Kerala has showcased several models in the development spheres that are worth emulating. The latest in the series includes the decision to pay a royalty to owners of rice paddies, to encourage them to retain their paddy fields and continue farming. As per the decision, which took effect from September 11 this year, a royalty amount of Rs 2,000 per hectare will be extended to owners of 2.05 lakh hectares of paddy land in the state. An amount of Rs 40 crore has been earmarked towards this in the 2020-21 state budget.
Though conversion to non-agricultural purposes or cultivation of other crops is not allowed, cultivation of crops like pulses, sesame or vegetables are permitted. Traditionally part of the rice paddy crop cycle, these crops are grown when water availability for paddy is limited, especially during the third crop. Cultivation of paddy can be ensured by self or through leasing out to individuals or groups. Care needs to be taken not to keep the land fallow or convert it for other purposes. The royalty will not be paid if the land is kept fallow continuously. The authenticity of the farmers’ claims will be verified by an Agricultural Officer.
This is perhaps the first time in India that royalty is being paid to farmers for growing a crop. Though it raises some technical questions, the programme is a welcome move to ensure ecological safety and farm income and mitigate climate change impacts. This is a market-based policy instrument for agro-ecosystem conservation.
Rice cultivation has been declining steadily in Kerala, dropping from 8.82 lakh ha in 1974-75 to 2.03 lakh ha in 2018-19. The conversion of these privately owned ‘joint production’ agricultural wetland systems has been a matter of great concern, more on account of ecological factors. In addition to providing the major staple grain of the state, they play a key role in water regulation and groundwater recharge, which are key positive externalities from wetland paddy.
The state of Kerala falls in the per-humid agro-ecological zone and receives a mean annual rainfall of 3000 millimetre per year, which is thrice the national average. Despite this, the per capita availability of water (1,248 m3/ person/ year) in Kerala is less compared to arid regions like Rajasthan (1,829 m3/ person/ year). The per capita water availability shows a declining trend and the state also faces acute water scarcity especially during summer months. A major reason for this is the poor water retention capacity and the resultant decline in recharge of groundwater. At the same time, given the very high well density in the state, groundwater continues to be the major source of domestic and irrigation water requirements. Groundwater (open wells) irrigate 33 per cent of the total irrigated area in the state.
Conversion of paddy lands is said to have impacted water recharge functions, leading to water scarcity. Wetland paddy fields are considered as natural reservoirs that hold standing water and help in groundwater recharge. Studies have estimated that nearly 2 crore litres of water is recharged from one hectare of paddy land (through three seasons). The floods in 2019 are also attributed to a decline in these natural reservoir systems.
The rice paddies in coastal areas prevent saltwater intrusion and arrest soil erosion in high and midland conditions. They also play a significant role in microclimate regulation, water purification, nutrient cycling, watershed functions, biodiversity conservation and carbon sequestration. The landscape is also of cultural significance to the people of the state.
There are also reports of ecological disservices from the rice paddies as they release methane that triggers climate change. However, these wetlands are estimated to provide net positive externalities even after discounting for ecological disservices like methane emission. Methane emission from paddy fields in Kerala is estimated to be around 20 to 60 teragrams.
Alternative land-use decisions in paddy lands by private landowners, driven by social and economic reasons, can have serious environmental and ecological implications for the region. Several studies conducted across Kerala have shown evidence to this effect, especially with respect to water management. Policy interventions by the state, such as land-use regulations and subsidies for paddy farmers, have not fully yielded desired results. The latest in the series, the royalty payment is to be seen in this background.
Conversion of paddy wetlands of Kerala is a classic case of market failure due to externalities. The proposed royalty payment is an attempt to reward paddy farmers to account for the positive externalities, at least partially, to prompt them to continue in paddy cultivation. However, there is no clarity on the mechanism through which this figure was arrived at. A scientific compensatory package aimed at rewarding paddy farmers for the net ecological services needs to consider the net value of non-market ecological services (such as water and air) accrued from paddy fields and fix the payment accordingly. Such an approach is scientifically known as Payment for Ecosystem Services (PES), which is used to describe all schemes in which the beneficiaries, or users, of ecosystem services provide payment to the stewards, or providers, of ecosystem services.
PES is an umbrella term to represent all those economic policy instruments that support and promote ecosystem conservation. It is desired that the current intervention as royalty be scaled up to the concept of PES, which is being practised in many other countries, successfully.
There are established frameworks and methodologies to assess the value of non-market ecosystem services and there are estimates from rice-growing economies across the globe. An assessment carried out in Indonesia using replacement cost method estimates the value of the paddy fields ability to provide nutrients and as a compost container at 688.18 million Indonesian rupiahs (Rs 3.37 million @ Rs 0.0049 per Indonesian Rupiah) per hectare. Assessment of ecosystem services from rice farms in eastern India estimates a total economic value in the range of US$ 1238 (Rs 90,374 @ Rs 73 per USD) to $1,688 (Rs 1,23,224) per hectare per year.
One could draw parallels from a study that attempted to arrive at a conceptual payment schedule for non-market ecosystem services from agro-ecosystems in India. The study details methodologies for estimating the value of ‘ecological incentive’ for non-market ecosystem services, at different levels of adoption of ecologically benign farming practices. Further, it also estimates the budgetary requirement to operationalise the inventive payment. It established incentive payments based on the ecosystem service approach as a feasible modification to minimum support price-based approach for doubling farmer’s income. However, the quantum and quality of such services vary across regions and farming practices. It is important that the eco-friendly farm practices are treated favourably compared to the chemical-based ones.
The Kerala government’s landmark decision to pay royalty to paddy farmers to retain them in cultivation needs to be supplemented with efforts at arriving at a more accurate and scientific estimation of the royalty amount. This is imperative to ensure economic justice to paddy farmers who incur huge private costs and continue with the farming, resulting in socially desirable land-use decisions. Unless the royalty amount compensates fully for the non-market ecosystem services generated from paddy agro-ecosystems, the decision by farmers to continue in paddy cultivation might not be sustainable in the long run. For this, there should be a science-based value estimation of net externalities, based on which the economic incentive can be decided.
In this context, there is an equally strong argument that the scheme is extended to all agro-ecosystems, to acknowledge the ecosystem services from the agricultural production process. The incentive mechanism can be flexible and varied in accordance with the management protocols followed in the production process, wherein environmentally safe practices can gain higher returns. Acknowledging the invisible services from Good Agricultural Practices (GAP) and paying for the services rendered to the practitioners can improve the financial gains from farming and can act as an incentive to continue the vocation. The intervention can be an effective step in the policy efforts towards doubling farmers’ income while ensuring the adoption of management practices that ensure a safer environment.
Prof Indira Devi is Director of the Kerala Farmer Welfare Board, and was Professor & Director of Research at the Kerala Agricultural University.
Dr M Manjula is Faculty, School of Development, Azim Premji University, Bengaluru.
Views expressed are the authors’ own.