IGB-BFP: WP 4 Institutional Analyses

Energy squeeze on Agricultural Water Use in the IGB and its impact on the poor

Changing dynamic of agrarian tenancy in the IGB.

A framework to study water governance in the IGB states

Is Irrigation Water Free? A Reality Check in the Indo-Gangetic Basin, World Development,

vol. 37, No. 2, pp422-434

Tushaar Shah, Mehmood Ul Hassan, Muhammad Zubair, Parth Sarathi Banerjee, O.P Singh

The global water pricing debate argues that zero price of increasingly scarce water is the prime cause of water scarcity.

Get the water price right; and all will be well.

The debate is cast in the context of public irrigation systems which are viewed as dominant suppliers of agricultural water.

Throughout the IGB, this context has become increasingly remote.

Classes of Irrigators in the IGB

Irrigation output &Irrigation cost/ha

20-22 mha

Million ha of gross irrigated area

cana

ls &

tan

ks

30-32 mha

Ow

n el

ectr

ic p

umps

10-12 mha

Ele

ctri

c pu

mp

purc

has

e

12-15mha

Ow

n d

iese

l pu

mp

7-8mha

Ren

ted

die

sel

pum

p

Own and rented gen-sets

IGB irrigation economy has got

heavily dieselized.

15-18 million Marginal farmers

and share cropper families

These buy irrigation for food

security and to absorb family

labour

Energy Divide in South Asia’s groundwater irrigation economy

Bangladesh and Pakistan have metered out electric tubewells. West Bengal is following suit.

Eastern India has de-electrified its country-side

In Indian Indus basin,

farmers have held the political Class to ransom and kept meters out.

Rapid relative price of diesel: India

Increase in diesel price relative to food and

general price index (Base: 1996=100)

0

50

100

150

200

250

300

350

400

450

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

Diesel price index

Food price index for farm laborers

General price index for farm laborers

Leveraged Impact of energy-squeeze on water buyers from diesel STWs

Diesel price rise and pump irrigation

price:Mirzapur, UP

0

20

40

60

80

100

120

1990

1997

1997

1998

2000

2001

2004

2006

2007

Rs.

Diesel Price (Rs/Lt)

Irrigation Charges (Rs/Hr)

User cost of irrigation relative to the prices of irrigated crops

Index No of Diesel price, irrigation price and farm produce:

Eastern Uttar Pradesh

0

100

200

300

400

500

600

700

800

900

1990 1995 2000 2005 2007

1990

=10

0

Diesel (Rs/l) 5 hp Pump Irrigation (Rs/hr)

Diesel Pump Irrigation Price (Rs/hr, 5 hp)

Wheat (Rs/kg), farm gate

Paddy (Rs/kg), farm gate

Sugarcane (Rs/kg), farm gate

In 1990, buying a liter of diesel required selling less than a kg of rice or wheat; today, it requires 3-5

times more.

10.00 57.00 5.70 Nepal terai

9.00 35.00 3.89 Bangladesh

11.80 37.80 3.20 Pakistan

6.00 34.00 5.67 India

Rice (Rs/kg)

Diesel (Rs/l)

kg rice/litreof diesel

Our fieldstudies in India-Pakistan-Bangladesh is showing that groundwater irrigation demand is in a super-elastic phase with

respect to use cost of water. A major source of agrarian stress.

Desperate Strategies:Small-holder/Water Buyer

Responses to Diesel Price Increase

West Bengal: Chinese diesel/kerosene pumps to the aid of India’s agrarian poor

Diesel-saving crop substitution: boro rice on a decline Among diesel pump buyers; Return to rainfed farming

Energy substitution: PDS kerosene for diesel; Electricity preferred but connections hard to come by

Forced exit from unviable farming-for landless who Cultivated leased land with rented diesel pumps

Energy saving irrigation practices: alternate furrow; Rubber pipes; adjacent fields leased to use drainage

Gambler’s response: shift to high value, high input, High risk crops-summer onion in North Bihar

Large increases in monopoly rents and power of electric tubewell owners:Uttar Pradesh

Pump irrigation price for water buyers is

rising 30-40% faster than diesel

price

Pump irrigation price is

downwardly sticky; it does not fall

when diesel price falls.

It is common for farmers in

eastern India to pay Rs 80-120 for 50 m3 of water.

Ideas to relieve stress on small-holder irrigation in IGB

• Diesel efficient pumps; promote Chinese pumps

• Pumps in the hands of the poor

• Subsidized diesel-as for fisher-folk in Gujarat?

• Kerosene ration for farmers? As in Kerala.

• Give small farmers LPG ration?

• Treadle pump? Return to gravity flow irrigation?

• Mulayam Singh’s strategy: Increase power supply.

• Increase the supply of electric connections and do a Jyotirgram

• Target electric tubewell connections to the poor

• Co-operative electric tubewells?

• Promote professional sellers of pump irrigation service.

Similarly, far-reaching changes are occurring in IGB’s land tenancy scene.

1. Extent, pattern, dynamicand impact of tenancy

2. Irrigation impact on Tenancy

3. Estimate irrigation value-added

Indirect estimation of Irrigation Value Added

• Irrigation benefit is estimated by comparing farm budgets with and without or before and after irrigation. Highly susceptible to measurement errors and manipulation.

• Original Objective: Land-lease rentals as indicators of “Irrigation Value Added”.

• We learnt some about this. But we also found that the institution of tenancy is undergoing profound changes.

• Precursor of the ‘shake-out’ imminent in India’s countryside

Tenancy in South Asia’s agrarian history

• State as well as people lived off the land.

• Mughal and pre-Mughal times: no private property in land; all cultivators were tenants-at-will; Emperor the heir to every subject.

• Land rents went upto 2/3rd of gross output; Akbar kept it at ½;

• East India Co. continued with rack-renting; the Colonial govt. policies encouraged ‘rent-seeking sub-infeudation’ akin to Western Europe’s feudal structure before the Ind. Revolution.

• When India became independent, tenancy reform was a key component of the land reform program.

• Security of tenure: Operation Barga in West Bengal• Regulation of Maximum Rent: all states passed laws

Extent of lease farming is vastly under-reported; moreover, there is explosive growth

in tenant farming since 1995

Figure 1 Trends in tenant holdings and

tenanted land (Source: NSS reports)

0

5

10

15

20

25

30

1960-

61

(17th)

1970-

71

(26th)

1981-

82

(37th)

1991-

92

(48th)

2002-

03

(59th)

%

Tenant holdings as % of total operated holdings

Tenanted area as % of total operated land

Tenancy is alive and kicking in Informal land lease markets.

Nair and Menon 2005, Laxminarayan and Tyagi 1977, Sanyal 1972 show it has always been higher than officially believed.

Bandyopadhyay (2008) places it at 15-35% of cultivated land.

We found indications that it is even higher in most states. Our estimates range from 22-65% in the villages we covered. More pervasive in West Bengal and Kerala than in many other states

But more importantly, the nature of the institution is changing

Drivers of land lease-markets• Tenancy laws? Naah. Just minor irritants. • Labor market environment: key driver in West Bengal and Kerala• Land fragmentation: owners lease out distant parcels• Dynamism in ‘non-farm economy’ of the area.• Highly unequal land ownership: UP & Bihar• Social structure: land owned by Kayastha’s in West Bengal Iyers in TN

who were never farming communities.• Enterprising farming castes like Gounders in TN and Patidars in Gujarat

are seeking new pastures.• Absentee owners: Irrational attachment to ‘ancestral property’; future

price appreciation.• Irrigation is by far the biggest driver: demand for canal irrigated land

is highest; few takers for rainfed lands• Rising cost of cultivation: owners find cultivating with hired labor

uneconomic.• Sub-marginal dairy farmers find tenanting land for fodder more

affordable than buying fodder.• NREGP is shrinking tenancy in central Gujarat and Nalgonda

Usurious rents levied from gullible tenants by emperors, overlords and zameendars has been the stuff India’s economic history is made of.

Reform of tenancy institution has been top on the govt. agenda since

Independence. But today, tenancy is reinventing itself..

Regulation of ‘maximum rent:Kerala: 1/3rd to 1/4thGujarat, Maharashtra, and Rajasthan= 1/6th of gross produce Assam, Karnataka, Manipur and Tripura= 1/4th to 1/5th.Punjab =1/3rdTamil Nadu= 1/3rd to 2/5thAndhra Pradesh= 1/4th for irrigated land; 1/5th on rainfed

Classical crop-share contract persists in stagnant

farm and non-farm economies of eastern India;

but even here, the terms are changing

In west and south, hundred flowers bloom; a vast variety of

fixed rent and share tenancy flourish; tenants are no longer at

the receiving end.

Drivers of tenancy: broad trends

Population pressure on farm land

Relatively high Relatively low

Relatively

low

Eastern UP, Bihar, West

Bengal: 50:50 crop share

contracts for single season

dominate, with owners

dominating the bargaining

process

Rajasthan, Vidarbha region;

eastern Madhya Pradesh,

Telangana: share-cropping

dominates but owners share

input costs with tenants

Dynamism

of the

economy

Relatively

high

Kerala: a variety of share,

fixed rental and hybrid

contracts are found with

bargaining power shared by

tenants and owners

Gujarat, Tamilnad: fixed

rental contracts for an year or

longer dominates; tenants

with credibility and loyalty

enjoy bargaining power;

Determinants of Terms of Tenancy• Conventional wisdom: crop-sharing predominates: owner takes half the

crop for just land.

• We found this still popular especially in the east; elsewhere, this is modified in myriad ways; moreover, scores of different contracts are in use; we identified 30 different share and fixed rental contracts.

• Demand-side (tenant side) factors: highly skilled and resourceful tenants prefer fixed-rent contracts; resource poor prefer share cropping

• Kharif tenancy is generally crop-sharing; rabi is often fixed rent

• Food crops is generally crop-share; cash-crop is both; high value cash crop is always fixed rent

Determinants of Terms ofTenancy

• ‘TINA tenancy”-the classical owner-dictated tenant contract

• “Scale-tenancy”-small/medium/large farmers seeking larger operational unit by renting unviable marginal holdings.

• “monitoring costs”-absentee owner prefer fixed rental

• “Custodian tenancy”-NRI owners; 5-7 year written contracts

• “fodder-tenancy”-Gujarat

• “Banana-tenancy”-Kerala; rent/pit

• “Coconut-tenancy in TN and ‘orange tenancy’ around Nagpur

• “specialist-skill tenants’ fixed rental contracts”- Telugu rice tenants in coastal Orissa; Mali’s of UP, Kachhias of Gujarat

• ‘niche tenancy”; migrant tenants tenanting land to exploit a niche market

Profile of Lessees and Lessors

Large farmers

Marginalfarmers

landlesse Large farmersMedium farmers

lessees

lessors

Rs/ha)

Location in Rainfed wells Canal Conjunctive term crop

the system only only Use

Mahi system, Kheda, Gujarat tail 4950 10524 18648 1 year various

Mahi system, Anand, Gujarat middle reach 2166 15129 16299 1 year various

Checkdam, Banaskantha, Gujarat near the dam 5249 10806 25620 1 year potato

Sainthal Sagar, Dausa, Rajasthanhead 11856 23712 1 year any

Pench Project,Nagpur, Maharashtrahead 3705 9880 season various

Temni project, Chindwara, Madhya Pradeshhead 6175 9880 season various

Narayanpur Lift Canal, Mirzapur, Uttar Pradeshhead 19687 24063 2 seasonsrice-wheat

Nagarjunsagar, Nalgonda, Andhra Pradeshhead 4200 5250 7350 season rice

Cheerakuzi regulator, Trichur, Keralamiddle reach 4500 4500 31250 1 year banana

Bhawani lift canal, Erode, Tamilnadumiddle reach 6175 16611 123500 1 year coconut

Mahandi barrage, Khurda, Orissa middle reach 13647 17224 16611 season rice

Sone canal, Rohtas, Bihar head 7039 17908 13585 season rice

Mayurakshi system, Birbhum ,West Bengalhead 6039 6002 11115 season boro rice

Irrigation Value Added in 12 systems

Some Implications and New Question

• “Irrigation Value Added”: if irrigation takes Rs 2.5 lakh/ha, it creates an asset with a rental value of 5-7% of the capital cost.

• Irrigation value-add depends on variety of factors besides system performance: skill and enterprise of the cultivator, stakes, access to markets, and more

• What does growing tenancy imply for water reform programs? What stakes would tenants have in WUAs and Watershed Committees?

• Does tenancy reform-old and proposed– matter? Many believe tenancy conforms to tenancy laws; others argue that liberalizingtenancy laws will help the poor. Is either true?

A framework to understand water governance in the IGB

• water governance is viewed as the sum total of processes, mechanisms, systems and structures that a State evolves and puts into place in order

to shape and direct its water economy to conform to its near and long term goals.

Governments influence the working of sectoral economies by using a combination of three classes of instruments

Taxing ‘socially undesirable’ behavior: ‘Polluter pays’;

Subsidizing products/services considered ‘socially desirable’: subsidy to micro-irrigation; canal irrigation subsidies; power subsidies

Price/economic instruments

Making laws to regulate individual actions: e.g., groundwater laws; APWALTA

Promoting institutional arrangements; PIM laws; PPP; GO-NGO Swachchh in Rajasthan; inviting global water companies

Promotion/ regulation

Banning private provision: administrative ban on private tankers in Chennai

Public production; canal systems; water supply systems; public tubewells

Direct action by public sector

NegativePositive

Forward linkages to

output markets

Improved

Livelihood

Access

Economics Institutions

Backward linkages to

input markets

Physical and social

setting

Externalities (e.g., socio-economic,

environmental and health)

Forward linkages to

output markets

Improved

Livelihood

Access

Economics Institutions

Backward linkages to

input markets

Physical and social

setting

Externalities (e.g., socio-economic,

environmental and health)

DirectInstruments of Water

Governance

Indirect instruments:e.g., power subsidies

Indirect instruments:

e.g., Gujarat’s recharge program

Indirect instruments:

Fixing Procurementpolicy

Indirect instruments e.g., subsidizing arsenic filters

Economic Growth and Water Governance

Direct; proactive; resource centered

Indirect; reactive; people-centred

Nature of water governance

Sustainable NRM;

Environment; Green Growth

Livelihoods; economic growth

Objectives of water governance

Highly formal; state’s direct reach deep and broad

Highly informal; state’s direct outreach limited

Nature of the water economy

RichPoor

Governance toolbox Un-governed Under-

governed

Moderately

governed

Intensively

governed

Polities Bihar, India Maharashtr

a, India

Hebei, China The

Netherlands 1 To what extent is the water economy

(in terms of volumes of water and

number of water users) formalized?

10-20% of

users and

volumes

40-45%

Of volumes;

70-75% of

users

60-65% of

volumes; 80%

of users

95%

2 What is the ‘ambit’ of the water

administration? How much of the

water economy—volumes and users—

does it encompass?

Very small;

<10%

1/3rd 4/5th

Full

*****

3 How effective have been the public

systems in promoting institutional

arrangements in the formal economy?

Or formalize informal IAs?

* ** *** *****

4 How effective and far-reaching is the

regulatory power of the public system

in the water economy?

0 ** **** *****

5 How extensive is the use of economic

instruments—prices, taxes,

subsidies—to manage the water

economy in keeping with policy

goals?

0 *** *** *****

6 What kind of indirect tools are used

outside the water economy to produce

desired impact within it?

0 * * No need