similarly, until a few years ago, it was common for landless or marginal farmers to lease small parcels of land for an annual rent of Rs 1,800-2,000/bigha (Rs 13,500-15,000 per ha). For crops like boro rice or vegetables, they could still manage by buying diesel pump irrigation. With present prices of diesel pump irrigation, however, this practice has almost ended, what with half or more of the boro production claimed by the providers of land and water alone.

Instead of cash tenancy, crop-sharing for water is on rise in some parts. In the Rajkot village of Saurashtra, Gujarat, water buyers depend on renting diesel pumps only for supplemental irrigation in kharif. Renting diesel pumps for rabi crops, once widespread, has completely disappeared. Electric tubewell owners, who under Gujarat’s new Jyotirgram Scheme get eight hours of uninterrupted, full voltage power under a fairly high flat charge of Rs 850/hp/year, have moved in as aggressive sellers of pump irrigation service during rabi [Shah and Verma 2007]. The common arrangement is crop-sharing rather than cash sales: the land owner provides land and labour and the tubewell owner provides pump irrigation service. Both parties share other costs and output on a 50:50 basis. In this deal, then, the value of pump irrigation is equivalent to both land as well as labour.

The rise in diesel prices has increased the rental value of surface irrigated land wherever surface irrigation is reliable. At the tail end of the upper Indravati system in the Kalahandi district of Orissa, Nayak reported that annual rent charged by command area farmers for one-tenth of a hectare rented for vegetable cultivation is Rs 1,000, while the rent for the a similar sized plot outside the canal command is just Rs 250 per year.

In the Kalahandi villages we covered in Orissa, electric pump owners generally provide irrigation services on a sharecropping basis and earn Rs 30,000-35,000 annually from selling water. In a standard contract, the pump owning large farmer usually contributes land and irrigation for groundnut while the tenant contributes labour. Both the parties share other costs and output on a 50:50 basis. If a small farmer contributes land and labour and the pump owner contributes just irrigation, then the latter absorbs all costs of other inputs – mainly seeds and fertiliser, and both share the output equally.

In coastal Orissa’s Purana Pradhan village, the cost price squeeze has forced many landless and marginal farmers to move to off-farm occupations. This has made more land available for the remaining landless to lease in for short-term crops like summer paddy as well as round the year vegetable cultivation. Even some women of the landless families now work on crop-share contracts rather than as casual farm workers.

IV Hierarchy of Exit

In many of our case study villages, we discerned a curious hierarchy of exit from diesel pump irrigated farming – in which small and medium farmers migrate out of unviable irrigated farming but even poorer households reverse-migrate into irrigated farming. This was evident in Keotkuchi, our Assam village. In this flood prone village, kharif paddy, always at the risk of a wash out, is a low-input-low-output affair. But farmers grow mustard, potato or vegetables soon after kharif paddy and then grow their main crop of summer paddy. This input and irrigation intensive crop of summer paddy with an assured yield of around 7 mt/ha had a strong fillip during the 1990s when the government supplied a large number of diesel pumps at subsidised rates. But now, summer paddy is on a decline, primarily thanks to soaring diesel prices. No matter how farm budgets are worked out, summer paddy does not generate any surplus for a farmer who views his farm as an economic enterprise. Therefore, most farmers in Keotkuchi who could find off-farm work have gone ahead and found it, sold off their diesel pumps at throw-away prices, and left farming to either large farmers or sharecroppers. The village is surrounded by villages full of hard-working landless Bangladeshi Muslims whose priorities are two: food security by growing their own rice; and putting their free family labour to productive use. They bought up the diesel pumps from Keotkuchi’s yesterday farmers at throw-away prices, leased their paddy land in the summer, and irrigated their summer paddy with kerosene or a kerosene-diesel mix. The other classes of farmers who have survived the energy squeeze are large farmers who can invest in electric pumps, diesel pumps, tractors and gensets and optimise on irrigation cost as well as quality.1

A similar hierarchy of exit from farming was noted in the more mechanised agriculture of Punjab, Haryana and Madhya Pradesh. Here, soaring diesel prices have been affecting smallholder farming through its leveraged impact not only on pump irrigation but also on the hiring rates of other machine services, mainly ploughing and threshing. With water tables down to 60-70 feet, 150-300 feet deep tubewells with submersible pumps are needed to access groundwater irrigation. The investment required may exceed Rs 1.2 lakh, and only large and some medium farmers are able to afford such investments. Since tractors are often used to run generator sets, farmers who have tractors and deep tubewells with submersible pumps enjoy economies of scope in the agrarian economy. Small farmers who depend on rentals of all machines find the going tough. Since electric tubewell owners hardly get enough electricity to irrigate their own fields, their customers have to contend with “gen-set irrigation” which may cost up to Rs 1,100 per day to water four to five hectares. In our study village in Malwa, giving five irrigations to a bigha of wheat with a tractor-powered gen-set can cost upwards of Rs 3,500, at which cost wheat cultivation becomes an unviable proposition. So only those farmers that have electric pumps or can crop-share with electric pump owners grow wheat. The rest turn to “rainfed” crops or quit farming. In response to squeezed margins in farming, many smallholders in Punjab and Haryana have been leasing out parts or all of their holdings to even poorer migrant labourers from Bihar and Madhya Pradesh at Rs 8,000-9,000 per acre of flat rent, while they themselves move to off-farm jobs. The migrant labourers, whose first concern is to receive fullemployment wage rates, rather than profit, make their farming viable through substituting muscle power for machine power and through super-intensive cultivation of high value crops for the market. It is these reverse migrants into farming and marginal farmers unable to find off-farm livelihoods who are bearing the brunt of the energy squeeze.

VI PDS Kerosene: For Kitchen or Farm?

VII Diesel-efficient Irrigation Options

Expectedly, the rise in pump irrigation costs has forced farmers to search for diesel-efficient irrigation options including crop choices, irrigation techniques and fuel options. In the Rajkot villages in Gujarat, we found farmers adopting small-bed irrigation in winter crops such as cumin, gram and wheat, and alternate furrow irrigation for cotton. They told us that these can save 20-25 per cent diesel usage but reduce crop yield/ bigha by a quintal in cotton as well as wheat. In our UP village in the Mirzapur district, to save on irrigation costs, farmers have begun applying four irrigations to the rabi wheat crop rather than the five that they have been giving all these years. In our Birbhum village of West Bengal, we found many share croppers leasing in parcels just below their own land so as to use the water drained out of their boro paddy in raising another rice crop in the lower field. Many who were forced to give up boro cultivation all together due to high diesel costs increased their area under mustard crop during winter when water can be pumped or manually lifted, for a supplemental irrigation from ponds. In this new trend of replacing boro rice by rabi crops, irrigation cost relative to crop value has been a prime consideration for small farmers choosing between mustard, wheat and potato. Mustard fetches better prices and requires less irrigation. Purchased diesel pump irrigation for rabi mustard may cost Rs 200-250/bigha against Rs 1,500/bigha for boro rice.

In our study village from Vidarbha, the system of rice intensification (SRI) was introduced some years ago as water-saving technology but after trying it for a few seasons, farmers found its labour requirement in weeding daunting and the SRI disappeared without a trace. However, many small farmers did switch to the practice of dividing their farms into small basins, roughly of 200 sq m, at different heights for more efficient water, and diesel usage. In coastal Orissa’s Purana Pradhan village, the soaring diesel price has induced farmers to convey water from well-head to their fields either by flexible pipes or by masonry channels.

How the energy squeeze is heralding wholesale cropping pattern changes from diesel-intensive to diesel-saving crops was striking in the Simra village of Patna district, Bihar. In 1990, this was a wholly rice-wheat village with little diversification away from this age-old rotation. Now, kharif paddy continues with or without irrigation but during rabi and summer, of its 300 ha, Simra has 150 ha under rainfed masoor, 50 ha under lightly irrigated gram, 40 ha under wheat, and 75 and 20 ha respectively under intensively irrigated onion and corriander, the last fetching them the highest return per acre as well as per litre of diesel/kerosene. In the eastern UP village, Akataha, farmers have switched from long duration to short duration paddy, and some irrigated paddy area has given way to diesel-saving groundnut and high-value potato crops.

VIII Gambler’s Choice

Curiously, in several of our study areas, small farmers have responded to the diesel price squeeze by adopting even more diesel-intensive crops, mostly vegetables and sugar cane. In the eastern UP village, the highly profitable sugar cane cultivation has replaced some of the wheat and paddy area. This reflects farmers moving from a low-input-low-output strategy to a high-input-high-income one to survive the rising cashintensity of farming. This was most evident in the Abakpur Mobana village of the Mirzapur district in UP, where lowvalue rainfed kharif crops are being increasingly replaced by high-value, lightly irrigated vegetable and groundnut crops. Here, 90 per cent of the farmland was under food crops (jowar, bajra, maize, gram, tun, wheat) in 1990. Today, 80-90 per cent of farmland is under cash crops, high-value vegetables and diesel-efficient groundnut. The vegetables most widely grown here are chilli, tomato, brinjal, onion and potato.

The primary driver of the high-risk, capital-intensive cropping strategy is the need to maximise the crop (and cash) per drop of diesel. In the Purana Pradhan village in Khurda district of coastal Orissa, Manas Satpathy computed that vegetables cost a lot more to cultivate in cash inputs than kharif or summer paddy but these also offer greater cash returns (Table 4). Some years ago, sugar cane was widely irrigated by diesel pumps but now vegetables are the most important crop irrigated by diesel pumps in this village because they yield the highest income per drop of diesel. Poorer farmers, whose main concern was foodgrain security for the family were cajoled into learning new skills of vegetable cultivation and of marketing it to maximise their household income. Such a family typically uses their family labour intensively – of men, women and children, on 1.5-2 acres of leased in low-land and purchased pump irrigation from kerosene or electric pumps. Cooperation among low-land vegetable growers here is of paramount importance; if one of them chose to grow paddy, the water draining out of his field might ruin the near-by vegetable crop.

Another example of marginal farmers turning to risky high value crops was found in the Simra village (Patna, Bihar). Here, forced to give up winter wheat, share croppers and marginal farmers took to intensive cultivation on small plots of fully irrigated onion crop during the summer; it required a good deal of capital but its higher cash returns justified the investment. Initially, intensive onion cultivation in the summer began as a strategy to beat the rising cost of diesel pump irrigation of wheat and other crops but now, with the area under summer onion rising to a quarter of the village’s farmland, the crop stimulated more diesel pump purchases. Onion requires 13 irrigations to mature and diesel pump owners charge Rs 3,000/bigha (Rs 12,000/ha) as a fixed charge for onion irrigation. This high rate makes investment in a diesel pump highly attractive. Simra’s onion revolution looked like a way to beat the energy squeeze.

Often, however, such desperate risky choices have ended up as sure ways of getting nothing out of something. This happened to Simra’s onion economy, too. After some years of bumper returns, untimely summer rains ruined Simra’s onion crop in 2005 and 2006, leaving the small tenants in a huge debt trap. While some gutsy smallholders will still keep experimenting with onion, chances are that most will steer clear of the high value but risky onion crop or choose some mix of onion and low-risk masoor to diversify the risk of being wiped out.

Similar was the experience in Birbhum. Struggling to survive, marginal farmers in Kaya, and surrounding villages took to vegetable cultivation for the market to make up for boro rice

Table 4: Costs and Returns from Paddy and Vegetables, Khurda, Coastal Orissa

(Rs per acre)

Cost of Cultivation Net Return

Source: From the Khurda case study.

IX Conclusion

Notes

References