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Thursday, 09 May 2013 00:00
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VGF has to be used to get states to act responsibly


Given how Punjab’s water table is falling by 3-4 metres a year, the central government’s viability gap funding (VGF) hasn’t come a day too soon. Under this scheme, the details of which are to be finalised soon, a total of R500 crore is to be given to Haryana, Punjab and Uttar Pradesh to wean away some part of their acreage from water-intensive crops. In the case of rice, 1 kg of the crop requires 5,389 litres of water in Punjab, in comparison with 2,713 in case the crop is grown in West Bengal. In the case of sugarcane, shifting cultivation from Maharashtra to Uttar Pradesh will reduce water consumption per kg of the crop by half.

While the R500 crore VGF is to be used to shift around 1.5 lakh hectares of paddy in Haryana and Punjab to maize, cotton and pulses, the Centre needs to be generous in raising the amount of VGF since the damage being caused is huge. This is not just in terms of excessive use of water, but also in terms of the impact on the budget. India produces way too much wheat and rice, which is why the government procures and holds three times the buffer stocks it needs—just reducing these holdings could free up resources for the government to fund a manifold hike in VGF expenditures. Indeed, larger VGF should be linked to comprehensive reforms of agriculture markets. There is the 14.5% level of mandi taxes in Punjab and Haryana that needs to be done away with—why will private traders buy maize/cotton/pulses in these states if the mandi taxes are so high? Over a period of time, the attempt has to be to free up markets completely so as to allow buyers to access farmers directly instead of through expensive mandis that are controlled by a small number of arhatiyas.


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