Institutional Analysis in the Indo-Ganges Basin


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Presented at the 2nd Phase Planning and Review Workshop of the Indo-Ganges BFP, 24-25 February, 2009, Haryana, India

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Institutional Analysis in the Indo-Ganges Basin

  1. 1. 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
  2. 2. 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
  3. 3. 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.
  4. 4. These buy Classes of Irrigators in theirrigation for food IGB and to security Rented diesel pump IGB irrigation absorb family economy has got labour heavily Own diesel pump Own and Electric pump Irrigation output & Irrigation cost/ha dieselized. rented gen- Own electric pumps purchase sets 15-18 million canals & tanks Marginal farmers 7-8 and share cropper families mha 10-12 12-15 mha mha 30-32 mha 20-22 mha Million ha of gross irrigated area
  5. 5. 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.
  6. 6. Rapid relative price of diesel: India Increase in diesel price relative to food and general price index (Base: 1996=100) 450 400 350 300 250 200 150 100 50 0 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
  7. 7. Leveraged Impact of energy-squeeze on water buyers from diesel STWs Diesel price rise and pump irrigation 120 price:Mirzapur, UP 100 Diesel Price (Rs/Lt) Irrigation Charges (Rs/Hr) 80 Rs. 60 40 20 0 1990 1997 1997 1998 2000 2001 2004 2006 2007
  8. 8. User cost of irrigation relative to the prices of irrigated crops Index No of Diesel price, irrigation price and farm produce: Eastern Uttar Pradesh 900 800 700 600 1990=100 500 400 300 200 100 0 1990 1995 2000 2005 2007 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
  9. 9. In 1990, buying a liter of diesel required selling less than a kg of rice or wheat; today, it requires 3-5 times more. kg rice/litre Diesel Rice of diesel (Rs/l) (Rs/kg) India 5.67 34.00 6.00 Pakistan 3.20 37.80 11.80 Bangladesh 3.89 35.00 9.00 Nepal terai 5.70 57.00 10.00
  10. 10. 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.
  11. 11. Desperate Strategies: Small-holder/Water Buyer Responses to Diesel Price Increase Diesel-saving crop substitution: boro rice on a decline Among diesel pump buyers; Return to rainfed farming West Bengal: Chinese diesel/kerosene pumps to is common for It the aid of India’s agrarian poor farmers in eastern India to Energy substitution: PDS kerosene for diesel;pay Rs 80-120 for Electricity preferred but connections hard to come by water. Pump irrigation 50 m3 of price is Forced exit from unviable farming-for landless who Cultivated leased landsticky; downwardly with rented diesel pumps it does not fall Energy saving irrigation practices: alternate furrow; when diesel price Pump irrigation price Rubber pipes; adjacent fields leased to use drainage falls. for water buyers is Gambler’s response: shift to high value, high input, rising 30-40% High risk crops-summer onion in North Bihar faster than diesel price Large increases in monopoly rents and power of electric tubewell owners: Uttar Pradesh
  12. 12. 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.
  13. 13. Similarly, far-reaching changes are occurring in IGB’s land tenancy scene. 1. Extent, pattern, dynamic and impact of tenancy 2. Irrigation impact on Tenancy 3. Estimate irrigation value- added
  14. 14. 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
  15. 15. 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
  16. 16. Extent of lease farming is vastly under- reported; moreover, there is explosive growth in tenant farming since 1995 Tenancy is alive and kicking in Informal Figure 1 Trends in tenant holdings and tenanted land (Source: NSS reports) land lease markets. 30 Nair and Menon 2005, Laxminarayan and 25 Tyagi 1977, Sanyal 1972 show it has always been higher than officially 20 believed. 15 % Bandyopadhyay (2008) places it at 15- 10 35% of cultivated land. 5 We found indications that it is even 0 higher in most states. Our estimates 1960- 1970- 1981- 1991- 2002- range from 22-65% in the villages we 61 71 82 92 03 covered. More pervasive in West Bengal (17th) (26th) (37th) (48th) (59th) and Kerala than in many other states Tenant holdings as % of total operated holdings But more importantly, the nature of the Tenanted area as % of total operated land institution is changing
  17. 17. 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
  18. 18. 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 1/4th Classical crop-share Gujarat, Maharashtra, and contract persists in stagnant Rajasthan= 1/6th of gross farm and non-farm produce economies of eastern India; Assam, Karnataka, Manipur but even here, the terms are and Tripura= 1/4th to changing 1/5th. Punjab =1/3rd Tamil Nadu= 1/3rd to 2/5th Andhra Pradesh= 1/4th for In west and south, hundred flowers bloom; a vast varietyland; 1/5th on irrigated of fixed rent and share tenancy rainfed flourish; tenants are no longer at the receiving end.
  19. 19. Drivers of tenancy: broad trends Population pressure on farm land Relatively high Relatively low Dynamism Relatively Eastern UP, Bihar, West Rajasthan, Vidarbha region; of the low Bengal: 50:50 crop share eastern Madhya Pradesh, economy contracts for single season Telangana: share-cropping dominate, with owners dominates but owners share dominating the bargaining input costs with tenants process Relatively Kerala: a variety of share, Gujarat, Tamilnad: fixed high fixed rental and hybrid rental contracts for an year or contracts are found with longer dominates; tenants bargaining power shared by with credibility and loyalty tenants and owners enjoy bargaining power;
  20. 20. 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
  21. 21. 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
  22. 22. Profile of Lessees and Lessors lessors Large farmers lessees landlesse Medium farmers Large farmers Marginal farmers
  23. 23. Irrigation Value Added in 12 systems 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 Pradesh head 6175 9880 season various Narayanpur Lift Canal, Mirzapur, Uttar Pradesh 19687 head 24063 2 seasonsrice-wheat Nagarjunsagar, Nalgonda, Andhrahead Pradesh 4200 5250 7350 season rice Cheerakuzi regulator, Trichur, Kerala reach middle 4500 4500 31250 1 year banana Bhawani lift canal, Erode, Tamilnadu reach middle 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 Bengal head 6039 6002 11115 season boro rice
  24. 24. 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 liberalizing tenancy laws will help the poor. Is either true?
  25. 25. 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.
  26. 26. Governments influence the working of sectoral economies by using a combination of three classes of instruments Positive Negative Direct action Public production; canal Banning private provision: by public sector systems; water supply administrative ban on private systems; public tubewells tankers in Chennai Promotion/ Promoting institutional Making laws to regulate regulation arrangements; PIM laws; individual actions: e.g., PPP; GO-NGO Swachchh in groundwater laws; APWALTA Rajasthan; inviting global water companies Price/economic Subsidizing Taxing ‘socially undesirable’ instruments products/services behavior: ‘Polluter pays’; considered ‘socially desirable’: subsidy to micro-irrigation; canal irrigation subsidies; power subsidies
  27. 27. Indirect instruments: Indirect e.g., power instruments: Direct Fixing Procurement subsidies Instruments of Water policy Governance Backward linkages to Forward linkages to input markets output markets Access Improved Livelihood Economics Institutions Indirect instruments e.g., subsidizing Indirect Physical and social Externalities (e.g., socio-economic, arsenic filters instruments: setting environmental and health) e.g., Gujarat’s recharge program
  28. 28. Economic Growth and Water Governance Poor Rich Nature of the Highly informal; Highly formal; water economy state’s direct state’s direct outreach limited reach deep and broad Objectives of Livelihoods; Sustainable NRM; water governance economic growth Environment; Green Growth Nature of water Indirect; reactive; Direct; proactive; governance people-centred resource centered
  29. 29. Governance toolbox Un-governed Under- Moderately Intensively governed governed governed Polities Bihar, India Maharashtr Hebei, China The a, India Netherlands 1 To what extent is the water economy 10-20% of 40-45% 60-65% of 95% (in terms of volumes of water and users and Of volumes; volumes; 80% number of water users) formalized? volumes 70-75% of of users users 2 What is the ‘ambit’ of the water Very small; 1/3rd 4/5th Full administration? How much of the <10% water economy—volumes and users— ***** does it encompass? 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 0 regulatory power of the public system ** **** ***** in the water economy? 5 How extensive is the use of economic 0 instruments—prices, taxes, *** *** ***** subsidies—to manage the water economy in keeping with policy goals? 6 What kind of indirect tools are used 0 No need outside the water economy to produce * * desired impact within it?