Why didn’t Bihar do better in This Year’s Drought?

8/14/2019 Why didnt Bihar do better in This Years Drought?

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Why didnt Bihar do better in This Years Drought?

Avinash Kishore

Doctoral Candidate, Harvard Kennedy School

Email: [email protected]
mailto:[email protected]:[email protected]


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Abstract

Bihar is water rich. Yet it lost more area to drought in Kharif 2009 than any other state except

Jharkhand. This article argues that high cost of irrigation, poor foodgrains procurement

infrastructure, and low productivity of agriculture in the state are the factors that make

agriculture in Bihar vulnerable to droughts in spite of physical abundance of water. Rural

electrification will make groundwater irrigation cheaper and reduce this vulnerability. While

electrification takes time to implement, the state government should fine tune its diesel subsidy

scheme to increase its uptake.


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Bihar is one of the worst hit states by the drought this year. The area transplanted under paddy is

down to nearly half (18 million hectares or mha) of the normal area (34 mha). After Jharkhand,

this is the highest percentage reduction in area under paddy of all states. As on 12 August 2009,

rainfall was deficient or scanty in 27 of 36 meteorological sub-divisions of the country. In Bihar,

rainfall was 40% below the normal. The deficit was comparable in Punjab (35%), and much

worse in eastern UP (53%), western UP (68%), Haryana (66%) and AP (46-59%)1. Yet the

percentage reduction in area under paddy is much lower in all these other states. In Punjab, the

reduction is barely perceptible in the data (0.7%); in Haryana it is just 10%. The figures are high

for AP (29%) and UP (36%), yet significantly lower than in Bihar (45%). At the national level,

there is a 20% reduction in area under kharif paddy from 341.44 mha in 2008 to 272.83 mha this

year (Business Line, 2009).

Why is Bihar the loss leader when the deficit rainfall is not the worst in the state? One can

understand that the floodplains of Bihar (and Assam) are most vulnerable to floods. That it is just

as vulnerable to droughts too, is something counterintuitive and merits closer scrutiny.

Access to irrigation is the best bet against droughts and among different sources of irrigation,

groundwater from alluvial aquifers provides most effective drought proofing. Prof B D Dhawan

showed this in his 1985 paper in this journal (Dhawan, 1985). If so, one would expect Bihar (and

eastern UP and West Bengal) to be least vulnerable to droughts. The region has rich stores of

groundwater at shallow depths and a high concentration of mechanized wells to access it. In fact

the density of mechanized wells in Bihar is just as high as in the rest of India. But the latest data


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on area left fallow due to drought shows the state to be one of the worst affected by the drought.

Why is it so?

I offer three explanations for this apparent irony.

1. High Cost of Irrigation

There is economic scarcity of water in Bihar, in spite of physical abundance. 85% of pumps here

run on diesel (against 50% nationally), and diesel is expensive. Two-thirds of the irrigators in

Bihar buy water from pump owners. Irrigation is even more expensive for them, costing up to

Rs. 80/hour. On top of it, cash-strapped farmers have to make upfront payment for diesel in cash.

In absence of institutional lenders, they borrow at very high rates. Bihar is not only the least

electrified state of India; it is also the least banked2.

High cash outlay of irrigation combined with costly and scarce credit makes intensive irrigation

unviable for most farmers in Bihar. A simple comparison of cost of irrigation between water

scarce North Gujarat and water rich North Bihar makes the irony ofeconomic scarcity in

physical abundance clear. A farmer in North Gujarat, who pumps groundwater from 1000 feet

below the ground, incurs zero marginal cost on irrigation due to the flat rate electricity tariff s/he

pays to the electricity board. Even when s/he pays for electricity at unit rate; s/he pays it at the

end of the season, in effect receiving working capital credit from the electricity board. A farmer

in Bihar on the other hand, has to pay Rs 40-80 per hour in cashborrowed at high interest rates

for irrigating from a shallow aquifer barely 20 feet below ground.


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2. Poor Price Incentives

Then there is a problem of price incentives or lack thereof. Let me illustrate.

On Thursday, August 20th 2009, Agriculture Minister, Mr. Sharad Pawar announced increase in

minimum support price (MSP) of rice from Rs850/quintal to Rs. 1000/quintal. He also promised

open market interventions by Food Corporation of India (FCI) to keep foodgrains prices in check

and discourage speculators and hoarders. Increase in MSP of rice will encourage farmers of

Punjab, Haryana, Western Uttar Pradesh and Andhra Pradeshwhere bulk of rice is procured

fromto invest up to Rs. 4500/ha3 in supplementary irrigation and other inputs to drought proof

their rice crop. In Bihar, this increase will not matter to the crop economics because there is little

FCI procurement in the state. In year 2005, FCI procured only 7% of total khraif production of

Bihar while in AP, Haryana, Punjab, and UP, it procured 78%, 64%, 87% and 28% of kharif

production respectively4.

On the other hand, open market intervention announced by the governmentif successfulwill

mean that price remain suppressed in spite of scarcity. Thus, producers of Bihar wont gain

anything from the first (price support) policy but loose substantially from the second (open

market intervention). Thus in face of a natural calamity (deficit rainfall in this year), Bihar is

unable to make good use of both natures bounty (rich groundwater aquifer) and centres

generosity (raised MSP).

3. Low Productivity and Profitability of Agriculture

Besides high cost of diesel and poor price incentives, third reason for Bihars high vulnerability

to poor rainfall is the low productivity and low profitability of its agriculture. Wheat-paddy


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system, the dominant cropping system of Bihar, is viable only because family labour is cheap

and land has few alternative usages. A hectare of paddy yields net return of just about sixty

dollars and a hectare of wheat less than hundred dollars (Rs. 3215 and Rs. 4787 res. @ 2006

prices) in Bihar. If land rent is also factored in, the net returns are negative (Planning

Commission of India, 2008). Thus farming in Bihar is a cost-covering and not a profit

maximizing enterprise. Production is just enough to cover costs. Not even as much if non-cash

costs are also included. Therefore, it makes more sense for farmers in Bihar to leave the land

fallow than do anythinglike irrigating from diesel pumpsthat protects crop but requires

additional cash expense.

Policy Imperatives

So, what can be done to reduce this vulnerability? Making irrigation cheaper is the obvious first

step. The state government, to its credit, has offered a onetime subsidy of Rs 15/ litre of diesel to

protect kharif crops. Each landowner is entitled to 20 litres of diesel at subsidized rates for every

hectare of land s/he owns. But there have been few takers. The subsidy has remained largely

unutilized. Two reasons: one, farmers have to buy diesel first, and then submit the cash-memo to

panchayat officials to collect the subsidy. This leaves the working capital problem, discussed

above, unresolved. Moreover, farmers are also not confident that they will actually get the

subsidy once they have bought diesel with their own money. The second reason is that irrigating

paddy crop, even at Rs. 20/litre (instead of Rs 35/litre) of diesel is probably a loss-making

proposition in Bihar, given low yields of paddy in the state. The state government also promised

more power supply to rural areas during kharif season. This policy is even less likely to be

effective. Half of the villages in Bihar do not have electricity and in the other half, there are too

few electric pumpsets left after years of indifferent power supply.


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In spite of limitations, subsidy on diesel is a step in right direction and the government should

fine tune the delivery mechanism to make it work better. In the long run, however, Bihar has to

improve rural electrification to catalyze agrarian dynamism in the state. Investing in improving

rural power supply can be the most effective stimulus plan for the stagnant agrarian economy of

Bihar. Both the state and the centre should come together to make it possible before the end of

12th five-year plan.


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References

Dhawan, B. D. (1985: Irrigation Performance during Drought. Economic and Political

Weekly, Vol. 20 (28): 1191-1196

Planning Commission of India (2008): Bihars Agricultural Development: Opportunities and

Challenges. A Report of the Special Task Force on Bihar. Government of India.

Business Line (2009): 1Paddy Acreage Shortfall Widens to Almost 70 Lakh Hectares. 27th

August, Page 16

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1 Rainfall During Monsoon Season (Table 3): http://www.imd.gov.in/section/nhac/dynamic/TABLE-3.htm

Downloaded on 15 August 2009. Overall deficit in monsoon rainfall has reduced since 12 August 2009. As on

16 September 2009, the rainfall deficit was 24% in Bihar, 36% in east UP, 39% in west UP, 30% in Punjab, 34%

in Haryana and 27-38% in different parts of AP.

2 Bihar has only one bank branch for every 13 villages and the C-D ratio is 32%, against 73% at the national

level (Planning Commission, 2008).

3 This is assuming an average expected yield of 30 quintals of paddy/ha in these states of India.

4 Hemant P shared this data with me. He also pointed out that FCI has total storage capacity of just about half a

million ton in Bihar compared to 6 million tons in Punjab, 3 million tons in AP and nearly 2.5 million tons in UP

and Haryana each.

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Why didn’t Bihar do better in This Year’s Drought?