DRAFT

Towards Accelerating Adoption of Drip Irrigation in Madhya Pradesh

International Water Management Institute Centre for Environment and Development Studies, Jaipur
December, 2011

Contents
Executive Summary ...................................................................................................................................... 3 1 The Study : Rationale and Scope........................................................................................................... 6 1.1 Methodology................................................................................................................................. 7

2. The Drip Irrigation Technology in India: Setting, Growth and Potential................................................... 8 2.1 Drip Irrigation in India: Current Status and Potential of Usage .......................................................... 9 2.2 Impact of Drip Irrigation ................................................................................................................... 13 2.3 Factors constraining uptake of drip irrigation by farmers ................................................................ 15 3. Drip Irrigation in Madhya Pradesh: A Status Report............................................................................... 16 3.1 Market development for drips in Madhya Pradesh.................................................................... 19

4. Subsidies for Drip Irrigation Technology ................................................................................................. 20 4.1 The Rationale .................................................................................................................................... 20 4.2 The Evolution of Subsidy Program for Drip....................................................................................... 21 4.3 Current Status of Subsidies on Micro Irrigation in India ................................................................... 23 4.4 Subsidy on Drip in Madhya Pradesh ................................................................................................. 25 4.5 Process of Subsidy Disbursal ............................................................................................................. 28 4.6 Madhya Pradesh : Extent of subsidy available and Uptake of Drip Technology .............................. 30 4.7 Availability of Subsidy and Uptake of Drip........................................................................................ 33 4.8 Towards an alternative model of delivery of Subsidies .................................................................... 38 4.8.1 Direct Delivery of Drip Subsidy - An Alternative Model for Subsidy Delivery............................ 39 4.9 Subsidy Regime and Development of Low Cost Innovative Drip Technologies........................... 44 5. Summing Up ............................................................................................................................................ 45

Towards Accelerating Adoption of Drip Irrigation in Madhya Pradesh

Executive Summary
Rising demand for irrigation water in the face of its inefficient use amid concerns of growing water scarcity has brought in to renewed focus the need for conserving water and improving water use efficiency. Given the difficulties and political compulsions associated with bringing about effective policy reforms to achieve the objective of water conservation, the emphasis has generally focused on technological solutions. Micro irrigation technologies such as those based on Drip and Sprinkler systems are being increasingly propagated as ideal technological solutions for achieving water conservation. Of the two technologies, drip irrigation, in its various forms, has been a relatively more important mode of micro-irrigation in India. However despite the numerous advantages and water saving potential the drip technology offers, it has failed to capture the kind of market that would have been expected of such a technology. The present study attempts to enquire into some of the possible reasons for the slow uptake of this otherwise high potential water conserving technology and suggest some interventions that could help contribute towards accelerating the pace of adoption of drip technology. Given that the main driver for the promotion of drip irrigation in India has been the provision of financial subsidies from the government, the study employing a partial analytical framework, specifically assesses the efficacy of instrument of subsidies in promoting uptake of drip technology by the farmers. While the present case study focuses primarily on the Indian state of Madhya Pradesh, the evidence drawn upon and the conclusions drawn from the study expectantly will have general applicability for other regions of the country as well. The evidence available suggests that almost all the drip equipment sales in the study area of Madhya Pradesh are subsidy driven. Manufacturers and market estimates suggest that more than 95 per cent of the drip sales in Madhya Pradesh are subsidy linked. Given that substantial government subsidy to the tune of 70 to 80 per cent of the cost of the system is available for purchase of drip system, it is but natural that no farmer would like to invest in a drip irrigation system without availing of the subsidy. The linkage between uptake of drip systems to availability of subsidy has killed both - the inertia of developing aggressive marketing strategies on the part of the manufacturers to push and promote sales of unsubsidized systems, and any attempts at bringing down the manufactured cost of the drip system through alternative/innovative product designs or technological innovations. All efforts of manufacturers, dealers and other stakeholders are focused on making the most of the available government subsidy through sale of their brand products. The system has thus made the manufacturers subservient to government favours and has led to loss of their enterprise spirit. Similarly the insistence on the drip products to carry ISI mark as a seal of guarantee, and more so as a pre- condition for qualifying to become eligible for availing of government subsidy on drip, has led to adoption of corrupt practices. Our careful analysis of the prevailing subsidy regime of the government together with the procedures set and manner in which subsidy disbursal takes place suggest a strong nexus between manufacturers and government departments entrusted with the administration of the subsidy program. The subsidy, meant for the farmers, as currently being administered, is actually going to the manufacturers who of course claim it all in the name of the farmers. The manufacturers have adopted competitive strategies to create a sustainable competitive advantage for promotion of their business. The actual business

4 model followed by companies is governed more by the State subsidy system. Companies operate more like a cartel to benefit from the subsidy provisions of the program. Producers and the chain of sellers involved in marketing of the micro irrigation technology emphasize building contacts with government officials at different levels in order to get maximum share out of the subsidy kitty. At the farm level, the attempt is to convince the farmer that he/she would get a high cost product without having to pay the full amount for it. Rather than emphasizing the benefits that the farmer might get from use of the technology or on details about maintenance etc. the focus is entirely on getting the necessary papers prepared for release of subsidy amount from the government. Even the decision about the choice of product and of the company is determined by the agent who succeeds in approaching the farmer and getting his papers cleared. The farmer is a passive participant in the entire process. The presence of a number of companies leads to competition among firms producing varying quality of equipment and services. The subsidy system is also responsible for unhealthy competition. Generally in any business, revenue is generated by the companies through sales and support system, cost structure of the product, and targeted profit. But in case of micro irrigation systems the adoption of high cost drip equipment is directly related with the provision of subsidies. Given the strong nexus that has developed over a period of time between different players involved in disbursal and receivers of the available drip subsidies, in shaping the subsidy delivery system of the government to their advantage and indirectly constraining the spread of drip irrigation technology, one often wonders is the government, by providing subsidies, trying to promote a specific kit of drip system or the concept of drip system in general? Why should eligibility condition for availing subsidy bind a farmer to a specific configuration of the drip system and not let farmer use his imagination to choose components which in his view could serve the same purpose but at a somewhat lower cost without the use of all the pre specified components? Is there a way out of exiting this nexus and use the available government subsidies to achieve the goals that these subsidies are intended to achieve? We premise that if the government were to dispense with completely the existing mechanism of subsidy delivery to the manufacturer/ intermediary in the name of giving subsidy to the farmer, and arrange to make direct delivery of drip subsidy to the beneficiary farmers themselves, the scenario of market prices and uptake of drip by farmers may change considerably. Based on feedback from different stakeholders we postulate that if the subsidies on drip in its present form were to be withdrawn by the government, it is very likely that the open market (unsubsidized) prices of the manufactured drip systems will fall by at least 40 percent. Increased open market competition may reduce further the cost of a system by another 5-10 percent or so. The net result is a likely reduction in prices of manufactured drip systems by about 50 per cent in free (unsubsidised) market. This perception is shared by almost all the market players including some of the leading manufacturers and sellers of the drip systems. This is also evidenced by the open market prices of drip systems being sold by the manufacturers/ assemblers of non- BIS marked drip systems in the study region, though admittedly there may be some difference in quality of performance between the two types of drip systems. Based on the above premise and possibilities of a likely reduction in open market prices of a drip system in the event of government withdrawing the current capital subsidy scheme for drip systems, we propose an alternative subsidy delivery model. In the proposed subsidy delivery model, we propose that rather than giving a one- time capital cost subsidy for investing in a drip system, the government gives interest cost subsidy to farmers willing to invest in a drip system. Under the scheme the government gives interest free loans for the entire cost of a drip system to all farmers- small, large, belonging to general/SC/ST category, willing to buy a drip system. These loans can be administered through the

5 existing financial institutions available in rural areas. The government provides interest free loans with capital repayable after five years. The farmer is free to buy drip system from any dealer/manufacturer, choose desired configuration of the drip system (such as to include or not to include venturi etc), negotiate a price and after sales service conditions with the dealer. The farmer does not need to visit government offices to obtain approval, clearances or no objection etc before buying the system. The government does play its facilitative role in ensuring that only good quality products are sold in the market and farmers are not cheated by manufacturers. With a given amount of funds available for subsidy, the proposed model, in comparison with the existing subsidy delivery system, can provide subsidy to a much larger number of farmers, can bring in much larger area under drip irrigation resulting in lower subsidy outgo per hectare of drip irrigated area, would still incentivise the farmers to invest in drip systems, lower the cost of subsidy outgo, be more transparent, less prone to corruption, easy to manage and govern, less prone to interference and whims and fancies of officials, and lead to more efficient use of available subsidy, without distorting the market for sales of drip systems. Thus on all indicators, the proposed subsidy scheme of direct delivery of drip subsidy to farmers outweighs the existing subsidy scheme of subsidising the manufacturers/ providers of drip systems in the name of subsidy to the farmers.

The Study: Rationale and Scope

Rising demand for irrigation water in the face of its inefficient use amid concerns of growing water scarcity has brought in to renewed focus the need for improving water use efficiency and raising crop water productivity. Large scale emphasis is being made to achieve water conservation through various demand side management interventions encompassing technological options and/or policy measures. Given the difficulties and political compulsions associated with bringing about effective policy reforms to achieve the objective of water conservation, the emphasis has generally focused on technological solutions backed by soft policy interventions to aid and facilitate adoption by farmers of such technological solutions.

Micro irrigation technologies such as those based on Drip and Sprinkler systems are being increasingly propagated as technological solutions for achieving water conservation. Of the two technologies, drip irrigation, in its various forms, has been a relatively more important mode of micro-irrigation in India. Some of the available evidence suggests that drip technology not only saves water but is also cost effective and has significant economic and social benefits. It results not only in saving of water but also of electricity for pumping water, uses less labour and leads to higher crop productivity.

These water conserving irrigation systems, however, do not come without a price. They are expensive and require clean water to prevent the clogging of the fine delivery tubes. The systems may, if not installed correctly or without the knowledge of the landscape or crop, not give any boost in production or reduction in water use and may ultimately be a waste of time. The plastic above ground lines of surface irrigation systems have also been known to break down in extreme temperatures. ( http://climatelab.org/Drip_Irrigation)

To partially offset the high capital cost of drip technology and to encourage farmers invest in this water conserving technology, the government in India has been providing substantial financial incentives in the form of capital cost subsidies to those farmers willing to invest in this technology. However despite apparent economic, financial, yield enhancing and water conserving advantages of drip technology, availability of substantial government incentives to encourage farmers invest in this technology, a favourable benefit-cost ratio of investment, and a short payback period of the investment made therein, the uptake of this technology by farmers has been rather sluggish.

7 Apart from the high cost limiting adoption of drip technology by farmers, there are, in addition, technological factors which have also constrained adoption of this technology by small farmers. Most common drip irrigation systems are designed to serve larger areas, and cannot be adjusted to fit small plots cultivated by the large majority of farmers. To address both the cost and technological issues constraining adoption of drip technology by small farmers, the International Development Enterprise (IDE) promoted low cost solutions to drip through affordable micro irrigation technologies (AMITs) suitable for even small parcels of land. The IDE claims to have successfully marketed this technology to a large number of farmers in several regions of the country without government subsidy but generally through donor supported programs for promotion of these technologies. However, available evidence shows that the adoption of even this low cost technology has also been much lower than the potential. The technology has failed to capture the kind of market that would have been expected given the significantly lower financial requirements in comparison with modern drip irrigation systems.

Thus both for high cost drip technology suitable for medium to large farmers and low cost drip technology suitable for small farmers, the drip technology has failed to capture the kind of market that would have been expected given the numerous advantages and water saving potential the technology offers. The present study attempts to enquire into some of the possible reasons for the slow uptake of this otherwise high potential water conserving technology and suggest some interventions that could help contribute towards accelerating the pace of adoption of drip technology. Given that the main driver for the promotion of drip irrigation in India has been the provision of financial subsidies from the government, the study employing a partial analytical framework, specifically assesses the efficacy of instrument of subsidies in promoting uptake of drip technology by the farmers. While the present case study focuses primarily on the Indian state of Madhya Pradesh, the evidence drawn upon and the conclusions drawn from the study expectantly will have general applicability for other regions of the country as well.

1.1

Methodology

The study is based on extensive interviews with manufacturers/ sellers/ retailers/ promoters (NGOs, extension agencies etc) of both high end and low cost drip technology in two selected regions of Madhya Pradesh (MP). Officials of MP Horticulture Department responsible for administering the subsidy program for drip irrigation were interviewed. Individual farmers and farmer groups of adopters of drip technology were interviewed to ascertain their experiences. Opinions of non- adopter farmers were also taken to understand the constraints for adoption of drip technology. The field survey was

8 conducted in three locations, viz., Sagar, Dhar and Indore districts of Madhya Pradesh. A total of 40 farmers (22 from Sagar , 10 from Dhar and 8 from Indore) were interviewed in addition to dealers and government officials in the respective districts. Since identifying villages and farmers was not easy, as the number of drip users are few and spread over a very wide area, these were selected purposively depending upon the ease of operation and availability of cooperation from the users.

2. The Drip Irrigation Technology in India: Setting, Growth and Potential

Farmers in India generally practice flood irrigation resulting in low water application and use efficiency. The estimated irrigation water use efficiency in India is of the order of about 35-40 percent. With deteriorating surface water infrastructure and rapid decline in ground water tables in large parts of the country, in the face of increasing demand for water from all sectors of the economy, there is a widespread concern for using the available water more efficiently. Micro irrigation system (MIS), comprising drip and sprinkler technologies, has emerged as an effective tool for water conservation and improving water use efficiency. While drip irrigation is ideally suited for horticulture crops such as pomegranate, grapes, mango, banana, guava, coconut, amla, and cash crops such as sugarcane, it is being used for cultivation of some other crops as well. Sprinklers are generally useful in undulating land with cereals crops. Despite substantial efforts having been made in promoting these demand side management (DSM) technologies, in practice, these have been slow to be accepted and adopted by the farmers. Of the two, drip irrigation is a relatively more preferred technology by the farmers in India.

Drip irrigation, is an irrigation method which enables saving of water by allowing water to drip slowly to the roots of plants, either onto the soil surface or directly onto the root zone. Drip irrigation methods range from simple bucket kit systems for small farms to automated systems linking release of water to soil moisture conditions measured continuously by tensiometers. Broadly drip Irrigation technologies can be categorized into two groups based on their technical, economic and social attributes. These are low-cost drip irrigation technologies and the commercialized, state-of-the-art drip irrigation systems. The low-cost drip irrigation technologies include the pepsee1, easy drip, various kinds of affordable drip irrigation systems designed by IDE, and micro tube drip systems. The latter class of drip irrigation technology includes the conventional high end drip systems.

Pepsee systems: Grassroots innovation under groundwater stress :Shilp Verma, Stanzin Tsephal and Tony Jose

While drip technology in its various manifestations has been in use since ancient times, however it is only with the advent of modern plastics that major improvements in drip irrigation have become possible. Water in a modern day drip system is delivered through a network of valves, pipes, tubings and emitters. Most large drip irrigation systems also employ some type of filters to prevent clogging of the small emitter flow path by small waterborne particles. These modern day drip systems, also permit delivery of liquid fertilizers and other nutrients along with the water in a process known as fertigation. Fertigation and chemigation use chemical injectors such as piston pumps or venturi pumps. Fertilizer savings of up to 95% have been reported from some of the recent field tests using drip fertigation and slow water delivery as compared to timed-release and irrigation by micro spray heads. ( http://en.wikipedia.org/wiki/Drip_irrigation). Drip systems have been shown to achieve up to 95% water use efficiency.

In addition to helping conserve water and fertilizers, drip irrigation can also help reduce the problems of salinization and waterlogging. Additionally, in water scarce environments, drip irrigation may allow for agriculture in areas where furrow or flood irrigation would not be possible.

2.1 Drip Irrigation in India: Current Status and Potential of Usage

In the initial stages of introduction, most of the MIS were introduced for horticlutural crops- mango, banana, orange etc but their use has subsequently been extended to a variety of crops- cotton, vegetables, sugarcane, groundnut etc. It is now possible to use drip and/or sprinkler irrigation to a wide variety of crops. Various estimates of potential and actual area under micro irrigation technologies have been made available by different researchers/ institutions.

The use of drip irrigation in India starting from the time of initial testing at Tamil Nadu Agricultural University in Coimbatore in 1970, increased rapidly to 55,000 hectares by 1992 (Pollock and Sivanapan, ). The technology in India was introduced on a commercial scale only during the Eighth Five Year Plan (1993-98) and during the one decade period 1993-2003 about 0.35 million hectares was brought under drip irrigation (Table 1 )2.
2

In addition to this area it has been estimated that an additional 100,000 hectares of area has also been brought under micro irrigation outside of the government schemes. Thus by the end of 2003 approximately 0.5 million hecatres had been brought under drip irrigation (GOI, 2004).

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Table 1 : Annual coverage of Area under Micro Irrigation in India Year 1992-93 1993-94 1994-95 1995-96 1996-97 1997-98 1998-99 1999-2000 2000-2001 2001-02 2002-03 Total Source: GOI (2004) Area (000 hectares) 13.49 14.05 14.59 39.80 46.50 45.15 53.08 53.19 25.44 15.20 27.10 347.59

Thus out of the 69 MH net irrigated area in the country, only 0.5 MH had been brought under drip and 0.7 MH under sprinkler irrigation by 2003 (GOI, 2004). Of the total area under drip irrigation in the country, almost 46 per cent of the drip area was in Maharashtra. Karnataka, Tamil Nadu, and Andhra Pradesh were the other important states in the country for drip irrigation accounting respectively for 21, 14 and 12 per cent of the drip irrigated area in the country. In terms of the use of drip irrigation for different crops, the use was limited to banana (11%), grapes (10%), mango (9.4%), citrus (7.9%) and pomegranate (6.2%), with all other remaining crops contributing to less than 5 percent of the drip irrigated area (GOI, 2004). The task force on micro irrigation, set up by Government of India, suggested a target of 2 million hectares to be brought under drip and 1 million ha under sprinkler irrigation by the end of Tenth Five Year Plan (2002-2007), and by about 17 MHa under micro irrigation by the end of the XI Plan period (2007-12) (Table 2 ) and hoped to cover the entire potential area by 2030. Of the about 69.5 million hectares that can be brought under micro irrigation in India, 39 per cent is through drip3 and the remaining about 61 per cent by sprinkler (Table 3). From amongst the area amenable for drip
3

The Indian Committee on Irrigation and Drainage (ICID) estimates a potential of 10.5 million hectares for drip irrigation in India.

11 irrigation the largest (26 per cent) is under cotton followed by sugarcane (16 per cent), fruits, oilseeds and vegetables (about 14 per cent each) (Table 4). Going by the progress achieved in the last about 15 years or so these targets indeed were very optimistic (in fact impossible) to achieve. Although there is an increasing awareness amongst farmers towards adoption of better water management practices through use of micro irrigation system, in practice for a variety of reasons they have been slow to adopt these technologies. This expectation has so far been belied, as the drip-irrigated area is much less than 1% of total groundwater irrigated area (Dhawan, 2000) and there is little hope of a sudden turn- around in the adoption scenario.

Table 2: Proposed Annual Targets for Microirrigation in India S.No Year Proposed Area for Adoption, MHa Drip 1 2 3 2004-05 2005-06 2006-07 X Plan 4 5 6 7 8 2007-08 2008-09 2009-10 2010-11 2011-12 XI Plan Total Source : GOI (2004) 0.50 0.70 0.80 2.00 1.00 1.50 2.00 2.50 3.00 10.00 12.00 Sprinkler 0.25 0.35 0.40 1.00 0.60 0.70 0.80 0.90 1.00 4.00 5.00 Total 0.75 1.05 1.20 3.00 1.60 2.20 2.80 3.40 4.00 14.00 17.00

12 Table 3: Theoretical potential area for drip and sprinkler irrigation in India (Million Ha) Crop Cereals Pulses Oilseeds Cotton Vegetables Spices and Condiments Flowers and Medicinal and Aromatic Plants Sugarcane Fruits Coconut and Plantation Crops, Oil Palm Total Source: GOI (2004) Table 4 : Estimated potential of drip and sprinkler irrigation under three crop categories S. No. Category Crops Estimated potential area (mha) 1 1 Widely spaced tree crops suitable for Drip irrigation (including 6.90 fruit crops, nuts, plantation crops, oil palm, rubber, forest crops) 2 2 Closely spaced crops suitable for Drip irrigation (including cotton, vegetables, tea, coffee, spices, sugarcane, tobacco, vanilla, mulberry, medicinal and aromatic plants, flowers, some extent of oilseeds and pulses) 3 3 Crops suitable for sprinkler irrigation (including cereals, some 42.50 extent of oilseeds, pulses, vegetables, tea, coffee, spices, medicinal and aromatic, flower and fodder Total Source: GOI (2004) 69.50 201.0 Drip 3.8 7.0 3.6 1.4 4.3 3.9 3.0 27.0 Sprinkler 27.6 7.6 1.1 1.8 2.4 1.0 1.0 42.5 27.6 7.6 4.9 8.8 6.0 2.4 1.0 4.3 3.9 3.0 69.5 Total

13 As per more recent data available, during the period between 2005-06 and 2008-09 (up to December 2009) about 1.72 million new area had been brought under micro irrigation, of which drip accounted for about 0.84 million hectares and the remaining by sprinkler. The pace of area under drip has increased substantially in recent years. The annual average area under drip which was around 3100 hectare between 1990 and 2005, has almost trebled and stood at 9300 hectare during the more recent period (2005-December 2010) (Raman and Palinisami, 2010).

2.2 Impact of Drip Irrigation

Various studies undertaken to assess the impact of drip irrigation have shown encouraging impacts on various farm variables Drip irrigation has helped bring in crop diversification from rainfed crops to horticultural crops and bringing in cultivable waste lands under horticultural crops. Water saving4 expected from use of MIS has motivated the beneficiary farmers to shift from low duty crops to high duty crops. Savings in water due to use of drip varied amongst horticultural crops have been in the range of 40-65 percent and in vegetables from 30-40 percent. Use of drip has also led to significant reduction of labour in irrigation, weeding, harvesting and aided convenience by eliminating drudgery in farm management (irrigating crops during irregular and odd hours of power supply). Saving in irrigation water due to MI has resulted in direct reduction of power consumption due to reduced hours of pumping. Adoption of MI has also been associated with increased level of crop yields- the level of increase varying from place to place and crop to crop incomparison with conventional irrigation. Some improvement in crop quality (such as uniform pod filling in case of groundnut, better shine in sweet orange, uniform bigger sized bananas) has also been reported leading to higher output realisation from the produce. Use of MI has also been reported to have led to reduction in cost of cultivation and
4

On the question of water savings impacts of drip irrigation, the opinions differ. While a majority of the studies agree that adoption of drip leads to significant savings in water application and use others say not necessarily so. It has been argued that while drip does reduce evaporative losses, is often associated with a switch to high value crops, and reduces fertilizer use when liquid fertilizer is added to the mix and delivered precisely to the root of the plant. While these productivity gains are often seen yet it is not as simple as that. It usually works for the farmer but can encourage an expansion or intensification of cultivation that often leads to an increase in water used. Thus with use of drip major gains are possible if drip is used as part of a program to build a restriction on individual consumption in combination with increasing farm productivity (Julia Bucknall in http://blogs.worldbank.org/climatechange dated 22 March 2010). It has also been argued that improving the efficiency of irrigation systems by itself does not translate in to real world savings in the hydrological cycle. Often, these improvements lead to an increase in water consumption and reductions in aquifer recharge/return flows. (Rita Cessti in http://blogs.worldbank.org/climatechange dated 24 March 2010).

14 increase in gross value of output. The magnitude of these changes have however varied from crop to crop and state to state. The financial rate of return have reported to have varied from about 30 percent to more than 50 percent. The payback period on investment under MI was reported to vary between 0.5 years to 1.17 years in the case of such crops as groundnut, potato, cotton while in the case of horticultural crops it was somewhat higher (Source: Evaluation study of the CSS).

Table 5 and 6 below give illustrative information about the impact of using drip on crop yields and in improving water use efficiency in studies reported by INCID. Yield increases varying from 30-200 percent have been reported for different crops alongwith improvement in quality of the produce. Doubling of irrigated area from the same amount of available water has also been reported with the use of MIS.

Table 5 : Yield increase with Drip Irrigation Crop Conventional Banana Grapes Sweet lime Pomegranate Papaya Tomato Water Melon Okra Chillies Sweet Potato Sugarcane Cotton Source : INCID (1994) 57.5 26.4 100.0 55.0 13.4 32.0 24.0 15.3 4.2 4.2 128.0 2.3 Drip 87.5 32.5 150.0 109.0 23.5 48.0 45.0 17.7 6.1 5.9 170.0 2.9 Yield (MT/ha) % Increase 52 23 50 98 75 50 88 16 44 39 33 26

15 Table 6: Water Use Efficiency with Drip Irrigation Crop Banana Chilly Grapes Groundnut Sweet Lime Pomegranate Sugarcane Tomato Water Melon Source : INCID (1994) Yiled Increase % 52 45 23 91 50 45 33 50 88 Water Saving % 45 63 48 36 61 45 56 31 36 Increase in WUE % 176 291 136 197 289 167 204 119 195

Based on the impact of drip irrigation on such parameters as water savings, increases in crop yileds, fertiliser savings etc, a number of authors have demionstrated that inmvestment in a drip irrigation system is a financially viable5 investment with a short pay back period.

2.3 Factors constraining uptake of drip irrigation by farmers

Despite the very favourable demonstrated impact of drip systems on water conservation, on crop yields, on other farm variables and financial viability of investment in drip why is it that only a few farmers have so far invested in drip irrigation? The uptake of drip systems by farmers has been far too lower than the potential this technology commands. Why is that many farmers are not coming forward to invest in a drip system? What is constraining farmers from investing in drip systems? The available literature and our primary survey of farmers in the selected regions of Madhya Pradesh point to some of the following factors that could be constraining farmers from investing in a drip system :
5

Based on farm level impacts (often derived on the basis of data collected from either a small number of drip using farmers or data available from experimental plots)of drip irrigation on crop yields and crop production, some authors have attempted to derive benefit-cost (B-C) ratios and pay back periods for recovery of invested capital. Some of the available estimates show a B-C ratio varying between --- to--- depending upon the crop/region of the study and a pay- back period ranging between ---- to --- years. However as pointed out by Dhawan (---) most of the available estimates of B-C ratio are flawed because these do not take in to consideration either the life of the equipment and stream of benefits emanating over the life of the equipment and/or do not evaluate the benefits of drip as the difference between with and without scenario. If one were to undertake financial anal ysis of investment in drip in a more systematic way the B-C ratio and pay- back period may undergo some change but still make investment in drip a financially viable option. Narayanamoorthy (1996,1997,2001) shows that if one were to take account of life of the drip systems over which the benefits occur the B-C ratio for Banana, Sugarcane and Grapes still were as high as 2.16, 1.91 and 1.76 respectively.

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Lack of awareness about the technology Non- availability of drip systems in market Small size of holding Unreliable technology Water source related constraints The hassels associated with the use of technology (the laying of pipeline, its storage during the period of non -use, choking and cleaning of emitters etc) Drip system not amenable for cultivation of crops which the farmers are cultivating Water availability for irrigation not a problem- enough water available for growing crops and no need for water conservation Subsidies on surface water and/or free electricity for irrigation pumping Non- access to government subsidy, difficult process to avail of government subsidy High upfront cost of investing in a drip system even after availability of subsidy Lack of access to institutional finance/ cost of finance Poor quality of the system supplied Unreliable and spurious spares and non-availability of standard parts Ignorance of the users regarding the maintenance and operation of the system Non-availability and uncertainty of power/energy supply Lack of access to technical support for running and maintenance of the system.

While all/ most of these factors affect to varying extent the uptake of drip irrigation systems in various locations/ underlying conditions one of the most important factors constraining uptake of this technology by farmers who are aware of this technology and willing to invest in the system nevertheless has been the high upfront cost of the technology.

3. Drip Irrigation in Madhya Pradesh: A Status Report

Agricultural policy of Madhya Pradesh emphasizes increasing area under horticultural crops and promotion of agro-processing industries. Encouraging cultivation of medicinal crops and floriculture in each district is also part of the policy. Achieving the objectives of the policy requires efficient water management as an integral part of the policy. Like other states , Madhya Pradesh is also implementing

17 the central government program for promotion of drip irrigation in the State but its implementation is contingent upon availability of central funds.

The adoption of drip program in Madhya Pradesh is of relatively recent origin. Appendix Table 1 provides district wise number of beneficiaries who have adopted drip irrigation during the last four years. Five of the --- districts in the state account for almost 73 percent of the total drip users in the state in the last four years (Table 7 ). Although incentives for investment in drip are available for all the districts in the state, the State Government has been pushing the drip irrigation more vigorously in these five districts. All these five districts are located in the south- western part of the state bordering Maharashtra and Rajasthan and are in the two agro climatic zones namely; Nimar Plains and Malwa Plateau and are experiencing severe shortages of groundwater (Figure 1).

Table 7: Important Districts for uptake of drip irrigation in Madhya Pradesh : Number of Users Adopting Drip Irrigation in Recent Years 2006-07 Beneficiaries District No Badwani Burhanpur Dhar Khargone Ratlam Other Districts Total State 134 448 29.9 100.0 873 2431 35.9 100.0 9913 39 142 12 0 121 Per cent 8.7 31.7 2.7 0.0 27.0 No 205 315 333 423 282 2007-08 Beneficiaries Percen t 8.4 13.0 13.7 17.4 11.6 932 1309 1884 2278 854 2656 26.8 100.0 12533 2008-09 Beneficiaries No Percen t 9.4 13.2 19.0 23.0 8.6 1253 1593 2231 2750 1309 3397 27.2 100.0 2009-10 Beneficiaries No Percent 10.0 12.7 17.8 21.9 10.4

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Agro Climatic Zones in Madhya Pradesh

AGRO CLIMATIC ZONES 1. Chattisgarh Plain Balaghat 2. Northern Hill Region of Chattisgarh 3. Kymore Plateau Satpura Hills 4. Central Narmada Valley 5. Vindhya Plateau 6. Grid Region 7. Bundelkhand 8. Satpura Plateau 9. Malwa Plateau 10. Nimar Plains 11. Jhabua Hills

Figure 1; Agro-Climatic Zones of Madhya Pradesh

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3.1

Market development for drips in Madhya Pradesh

The drip irrigation equipment market is fairly well developed in Madhya Pradesh. A number of large, medium and small companies provide irrigation equipment that includes drip and sprinkler sets. The available record shows that there were 51 registered companies in the state engaged in the business of irrigation equipment. Most companies were involved in the business of sprinkler sets (45 percent), followed by both sprinkler and drip irrigation (43%) and exclusively drip equipment (12 percent) (Table 8).

Table 8: Number of companies providing irrigation equipment Type of Equipment Drip & Sprinklers Sprinklers Drip All No. of Companies 22 23 6 51 Distribution % 43 45 12 100 Distribution of Companies % Within the State 27 22 8 24 Outside the State 73 88 82 76

One-fourth of the total companies are based in Madhya Pradesh and the remaining are from other states viz., Delhi, Maharashtra, West Bengal, Rajasthan and Gujarat. Competition among these companies is strong. The range in terms of quality and cost is quite substantial. A few companies such as, Jain Irrigation and Netafim Irrigation are recognized for maintaining the quality of their products. Other products are considered lower in quality but the range is large.

20

4. Subsidies for Drip Irrigation Technology

4.1 The Rationale
While the decision of a farmer to invest or not in a new technology such as drip irrigation system is dependent on a large number of factors, the two factors that play a relatively more important role in this decision making process are the financial viability of investing in the technology and the ease with which the technology can be used. Once a farmer is convinced of the economics of investment, the next important consideration is looking at the factors which could either constrain or facilitate the adoption of the technology. Availability of good quality equipment and access to financial resources6 for meeting the upfront cost of investing in the technology are some of the important factors that could influence technology uptake and adoption.

Adoption of drip technology by farmers in India has been constrained by both set of factors which influence its uptake not too sure about the financial viability of the investment in the technology and lack of access to resources to invest in a high cost technology. While some studies have demonstrated the financial viability of investing in a drip technology the available evidence is too sparse, based on either experimental data or too few observations, or is location/ situation/ farm size/ crop specific. Often the methodology employed to derive financial viability of drip in some of these studies suffers from serious limitations (Dhawan, ) and therefore do not instil the level of confidence that is required

to encourage spontaneous and widespread adoption of such a technology by the farmers. For similar reasons farmers do not want to invest either their own money or borrow money, either from financial institutions or other sources, to invest in the technology.

Similar views have been expressed by the industry. Jain Irrigation, one of the leading players in the manufacture of drip irrigation products opine that The major obstacle we are facing in promotion

of drip irrigation concept is availability of credit flow / finance to the farmers. Though the governments are subsidizing the cost of drip irrigation systems by about 50%, the farmers need funds to meet the balance 50% cost of the system. Hence availability of credit for meeting the balance 50% cost of the systems becomes a limiting factor.... The governments and the banking sector need to look at this concept more pragmatically and increase their credit flow substantially. The banks should offer attractive interest rates and increase the allocation for financing drip systems.

21 Given the pressing need for adoption of water conserving measures in the face of high upfront cost of the technology and not- too- certain private (and often social and water saving7) returns from its adoption, the government has been using the capital cost subsidy as the primary vehicle for promoting uptake of drip technology by the farmers in India. The dual logic behind providing capital cost subsidy is to reduce the high upfront capital cost of the technology and thereby make it possible for the farmer to invest in the technology with minimum personal investment; and to improve the financial viability of private investment8. Although the percentage of drip cost eligible for subsidy, the total quantum of finances allocated by the central and state governments for disbursal of subsidy, the institutional arrangements employed for subsidy disbursal, the eligibility criterion and other conditionalities attached with availing of subsidies by farmers have varied over time, yet subsidies have continued to be the main driving force for promoting investments in and uptake of drip technology.

4.2 The Evolution of Subsidy Program for Drip

The subsidies for micro irrigation were introduced by the central and state governments as early as 1988-1991. A Centrally Sponsored Scheme (CSS) on use of plastics in agriculture was launched during the VIII Five Year Plan (1992-97) of government of India (GOI) with an outlay of Rs 2500 million of which an outlay of Rs 2000 million was earmarked for promoting efficient method of irrigation through drip/micro irrigation in the country. During 1994-96 the government of India was giving subsidy at the rate of 50% of the cost of equipment to all categories of farmers. From 1997 to 1999-2000, for facilitating installation of drip systems, the GOI provided assistance at the rate of 90% of the cost of the system or Rs 25,000 per hectare, whichever was less, for small and marginal farmers, SC/ST farmers, and women farmers. For other categories of farmers the amount of assistance was limited to 70% of the total cost or Rs 25000 per hectare, whichever is less. Assistance was also provided for drip demonstrations at the rate of 75% of the system cost or Rs 22500 per hectare whichever is less.

Following the above formula, the government disbursed subsidy uniformly irrespective of the size of the farm, the nature of crop cultivated, or the amount of plant spacing. A Cost Committee constituted by the Ministry of Agriculture in 1997 suggested following modifications to the subsidy disbursal program for drip irrigation:
7 8

A number of studies have shown that adoption of drip technology does not lead to any savings in water Some studies however suggest that investment in unsubsidised drip system is also viable (see, e.g., Naryanamoorty, )

22 1. Differential unit cost of system for different plant spacing. The unit cost based on less than one hectare norms will be higher as compared to the unit cost for one hectare. It therefore also worked out cost norms for 0.4 hectare, 1 ha and 4 ha 2. Components such as sand filter and venturi assembly are to be included as optional items because of its restricted use by the farmers coupled with high cost 3. The cost of drip irrigation system needs to be charged from the farmers based on free competition as per market forces 4. The assistance needs to be lowered from 90% to 50% for SC/ST, small and marginal and women farmers whereas it may be reduced from 70% to 35 % for other categories of farmers subject to a ceiling of Rs 25000 per hectare. 5. The assistance may be restricted for a maximum of 4 ha against the existing unlimited area restriction 6. The registration of companies/manufacturers supplying imported as well as indigenous drip irrigation components needs to be done centrally at NCPA 7. Only those companies which manufacture at least 2 components of DIS i.e laterals and emitting devices need be registered.

Based on the recommendations of the Committee, the pattern of assistance for micro irrigation was revised during the IX Five Year Plan (1997-2002) as per the details given below:

Table 9 : Pattern of Assistance for Micro Irrigation in IX Plan

State Category

Maximum

Ceiling

for

Small, Maximum

Ceiling

for

other

Marginal, SC/ST and Women categories of farmers (Rs/ha) (35% Farmers (Rs/ha) (50% of Cost) for of cost) for a crop spacing of a crop spacing of 1.5X1.5 m A B C 22500 26000 28500 1.5X1.5m 16000 18200 20000

A Category States- Developed States B Category States- Other States other than those in the Himalayan Region C- All states in the Himalayan Region except those in NE Region

23

The above pattern of assistance continued till the end of IX Plan (2001-02). Thereafter with effect from 2002-03 during the Tenth Plan, the assistance was reduced to 25% of the cost of the system for all categories of farmers.

4.3 Current Status of Subsidies on Micro Irrigation in India

Continuing with the past approach of promoting use of micro irrigation through the provisioning of financial subsidies on the cost of the equipment, the Government of India launched in 2005-06 and subsequently during the XI five year plan (2007-12) upscaled it for implememntation at the national level a National Mission on Micro Irrigation (NMMI) as a Centrally Sponsored Scheme (CSS) for promotion and uptake of minor irrigation through provision of financial subsidies9. Under this CSS 40% of the cost of the micro irrigation system is borne by the Central Government, 10% by the State Government and the remaining amount is borne by the beneficiary either through his / her own resources or through loan from financial institutions. Additional assistance of 10% of the cost of the MI system is borne by the Central Government in respect of small and marginal farmers. Many state governments are providing even higher than the required minimum subsidy of 10 %.

Some of the eligibility requirements and the institutional arrangement for the delivery of subsidies as per the NMMI scheme are10:

All categories of farmers are eligible to avail assistance under this scheme. Assistance to farmers is limited to a maximum area of five ha per beneficiary. Assistance is available for both drip and sprinkler irrigation for wide spaced as well as close spaced crops. However, assistance for sprinkler irrigation system is available only for those crops where drip irrigation is uneconomical. All types of drip irrigation systems such as on line drip irrigation systems, in line systems, sub surface drip systems, micro jets fanjets etc are eligible.

Components of drip and sprinkler irrigation systems are at present also included in some other CSS such as National Food Security Mission (NFSM), Integrated Scheme of Oilseeds, pulses, oil palm and maize (ISOPOM) and Technology mission on cotton (TMC). These programs however also conform to the same norms and pattern of assistance as stipulated under NMMI. 10 Source; Government of India. 2010.National Mission on Micro Irrigation: Operational Guidelines. New Delhi: Ministry of Agriculture, November 2010

24 Assistance is available for irrigation systems for protected cultivation including greenhouses, polyhouses and shadenet houses. Assistance is available for implementation of advanced technology like fertigation with fertilizer tank / venturi systems, sand filters / media filters, hydrocyclone filters / sand separators and other different type of filters and valves required for MI system.

The NMMI has also suggested for implementation by states an elaborate institutional arrangement and prescribed a set of procedures for disbursal of subsidies. The NMMI has also provided the estimates of the nominal cost of a MI system for different crop spacing and for different sizes of farms for use by states to calculate the eligible amount of subsidy. For the purpose of fixing the nominal price of a drip system and therefore for determining the amount of eligible subsidy, the states have been categorized into three categories, viz. Category 'A', 'B' and 'C' depending upon their level of development with respect to drip irrigation. States where more than 20,000 hectares have been brought under drip irrigation come under category A for which the costs have been worked out by NMMI. This include the States of Andhra Pradesh, Gujarat, Karnataka, Madhya Pradesh, Maharashtra and Tamil Nadu. All the States except those covered under Category A and those falling in the Himalayan belt come under Category B. All the North Eastern States, Sikkim, Himachal Pradesh, Jammu & Kashmir, Uttarakhand and Darjeeling District of West Bengal come under Category C. Keeping in view the level of awareness, proximity to the manufacturing units, distance involved in transportation, potential for drip irrigation, the cost of drip system in Category B States is estimated to be 15% higher than Category A States while for Category C States it is estimated to be 25% higher than Category A States.

We present in Table 10 cost of drip irrigation systems, in respect of a few of the farm sizes-crop spacing combination, that is used for calculating the amount of eligible subsidy in Category A states.

25

Table 10: Indicative Costs of Drip Irrigation Systems for subsidy calculation for different sizes of farms and different lateral spacing (Costs in Rs) Lateral spacing (mxm) 12x12 8x8 4x4 2x2 1.2x0.6 Wide Wide Wide Wide Close 8057 8673 11177 18319 24063 13785 15088 18621 31616 43818 18820 22028 31793 63598 97598 29928 36217 55725 123441 185565 46467 56087 86926 179332 280886 57809 70893 113812 249134 378946 73611 89964 135459 305797 474070 Spacing 0.2 ha 0.4 ha 1.0 ha Farm Size 2.0 ha 3.0 ha 4.0 ha 5.0 ha

4.4 Subsidy on Drip in Madhya Pradesh

In its endeavour to promote adoption of drip irrigation by farmers, the Madhya Pradesh government, like many other state governments, has also been providing financial subsidy to farmers to help moderate the capital cost of the system and make investment in drip irrigation by farmers more attractive, affordable and economic. Under the prevailing subsidy regime in the State of Madhya Pradesh, the extent of subsidy varies between 70 and 80 per cent of the cost of the drip system. As discussed above this burden of subsidy is shared between Central and State governments. While the Central government provides for 50 per cent of the equipment cost as subsidy in the case of small and marginal farmers (belonging to both general category as well as SC/ST category), the extent of subsidy is 40 per cent in the case of other category of farmers. The State government additionally provides between 20 and 30 per cent of the cost as subsidy. The total subsidy as per cent of the cost of equipment thus varies between 70 and 80 per cent for different category of farmers (Table 11).

26

Table 11: Subsidy on Micro Irrigation in Madhya Pradesh (effective 1 January 2011) Sr No Category Farmers 1 Small Marginal 2 3 Others Small Marginal 4 Others General 40 30 70 SC/ST and General 40 50 30 20 70 70 and SC/ST of Caste Percent Subsidy Central Govt 50 State Govt 30 Total 80

Source : Office of the Micro Irrigation Committee, Bhopal

The indicative cost, for the purpose of calculation of eligible amount of subsidy, for different farm sizes and different crop spacing, are the same as suggested by NMMI and presented in Table 10 above. Table 12 shows the various components that form the standard drip irrigation system for two of the illustrative farm sizes- crop spacing combinations. These are the components which go in to determining the cost of drip irrigation as given in Table 10 above and thus for estimation of eligible amount of subsidy.

27

Table 12: Components and material requirements for a standard Drip Irrigation System11 Wide Spaced Crops 0.2 Hectares PVC Pipe 75 mm; Class II ; 4kg / cm2 PVC Pipe 63 mm; Class II ; 4kg / cm2 PVC Pipe 50 mm; Class II ; 4kg / cm2 Lateral 16 mm Class II ; 2.5 kg / cm2 Lateral 12 mm Class II ; 2.5 kg / cm2 Emitter 4 / 8 lph Microtube 6 mm Control Valve 75 mm Control Valve 63 mm Control Valve 50 mm Flush Valve 63 mm Flush Valve 50 mm Air Release Valve 1" Non Return Valve 1.5" Throttle Valve 1.5" Screen Filter 10 m3 / hr By-pass Assembly - 2" By-pass Assembly 1.5" Venturi & Manifold 2" Venturi & Manifold 1.5" Wide Spaced Crops- 5 Hectares PVC Pipe 90 mm; Class II ; 4kg / cm2 PVC Pipe 75 mm; Class II ; 4kg / cm2 PVC Pipe 63 mm; Class II ; 4kg / cm2 Lateral 16 mm; Class II; 2.5 kg / cm2 Lateral 12 mm; Class II; 2.5 kg / cm2 Emitter 4 / 8 lph Microtube 6 mm Control Valve 90 mm Control Valve 75 mm Control Valve 63 mm Flush Valve 75 mm Flush Valve 63 mm Air Release Valve 1.5" Non Return Valve 1.5" Non Return Valve 2.5" Throttle Valve 1.5" Throttle Valve 2" Throttle Valve 2.5" Screen Filter 20 / 25 m3 / hr Screen Filter 10 m3 / hr By-pass Assembly 2.5" By-pass Assembly - 2" By-pass Assembly 1.5" Venturi & Manifold 2.5" Venturi & Manifold 2" Source: Government of India (2010)
11

Requirement may vary depending upon lateral to lateral dripper spacing

28

4.5 Process of Subsidy Disbursal

As per the prevailing process for availing the subsidy, the subsidy administering department (the Horticulture Department) in the State government has issued detailed procedures and timelines for each stage, from submission of application to disbursal of subsidy. The detailed procedure right from collecting the form for applying for availing of subsidy, roles, responsibilities and duties of different agencies involved in the process, timelines for different stages, etc is reproduced in Appendix 1. To what extent these laid down procedures and indicated timelines are actually adhered to in practice is difficult to comment upon, though several farmers and agents we spoke to suggested wide differences between the two. The salient features of the process are summed up in the following diagram. The complicated procedures prescribed for availing of subsidy nevertheless entails filling up of several forms, attaching several documents/ documentary evidences, obtaining no objection and clearances from different agencies, shunting of documents between different agencies/ government departments, visiting different offices/agencies etc - strong enough disincentives to put off an otherwise enthusiast to consider applying for subsidy on his own without taking the assistance of an intermediary or an agent. Figure 2 below provides a glimpse of the step by step process for subsidy application and approval

29
BLOCK DEVELOPMENT OFFICER

Receipt and registration of Gram Sabha approved applications with documents on first come first serve basis from farmers through Village Horticulture Extension Officer, Horticulture Extension Officer and other sources like regional workers/dealers of Micro Irrigation (MI) Companies Field visit to the farm with Village Horticulture Extension Officer for information verification. Send applications in an ordered list to District Horticulture Officer
MEMBER SECRETARY, DISTRICT MICRO IRRIGATION COMMITTEE (DMIC)

Estimation of area and cost on basis of received applications, formulation of District Action Plan and forward DMICs sanction plan to State Micro Irrigation Committee (SMIC)
MEMBER SECRETARY, STATE MICRO IRRIGATION COMMITTEE (DMIC)

Preparation and approval of state level Action Plan by SMIC. Forward to Central Governments Department of Agriculture and Cooperation (DAC), New Delhi Sharing of information received about district wise Action Plan approved by DAC with DMIC
MEMBER SECRETARY, DISTRICT MICRO IRRIGATION COMMITTEE (DMIC)

Forwarding of block wise applications to MI Companies selected by farmers for survey drawing/design etc. along with bank loan application approved by bank for further action
MICRO IRRIGATION COMPANY

Survey drawing/designing etc. and sending it to BDO and Senior Horticulture Development Officer
BLOCK DEVELOPMENT OFFICER

Physical verification of irrigation water and energy for purposed MI system and sending documents with recommendations to Member Secretary, DMIC
MEMBER SECRETARY, DISTRICT MICRO IRRIGATION COMMITTEE (DMIC)

Issue of administrative approval and work orders to MI Company

MICRO IRRIGATION COMPANY

Establishment of irrigation system, training of farmer along with Hindi manual. Sending Satisfaction Certificate obtained from farmer and bills to Member Secretary, DMIC
NOMINATED GROUP OF OFFICERS

Physical verification & inspection of system installed. Processing of payment to MI Company

BENEFICIARY

Submission of Affidavit with documents to Assistant Director, Horticulture and Joint Secretary, DMIC stating system installed will not be transferred or sold. Give in written that no benefit has been drawn before from any similar govt. scheme

30

4.6 Madhya Pradesh : Extent of subsidy available and Uptake of Drip Technology
The performance of implementation of Drip Irrigation Program in the State in recent years can be observed from Table 13 that shows the status with respect to physical and financial targets and their achievement in the last five years.

Table 13: Year wise Physical and Financial targets and achievements (Physical in hectares and financial in Rs. lacs)
Year Target Physical Achieve ment Achieve ment % Total Allocation Proportionate share of Centre State Total Financial Expenditure Proportionate share of Centre State Expenditure as percent of funds allocated 2006-07 2007-08 2008-09 2009-10 2010-11 Total 3528 7486 30153 33308 42166 116641 875 7846 38146 35604 9382 91853 25 105 127 107 22 79 704 2677 8534 7407 6580 25903 82 41 54 47 56 52 18 59 46 53 44 48 165 1508 7516 8791 2333 20313 82 68 58 49 76 57 18 32 48 51 24 43 23 56 88 119 35 78

Source: Presentation in Annual meeting 2010-2011, of Department of Horticulture, M. P.

The data presented in the table shows that there is no consistency in allocation of funds and the physical targets. The program is significantly dependent on availability of central funds that may or may not be released on time due to several administrative reasons such as non-availability of previous years utilization and audit certificates or for deficiencies found in implementing the program according to central government guidelines. Except in 2009-10 when utilization was more than funds allocated, in all other years utilization varied between a low of 23 percent in 2006-07 to a high of 88 percent in 200809. Government officials during discussions accepted that there is potential for realising improved physical targets for micro irrigation but lack of funds at the required time was constraining in achieving these.

In terms of the number of new adopters of drip irrigation, during the year 2006-07, 448 new farmers

31

Table 14: Uptake of drip irrigation in important districts of Madhya Pradesh: Number of Beneficiaries
2006-07 Beneficiaries No Badwani Burhanpur Dhar Khargone Ratlam Other Districts Total State 39 142 12 0 121 134 448 Per cent 8.7 31.7 2.7 0.0 27.0 29.9 100.0 2007-08 Beneficiaries No 205 315 333 423 282 873 2431 Percent 8.4 13.0 13.7 17.4 11.6 35.9 100.0 2008-09 Beneficiaries No 932 1309 1884 2278 854 2656 9913 Percent 9.4 13.2 19.0 23.0 8.6 26.8 100.0 2009-10 Beneficiaries No 1253 1593 2231 2750 1309 3397 12533 Percent 10.0 12.7 17.8 21.9 10.4 27.2 100.0

District

adopted drip irrigation which number increased to 12533 new users during 2009-10 as a result of larger availability of subsidies (see Table 14). A majority of the drip sales are concentrated in just five of the --districts of the state. During the year 2009-10, 73 percent of the new users of drip were located in these five districts- Badwant, Burahampur, Khargone, Dhar and Ratlam (Figure 3).

32

10.4%

10%

17.8% [Type a 21.9 quote %[Ty from pe a the quote docu from ment the or the docu summ ment ary of or an the intere sum sting mary point. of an You intere can sting positi point. on the You text can box positi anyw on

12.7% Figure 3 :Location of Districts with Highest number of Beneficiaries of Drip Irrigation Subsidy 2009-10

33

4.7 Availability of Subsidy and Uptake of Drip

Almost all the drip equipment sales in the study area of Madhya Pradesh are subsidy driven. Manufacturers and market estimates suggest that more than 95 per cent of the drip sales in Madhya Pradesh are subsidy linked. It is therefore premised that if subsidy on drip were to be withdrawn at this stage it is quite possible that the sales of drip may nosedive and there may not be many new takers for this technology. This line of reasoning is being advanced to not only justify continuing with the existing subsidy regime but also to possibly increase per cent subsidy to encourage more farmers invest in drip technology. This argument is also being advanced to encourage and persuade governments to increase the total kitty of annual financial allocations for subsidy disbursal for drips so that at the prevailing subsidy levels, more and more farmers could be benefitted. To support this line of argument all the intermediaries involved in manufacturing and selling of drip systems show a long list of pending farmer demand which indicates that a farmer has to sometimes wait for one to two years before his turn for subsidized drip system matures. Given that substantial government subsidy to the tune of 70 to 80 per cent of the cost of the system is available for purchase of drip system, it is but natural that no farmer would like to invest in a drip irrigation system without availing of the subsidy.

The linkage between uptake of drip systems to availability of subsidy has killed both - the inertia of developing aggressive marketing strategies on the part of the manufacturers to push and promote sales of unsubsidized systems, and any attempts at bringing down the manufactured cost of the drip system through alternative/innovative product designs or technological innovations. All efforts of manufacturers, dealers and other stakeholders are focused on making the most of the available government subsidy through sale of their brand products. The system has thus made the manufacturers subservient to government favours and has led to loss of their enterprise spirit12. Similarly the insistence on the drip products to carry ISI mark as a seal of guarantee, and more so as a pre condition for
12

Shah and Kellor ( ) note that 15 years ago when drip irrigation came to be commercially marketed for the first time, some of the leading playersespecially, Jain Irrigationinvested heavily in market development and were beginning to reap the benefits. But in the 1990s, GoI introduced subsidy in drip systems. The major industry playerslike Jain irrigation-- are frustrated by the distortions caused by the subsidy. In reality, it has also increased competition for them. The subsidy has attracted a large number (40-50 companies are registered) of shady players in the drip business who peddle low quality products, and often claim subsidy without selling systems. Getting the ISI registration involves a one time bribe of Rs 6-8 lakh; but then the manufacturer becomes entitled to market his products under the subsidy scheme. This has made big players uncompetitive; it has also created quality problems and impeded market growth due to diminishing farmer faith in the technology.

34 qualifying to become eligible for availing of government subsidy on drip, has led to adoption of corrupt practices13.

Our careful analysis of the prevailing subsidy regime of the government together with the procedures set and manner in which subsidy disbursal takes place suggest a strong nexus between manufacturers and government departments entrusted with the administration of the subsidy program . The subsidy, meant for the farmers, as currently being administered, is actually going to the manufacturers who of course claim it all in the name of the farmers14. Since subsidy is provided as a per cent of the price (which earlier used to be capped by the government department for the purpose of calculating the maximum amount of eligible subsidy but is no longer the case now) the higher the quoted price, up to the normative prices fixed by the government for the purposes of subsidy calculation, the higher is the amount of subsidy. It is therefore in the interest of the manufacturer to jack up the prices of drip sets in the name of higher manufacturing cost and claim higher amount of subsidy without any commensurate benefit of higher subsidy going to the farmers.

The manufacturers have adopted competitive strategies to create a sustainable competitive advantage for promotion of their business. Companies follow various methods for delivering water saving

technology at farm level, such as demonstrations using outreach material and establishing personal contacts between farmers and company representatives and dealers. Demonstrations of the technology on the farms of progressive and influential farmers are organized. This has had an unintended negative effect of excluding the small farmers and thus depriving them of knowledge about the technology. The
13

Quoting the views of a dealer, Shah and Kellor ( ) refer this to ISI mark + subsidy = fraud.

14

Shah and Kellor ( ) also refer to the strong nexus between the subsidy regime and siphoning off of the subsidies by both the manufacturers and the government officials involved in subsidy delivery. They opine that Governments are now cutting subsidies on drip irrigation; and this is creating a new
generation of problems for the industry mainstream which has got hooked onto the opiate of subsidies over several years. Until last year when the subsidy was as high as 90%, the marketing dynamic of the drip system was fired by the subsidy culture. Indeed, the manufacturers and dealers including the leading brands--were after the unearned profit in the form of subsidies than manufacturing and marketing margins from serving satisfied customers. Since ISI-marked product enjoyed a degree of monopoly in the form of subsidy access, their manufacturers hiked their prices pretty much to levels where they and the bureaucrats empowered to approve subsidies claimed the bulk of the subsidy. However, since claiming the subsidy involved between 1-3 years and 15-20% bribe money, there was always a market for non-subsidy drip system and products. Now that the subsidy has been reduced to 30%, the profits in ISI marked drip systems have taken a plunge. All players with major names in the ISIsector are facing declining fortunes; they have been progressively cutting their prices to stimulate their non-subsidy sales; but here they face stiff competition from the non-ISI players who sell unbranded products at rock bottom prices.

35 actual business model followed by companies is governed more by the State subsidy system. Demonstrations on big farms strengthen the nexus between dealers, companies, officials and farmers. Companies operate more like a cartel to benefit from the subsidy provisions of the program. Producers and the chain of sellers involved in marketing of the micro irrigation technology emphasize building contacts with government officials at different levels in order to get maximum share out of the subsidy kitty. At the farm level, the attempt is to convince the farmer that he/she would get a high cost product without having to pay the full amount for it. Rather than emphasizing the benefits that the farmer might get from use of the technology or on details about maintenance etc. the focus is entirely on getting the necessary papers prepared for release of subsidy amount from the government. Even the decision about the choice of product and of the company is determined by the agent who succeeds in approaching the farmer and getting his papers cleared. The farmer is a passive participant in the entire process. Extra economic factors such as social and local political influence, rapport with the government officials, and relation with the company agent play a more important role than the techno-economic considerations necessary in choice of technology and product. The deciding factor for the amount of subsidy sanctioned is linked to the margin of service charges and profit of the dealer. Dealer margin in good quality products is relatively small. Therefore the agents/middlemen promote lower quality products with higher value of pro-forma invoice in order to increase the margin. This nexus pressurizes farmers to choose equipment of poor quality by offering them different incentives including fast processing of files and some discount, ultimately lending up to pay much more than his expectation.

The presence of number of companies leads to competition among firms producing varying quality of equipment and services. The subsidy system is also responsible for unhealthy competition. At present, there are only two companies viz., Jain Irrigation and Netafim Irrigation that are known for high cost good quality product. The IDE supplies a low cost alternative which in any case is outside the subsidy regime. Between the two - high and low cost products - there are a number of companies providing equipment of varying quality. Most, if not all, systems are locally available and location of source of supply is not a constraint for obtaining technology. In the business of irrigation equipments, the nexus among the participants is shown below in Figure 4. This is the result of the subsidy system. The facilitators are middlemen for speeding up the bureaucratic process/procedures involved in availing the subsidy.

36 On the suppliers side, there is a chain of producer, dealers and sub-dealers. Their objective is to increase sale and maximize the share in subsidy. The chain also includes facilitators and mediators who manage the links among dealers, government officials and farmers.

Generally in any business, revenue is generated by the companies through sales and support system, cost structure of the product, and targeted profit. But in case of micro irrigation systems the adoption of high cost drip equipment is directly related with the provision of subsidies. Socio-political factors also play an important role in allocation of subsidies because of indirect political involvement in decision making and the prescribed differential rates of subsidy.

Looked at from another perspective the subsidy regime indirectly incentivises - both the manufacturers/sellers of the drip systems as also the government agencies administering the subsidy program - to target mainly the medium and large farmers for sale of drip systems. We illustrate this by an example. With an annual assumed government subsidy budget (combined budget of central and state government) of Rs 50 crores for drip installation, this amount can provide subsidy to about 64000 farmers to install drip on 0.2 hectares of land, cultivated with wide spaced crops with lateral spacing of 4mX4m, resulting in an area of 12781 hectares being brought under drip irrigation. In contrast the same amount of subsidy can be exhausted by installing drip system on 5273 large farms of 5 hectares each leading to 26365 hectares of land being brought under drip irrigation. The implicit subsidy per hectare of drip area in the former case at Rs 39120 is more than two times the per hectare subsidy cost of Rs 18964 in the latter case (Table 15). Thus by focussing on a small number of relatively well informed and financially better-off farmers belonging to medium and large size groups of farmers for subsidy disbursal not only the manufacturers/ sellers gain by saving on much marketing efforts and advertising of their product, the officials administering the subsidy disbursal also gain by a significant reduction in their overseeing efforts, including need for visiting a much smaller number of farmers for physical verification, while at the same time getting the applauds for bringing a much larger area under drip and in meeting their targets with a given amount of subsidy.

37 Table 15 : Illustrative estimates of beneficiaries from a drip subsidy of Rs 50 Crores for wide spaced crop lateral spacing (4mX4m)
Farm Size Drip Cost (Rs) Subsidy (70%) Number of Farmers benefitting 63907 5273 Area brought under drip 12781 26365 Per ha subsidy cost 39120 18964

0.2 5.0

11177 135459

7824 94821

Figure 4: Subsidy Delivery : Nexus between different players

Promotion/ Adoption of water saving technologies

Manufacturer of Drip Irrigation Equipment Dealers Governments: Centre and State

Department of Horticulture
Block Development Officer Agriculture Supervisor & Revenue Officer

Sub-Dealers Facilitators & Mediators

Farmers

Instrument of implementation: SubsidiesI Diagram State-30%/40% Union Government-40%

38

4.8 Towards an alternative model of delivery of Subsidies

Given the strong nexus that has developed over a period of time between different players involved in disbursal and receivers of the available drip subsidies, in shaping the subsidy delivery system of the government to their advantage and indirectly constraining the spread of drip irrigation technology, one often wonders is the government, by providing subsidies, trying to promote a specific kit of drip system or the concept of drip system in general? Why should eligibility condition for availing subsidy bind a farmer to a specific configuration of the drip system and not let farmer use his imagination to choose components which in his view could serve the same purpose but at a somewhat lower cost without the use of all the pre specified components? Is there a way out of exiting this nexus and use the available government subsidies to achieve the goals that these subsidies are intended to achieve? We premise that if the government were to dispense with completely the existing mechanism of subsidy delivery to the manufacturer/ intermediary in the name of giving subsidy to the farmer, and arrange to make direct delivery of drip subsidy to the beneficiary farmers themselves, the scenario of market prices and uptake of drip by farmers may change considerably.

A comparison of the prices of some of the components used in the high end drip systems, as prevailing in the open market and as accounted for their product costing by some of the reputed drip manufacturers in the manufactured/assembled drip systems, point to the scope for price reduction possible. To illustrate, the manufacturers of drip system cost an important component of the system, Venturi, at around Rs 4800-5000 while in the open market this component is available for around Rs 2400 or so. Similarly the filter is valued at around Rs 11000 in a manufacturer assembled system while it is available at around Rs 5000 in the open market. The wholesale prices of these components would still be lower than the quoted retail prices and to that extent indicate the scope for further reduction in prices of the final product. Similar differences in prices exist in other components of the drip system. If the subsidies were therefore to be withdrawn by the government it is very likely that the open market (unsubsidized) prices of the manufactured drip systems will fall by at least 40 percent15. Increased open market competition may reduce further the cost of a system by another 5-10 percent or so. The net

15

This level of price reduction is possible and is based on the opinion shared by several dealers and manufacturers we spoke to during our field visits in the study area. Shah and Kellor ( ) also point to similar or larger level of price reductions possible when they say non-ISI marked products which are
nearly as good as the best available in the market but selling at 60-70% lower price.

39 result is a likely reduction in prices of manufactured drip systems by about 50 per cent in free (unsubsidised) market. This perception is shared by almost all the market players including some of the leading manufacturers and sellers of the drip systems. This is also evidenced by the open market prices of drip systems being sold by the manufacturers/ assemblers of non- BIS marked drip systems in the study region, though admittedly there may be some difference in quality of performance between the two types of drip systems.

4.8.1 Direct Delivery of Drip Subsidy - An Alternative Model for Subsidy Delivery Based on the above premise and possibilities of a likely reduction in open market prices of a drip system in the event of government withdrawing the current capital subsidy scheme for drip systems, we propose an alternative subsidy delivery model which would still incentivise the farmers to invest in drip systems, lower the cost of subsidy outgo, be more transparent, less prone to corruption, easy to manage and govern, less prone to interference and whims and fancies of officials, and lead to more efficient use of available subsidy, without distorting the market for sales of drip systems16.

In the proposed subsidy delivery model, we propose that rather than giving a one time capital cost subsidy for investing in a drip system, the government gives interest cost subsidy to farmers willing to invest in a drip system. Under the scheme the government gives interest free loans for the entire cost of a drip system to all farmers- small, large, belonging to general/SC/ST category, willing to buy a drip system. These loans can be administered through the existing financial institutions17 available in rural areas. The government provides interest free loans with capital repayable after five years. The farmer is free to buy drip system from any dealer/manufacturer, choose desired configuration of the drip system (such as to include or not to include venturi etc), negotiate a price and after sales service conditions with the dealer. The farmer does not need to visit government offices to obtain approval, clearances or
16

Poulok and Sivanapan ( ) also plead for change in subsidy regime system on drip irrigation. Without elaborating on the details of an alternative subsidy delivery model they nevertheless suggest the need for an alternative subsidy delivery mechanism. They opine tha t to stimulate its wider adoption, the Government of India has provided subsidies for drip irrigation in the sixth, seventh, and eighth five year plan. While the subsidy has encouraged some farmers to install drip systems, it has had paradoxical results. For example, delays as long as one year in releasing subsidy payments to manufacturers produce paradoxical price increases for subsidized equipment. . Changing the design of effective drip systems so that they can be sold profitably by the private sector at a price lower than the existing subsidized price opens up the possibility of replacing subsidies with an alternative that produces the intended impacts without the disadvantages.
17

Financial institutions are even currently providing loans to farmers to meet their share of capital cost of the drip system i.e total cost minus the amount of eligible subsidy.

40 no objection etc before buying the system. The government does play its facilitative role in ensuring that only good quality products are sold in the market and farmers are not cheated by manufacturers.

Table 16 below provides illustrative calculations under the two subsidy scenarios for two of the farm size groups we discussed above. In the first case we consider drip installation on wide spaced crops (lateral 4mX4m) in a 0.2 hectare farm while in the second case we consider installation of a similar system on a 5 hectare farm. To enable make a comparative assessment of the two subsidy scenarios, we assume that the same number of drips, as are feasible with a subsidy budget of Rs 50 crores under the prevailing subsidy regime, will be installed under the proposed subsidy scheme. Thus under the existing subsidy scenario, as we earlier estimated, either 63907 drip systems of 0.2 hectares or 5273 drips of 5.0 hectares can be installed with an assumed subsidy budget of Rs 50 crores (Table 15).

We set up three alternative scenarios depicting the likely impact of withdrawal of existing subsidy regime on the open market price of drip systems. Under scenario 1 we assume that the open market prices will be lower by 50 per cent of the existing nominal prices fixed by the government. In the other two scenarios we assume a reduction of 40 and 30 per cent on the currently prevailing prices. Depending on the assumption made about possible price reduction the total cost of installing 63907 drip systems of 0.2 hectares or of 5273 drip systems of 5.0 hectares vary between Rs 35.7 crores to Rs 50 crores (Table 16). Table 16: Illustrative Calculations for Cost of drip irrigation systems under alternative assumptions about reduction in market prices consequent upon withdrawal of current subsidy scheme Farm for Drip Size Current Scenario Percent reduction in New open Number of Total Cost

Market Price Number (Rs)

market price drips to be of Drips (Rs installed/ Number farmers benefitting* of Crores)

market (Rs)

price (%)

0.2 0.2 0.2 5.0

11177 11177 11177 135459

1 2 3 1

50 40 30 50

5588 6702 7824 67730

63907 63907 63907 5273

35.7 42.9 50.0 35.7

41 5.0 5.0 135459 135459 2 3 40 30 81275 94821 5273 5273 42.9 50.0

This is the same number as currently feasible to install with a subsidy budget of Rs 50 crores. For details please see Table 15

We present in Table 17 some of the derived comparative statistics for the two subsidy delivery models. Under the prevailing subsidy model the farmer has to pay upfront from his own resources the difference between the cost of the system and the eligible subsidy. Thus for a 0.2 hectare drip system the farmer has to pay Rs 3353 and for a 5.0 hectare system the farmer has to pay Rs 40638. Under the proposed subsidy delivery system, since an amount equivalent to the entire upfront market cost of a drip system will be provided as interest free loan, the farmer is not required to contribute any amount from his own resources. The total capital outlay of the government under the three price scenarios in the proposed model vary between Rs 35.7 crores to Rs 50 crores as compared to Rs 50 crores in the existing model. In the proposed model the government provides interest free loans to farmers repayable after five years. Assuming the opportunity cost of capital to be 10 per cent, the government at the end of five years would have incurred between Rs 21.8 and Rs 30.5 crores as cost for providing the entire cost of drip systems as interest free loans as against Rs 50 crores spent lump sum right in year 1 for providing subsidy on equivalent number of drip system under the prevailing subsidy scenario. The imputed subsidy burden on the government for a 0.2 hectare farm drip varies between Rs 3412 to Rs 4777 under the proposed subsidy scenario as against Rs 7824 currently prevailing. For a 5.0 hectare farm drip the corresponding subsidy burden are between Rs 41350 and Rs 57889 as against Rs 94821 under the prevailing regime. Similarly the subsidy outgo per hectare is also much lower in the proposed subsidy scheme in comparison with the existing subsidy scheme (Tables 17 and 18).

Thus on all parameters the proposed subsidy scheme of direct delivery of drip subsidy to farmers outweighs the existing subsidy scheme of subsidising the manufacturers/ providers of drip systems in the name of subsidy to the farmers.

42 Table 17 : Comparative select statistics about drip irrigation under the prevailing subsidy scenario and alternative scenarios under the proposed subsidy delivery model Farm Size for Drip 0.2 hectares Scenario Currently Prevailing Upfront cost 3353 0 0 0 Alternative Scenarios 1 2 3 Farm Size for Drip 5.0 hectares Scenario Currently Prevailing 40638 0 0 0 Alternative Scenarios 1 2 3

payable by each beneficiary from

his own resources (Rs) Total Government 50.0 Capital Outlay (Rs Crores) Cost to the 50.0 21.8 26.2 30.5 50.0 21.8 26.2 30.5 35.7 42.8 50.0 50.0 35.7 42.8 50.0

Government (Subsidy) Crores) Subsidy/Beneficiary 7824 (Rs) Area under (hectares) Subsidy/hectare 39120 17059 20471 23883 18964 8270 9924 11578 brought 12781 drip 12781 12781 12781 26365 26365 26365 26365 3412 4094 4777 94821 41350 49619 57889 (Rs

43 Table 18 : Illustrative Calculations of Impact of allocating Government Subsidy Budget of Rs 50 crores to different size groups of general category farmers on Number of farmers benefited and area brought under drip irrigation Farm Size (ha) Drip Cost Rs Subsidy (70%) Number of Beneficiary Farmers Area Brought under Drip (ha) WIDE SPACED CROPS LATERAL SPACING 4mX4m 0.2 0.4 1 2 3 4 5 11177 18621 31793 55725 86926 113812 135459 7824 13035 22255 39008 60848 79668 94821 63907 38359 22467 12818 8217 6276 5273 12781 15344 22467 25636 24652 25104 26365 39120 32587 22255 19504 20283 19917 18964 Implicit Subsidy Cost per hectare of drip installed area (Rs)

CLOSE SPACED CROPS LATERAL SPACING 2.5mX0.6m 0.2 0.4 1 2 3 4 5 15463 26791 54909 100906 154213 214153 262885 10824 18754 38436 70634 107949 149907 184020 46193 26661 13009 7079 4632 3335 2717 9239 10665 13009 14157 13895 13342 13586 54121 46884 38436 35317 35983 37477 36804

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4.9 Subsidy Regime and Development of Low Cost Innovative Drip Technologies
Faced generally with the problems relating to high cost and/or non- availability of subsidized drip , and following on the model of low cost Krishak Bandhu (KB) drip promoted by IDEI, several improved and hybrid variants of drip system have concurrently been introduced in the market both by established as also less known manufacturers of drip. These drips generally use better quality pipelines than the KB drip and rather than punching holes manually in the pipeline as is done in KB pipes, these pipelines come fitted with champins which act as dripers and are more efficient than the manual holes of KB drip and apply water more uniformally than can be done with a KB drip. These pipelines fitted with champins cost between Rs 3 to Rs 3.50 per meter as compared to Rs 1 per meter for a KB pipe. Though more expensive than the KB pipe they last for 3-4 years as compared to a useful life of about 1-2 years for a KB pipeline. Though not as efficient and convenient to use as a high cost drip fitted with pressure systems, filters, venture etc, these champin fitted pipelines can nearly serve the same purpose as an expensive drip system. These pipelines do not carry any government subsidy or support and are freely available in the market. Since in official statistics such systems are not counted as drip systems the information on extent of its use and adoption by farmers is not collected. While during our field work in the study region we also could not collect any data on the extent of off take of these pipes or farmer satisfaction and experience with use of these pipes, we however get an impression that their off take has so far been relatively slow as compared to the potential primarily because these were introduced only recently about 2-3 years ago, farmers still prefer to wait for their turn for the expensive systems and possibly these lack general awareness.

If the government were to withdraw subsidies on drip systems it is quite possible that similar new and relatively less expensive innovative models will get developed and get adopted by the farmers who cannot otherwise afford to invest in an expensive drip. These not so perfect drip systems serve almost the same purpose of enabling the farmer to more efficiently use the available water for productive purposes, the efficiency of water use may or may not be as perfect as with a perfectly designed drip system. One however needs to carefully weigh the benefits foregone in terms of extent of water savings, impact on crop yields etc through use of such innovative low cost drip systems as compared to an expensive drip system and the costs associated with administering and giving away of the subsidies on drip.

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5. Summing Up
In the context of growing water scarcity and low use efficiency of the available water there is an increasing emphasis on conserving water and using it more efficiently. Micro irrigation technologies based on drip and sprinkler irrigation systems provide some window of hope for achieving this. The government has been providing substantial financial incentives in the form of capital cost subsidies (to the tune of 70-80 per cent of the capital cost of the equipment in the case of drip technology) to farmers to invest in these technologies. The present system of subsidy delivery, besides breeding inefficiencies and encouraging corrupt business practices, has distorted the market for drip irrigation and killed the inertia of developing aggressive marketing strategies and investing in development of alternative product designs by the manufacturers. Additionally almost all the drip equipment sales in the study area of Madhya Pradesh are subsidy driven. Manufacturers and market estimates suggest that more than 95 per cent of the drip sales in Madhya Pradesh are subsidy linked. Largely as a result of the existing subsidy delivery mechanism, the drip technology has failed to capture the kind of market that would have been expected given the numerous advantages and water saving potential the technology offers.

The present study puts forward an alternate system of subsidy delivery wherein the subsidy is given directly to farmers willing to invest in a drip system in contrast to the current system of subsidy delivery which provides subsidies to the manufacturers/middlemen in the name of subsidies given to farmers. With a given amount of funds available for subsidy, the proposed model, in comparison with the existing subsidy delivery system, can provide subsidy to a much larger number of farmers, can bring in much larger area under drip irrigation resulting in lower subsidy outgo per hectare of drip irrigated area, would still incentivise the farmers to invest in drip systems, lower the cost of subsidy outgo, be more transparent, less prone to corruption, easy to manage and govern, less prone to interference and whims and fancies of officials, and lead to more efficient use of available subsidy, without distorting the market for sales of drip systems. Thus on all indicators, the proposed subsidy scheme of direct delivery of drip subsidy to farmers far outweighs the existing subsidy scheme of subsidising the manufacturers/ providers of drip systems in the name of subsidy to the farmers.

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APPENDIX
Appendix Table 1: District wise percent of beneficiaries using drip irrigation 2006-07 Beneficiaries 2007-08 Beneficiaries Percen District Anup pur Ashoknagar Badwani Balaghat Betul Bhind Bhopal Burhanpur Chhatarpur Chhindwara Damoh Datia Dewas Dhar Dindori Guna Gwalior Harda Hoshangabad Indore Jabalpur Jhabua Katni Khandwa Khargone No 0 0 39 0 3 0 10 142 3 0 2 0 0 12 0 1 0 0 15 4 0 33 0 45 0 Percent 0.0 0.0 8.7 0.0 0.7 0.0 2.2 31.7 0.7 0.0 0.4 0.0 0.0 2.7 0.0 0.2 0.0 0.0 3.3 0.9 0.0 7.4 0.0 10.0 0.0 No 0 0 205 1 49 0 42 315 6 25 11 0 31 333 0 4 2 18 2 112 3 115 0 146 423 t 0.0 0.0 8.4 0.0 2.0 0.0 1.7 13.0 0.2 1.0 0.5 0.0 1.3 13.7 0.0 0.2 0.1 0.7 0.1 4.6 0.1 4.7 0.0 6.0 17.4 0 14 932 6 179 0 28 1309 10 234 6 0 329 1884 0 3 9 75 2 415 2 240 1 367 2278 2008-09 Beneficiaries No Percen t 0.0 0.1 9.4 0.1 1.8 0.0 0.3 13.2 0.1 2.4 0.1 0.0 3.3 19.0 0.0 0.0 0.1 0.8 0.0 4.2 0.0 2.4 0.0 3.7 23.0 22 34 1253 22 134 0 28 1593 24 230 141 30 545 2231 3 2 7 25 0 586 13 228 1 261 2750 2009-10 Beneficiaries No Percent 0.2 0.3 10.0 0.2 1.1 0.0 0.2 12.7 0.2 1.8 1.1 0.2 4.3 17.8 0.0 0.0 0.1 0.2 0.0 4.7 0.1 1.8 0.0 2.1 21.9

47 Mandia Mandsaur Morena Narsinghpur Neemuch Panna Raisen Rajgarh Ratlam Rewa Sagar Satna Sehore Seoni Shahdol Shajapur Sheopur Shivpuri Sidhi Tikamgarh Ujjain Umaria Vidisa Total State 0 0 0 0 0 0 0 0 121 0 0 0 0 2 0 0 0 0 0 0 16 0 0 448 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 27.0 0.0 0.0 0.0 0.0 0.4 0.0 0.0 0.0 0.0 0.0 0.0 3.6 0.0 0.0 100.0 0 20 1 0 12 1 22 21 282 4 2 0 0 4 0 138 3 1 0 3 44 2 28 2431 0.0 0.8 0.0 0.0 0.5 0.0 0.9 0.9 11.6 0.2 0.1 0.0 0.0 0.2 0.0 5.7 0.1 0.0 0.0 0.1 1.8 0.1 1.2 100.0 18 54 0 29 34 11 11 60 854 0 53 22 23 6 4 168 0 13 0 11 177 6 36 9913 0.2 0.5 0.0 0.3 0.3 0.1 0.1 0.6 8.6 0.0 0.5 0.2 0.2 0.1 0.0 1.7 0.0 0.1 0.0 0.1 1.8 0.1 0.4 100.0 30 106 2 30 61 46 7 57 1309 58 240 31 56 3 39 86 6 22 4 29 99 8 41 12533 0.2 0.8 0.0 0.2 0.5 0.4 0.1 0.5 10.4 0.5 1.9 0.2 0.4 0.0 0.3 0.7 0.0 0.2 0.0 0.2 0.8 0.1 0.3 100.0

Source: Department of Horticulture, Govt. of Madhya Pradesh.

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Appendix - 1 Process for Implementation of Micro Irrigation Scheme

1) The Block Development Officer will receive Gram Sabha approved applications with the

required documents on basis of first come first served basis, from the farmers interested in availing benefit under the scheme through Village Horticulture Extension Officer, Horticulture Development Officer and other sources such as regional workers/dealers of registered manufacturing companies. Action: Block Development Officer

2) At Block Development level, the compiled applications will be put in a register according to priority and registered number and date will be assigned. The registration number and date will be informed to beneficiary in written. (Form-One) Action: Block Development Officer 3) Within three days of receiving the application, a visit to farmers field will be made with Village Horticulture Extension officer to confirm the information entered in application and field notes will be compiled in a folder. (Form-Two) Action: Block Development Officer Time Limit: Three days

4) After the field visits, the applications will be arranged in an ordered list and sent to District Horticulture Office along with application form-three. A copy of list and application will remain with Block Development Officer. (Form-Three) Action: Block Development Officer Time Limit: Four days

5) At District Level, development block wise received list will be registered and kept in same order in block wise registers. From every Block Development list each application will be accepted in order. Time Limit: Three days Action: Member Secretary, District Micro Irrigation Committee (DMIC)

49 6) The estimation of proposed area and cost will be made according to received applications, district level integrated Action Plan will be formulated and District Micro Irrigation Committees sanction proposal will be sent to State Micro Irrigation Committee. Time Limit: Ten days Action: Member Secretary, State Micro Irrigation Committee (SMIC)

7) On the basis of district level Action Plans, state level Action Plan will be prepared and after approval from State Micro Irrigation Committee (SMIC) will be sent to central governments Department of Agriculture & Cooperation, New Delhi. Time Limit: Ten days Action: Member Secretary, State Micro Irrigation Committee (SMIC)

Part-Two
1) The information received about District wise Action Plan approved by central governments Department of Agriculture & Cooperation will be shared with DMIC. Time Limit: Three days Action: Member Secretary, State Micro Irrigation Committee (SMIC)

2) (a) After receiving information about approved Action Plan for district, each block wise registered application will be forwarded to manufacturing companies which were selected by farmers for survey drawing/design etc., in an order. (Form- Four) Time Limit: Three days Action: Member Secretary, District Micro Irrigation Committee (DMIC) (b) After getting the approval from the bank, bank loan application will be send to the MI Company for the further required action. 3) Micro Irrigation Company will prepare drawing, design, etc. of the farmers field in which system has to be established and make them available to Block Development Officer and Senior Horticulture Development Officer. Time Limit: Three days Action: Micro Irrigation Company

50 4) After receiving documents from Micro Irrigation Company, Block Development Officer will visit concerned farmers field and will make initial physical verification of irrigation water and available energy for the proposed system which is to be established. After initial physical verification, required documents along with recommendation of block development officer should be sent to Member Secretary, DMIC. (Form: Five) Time Limit: Three days Action: Block Development Officer

5) After receiving approved applications from Block Development Officer within stipulated time limit, Member Secretary, DMIC will issue administrative approval and give work orders to MI Company to accomplish work. (Form- Six) Time Limit: Three days after receiving applications Action: Member Secretary, District Micro Irrigation Committee (DMIC)

6) After receiving work direction from Member Secretary, District Micro Irrigation Committee (DMIC), Micro Irrigation Company will establish system in working condition at the site selected by concerned farmer. It will give required training to farmer and manual in Hindi. The satisfaction certificate will then be obtained from farmer should be sent to Member Secretary along with bills. (Form- Seven) Time Limit: Seven days Action: Micro Irrigation Company

7)

After receiving information about system establishment from MI Companies, group of nominated officers from DMIC will physically verify the established system and report will be presented in prescribed form. After receiving correct physical verification report, the approved grant payment will be issued in prescribed form (Form-Nine) and action for payment will be ensured. (Form- Eight) Time Limit: Ten days Action: Nominated Group for physical verification

Note: (1) The process of making payments to the suppliers of materials under scheme should be made after physical verification and other necessary formalities have been completed. The payment should be made according to priority.

51 (2) During physical verification concerned officials will see that system has been established according to the drawing/design presented initially by MI Company. The standard material has been provided in prescribed quantity. The distribution of irrigated water is uniform at all the places. The farmer has been trained to operate the system, maintain it etc. and manual in Hindi has been provided. 8) If during physical verification the facts are presented showing incomplete provision of system and supply of non-standard material, Member Secretary will have a responsibility to inform MI Company that it should establish the system according to the presented proposal. The physical verification of system should be done again before taking action to make payment to company. Time Limit: 3 days Action: Member Secretary, DMIC It will be responsibility of Head, DMIC that the above action is taken in stipulated time. Action: Head, DMIC 9) The person getting benefit out of micro irrigation scheme has to submit an affidavit on a 5 rupees stamp paper along with the necessary forms to the Assistant Director, Horticulture, Joint Member Secretary, District Micro Irrigation Committee declaring that he will not transfer the drip/sprinkler system to any other farmer neither sell it. (Form- Ten) Action: Beneficiary Answerable: Block Development Officer

10) The beneficiaries of this scheme will have to give in written that they or any member of their family (if combined) has not taken benefit from any Govt/ state Govt scheme of providing drip/sprinkler for irrigation. (Form- Eleven) Action: Beneficiary Answerable: Block Development Officer

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REFERENCES

http://climatelab.org/Drip_Irrigation http://en.wikipedia.org/wiki/Drip_irrigation
Julia Bucknall in http://blogs.worldbank.org/climatechange dated 22 March 2010). Rita Cessti in http://blogs.worldbank.org/climatechange dated 24 March 2010

Pollock and Sivanapan : GOI (2004) Report of the Task Force on Microirrigation, Mininstry of Agriculture, New Delhi, Januray 2004 INCID (1994) Dhawan (---) . Narayanamoorthy (1996,1997,2001)
Government of India. 2010.National Mission on Micro Irrigation: Operational Guidelines. New Delhi: Ministry of Agriculture, November 2010

Shah and Kellor ( Poulok and Sivanapan ( Raman and Palinisami, 2010

Footnote 1 ref of pepsee Verma Fottnote 3 ICID P14 evaluation study of CCS Footnote 5 complete Dhawan B-C Page 20 add Dhawan year Footnote 8 Narayanmoorty

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