The ppt discusses about policies and incentives for crop diversification in India after taking into account the externalities and subsidies. It quantified social cost benefits of different crops after considering the subsidies, negative externalities like green house gas emissions and also positive externalities like value of Nitrogen fixation by legume crops.

1. Policies, incentives and subsidies
for crop diversification
(special reference to pulses)
A Amarender Reddy
Principal Scientist & Head, Section of Design and Analysis
ICAR-Centre Research Institute for Dryland Agriculture,
Hyderabad
Email: Amarender.reddy@icar.gov.in

2. Overview of the sector
 Production increased from 13-15 mt in 2009-10 to 19 mt in
2014 and now 25-27 mt.
 With policy and technological intervention (short duration and
HYVs, NFSM-pulses, Accelerated Pulses Production
programme, increase in MSP from 2007 onwards, good
monsoon)
 2015 and 2016 bad years, production reduced to 17 mt, but
now production is more stable even during droughts.
 Opportunities for increasing supply.
 Demand growing faster (4-6% per annum)
 Trade opportunities (world trade only 12-18 mt)
 Rationalization of subsidies to compensate for externalities.
 Consumption among poorest.

3. Outline of presentation
• Demand and supply
• Incentive structure (subsidies and
externalities)
• Addressing fluctuating and high prices (trade
policy)
• Value chain and consumption enhancement.
• Policy options

4. DEMAND AND SUPPLY

5. 5
Production and availability of Pulses (Million Tons)

6. 0
20
40
60
80
100
120
Rural
Urban
Total
Rural
Urban
Total
Rural
Urban
Total
Rural
Urban
Total
Rural
Urban
Total
UP Bihar MP Rajastan Punjab
Consumptionofpoorestandrichest
consumers(gm/capita/day)
Poorest Richest
Poor consume very less even though pulses are known as poor mans meat

7. Supply shift in chickpea
(chickpea became more cheaper)

9. INCENTIVE STRUCTURE

10. Measurement of social cost-benefits
• Cost-benefit analysis at market prices for
pulses and competing crops.
• Measurement of subsidies (Fertilizer + Water)
(subsidies are costs to government)
• Measurement of externalities (CO2 +Nitrogen
fixation).
(negative externalities are costs to society &
positive externalities are benefits to society)
• Social cost-benefit analysis

11. Economic cost benefits(2019-20)

12. Economic cost benefits (2020)

15. Incentives should reflect true value
of pulses to the society
1. In ideal situation positive externalities be
compensated by govt through subsidies/incentives.
2. Positive externalities to be quantified and equivalent
amount to be given to pulse farmers (in terms of free
seed, rhizobium culture and micro-nutrients, dal
mills).
3. Biased subsidies to be replaced by neutral direct
money transfers(second best).
4. Under one-district one-product, market linkages and
infrastructure may be improved (second best).

16. ADDRESSING FLUCTUATIONS IN
PRICES

18. Escaping cob-web phenomenon

19. Improving India’s pulses
importing/exporting
Be a better negotiator? Long-term contracts?

20. Ad-hoc vs. exclusive vs. nonexclusive

21. Trade strategies
• More bargaining power may backfire in ad-hoc trade
• Long-term contracts may be worse than ad-hoc trade
• Proposal 1: long-term contracts with multiple suppliers
• Proposal 2: long-term contracts with suppliers of
existing ad-hoc relationships
• Budget favors ad-hoc importing

22. Infrastructure Post-Harvest value chain of
pulses

23. Consumption
Pulses consumption is low among poor
• Pulses distribution under PDS is may be
increased from 1 kg/household/month to 2 kg.
• Mid-day meal scheme/ICDS are best ways to
improve women and children malnutrition.
• Subsidised low cost meals in urban centres.
• All social welfare schemes school hostels and
college hostels and hospitals.

24. Policy Environment
 Subsidies for seed, rhizobium culture, micro-nutrients, micro-
irrigation/mobile sprinklers.
 MSP and government procurement not effective-(deficiency
payment).
 Price monitoring- timely government intervention to maintain
price band
 Buffer stock purchase from APMC markets and FPOs.
 Reduce controls (export ban/stock limits) and encourage long-
term contracts.
 Contingency planning
 Futures markets
 Aggregators/producer companies (Rs.500 crores fund).

25. Thank you!