The relative failure of Punjab to transition from agriculture to industry or to modern services means that the state still faces a major challenge in effecting this classical structural transformation needed for growth. This failure has been a major reason in the state’s decline toward the middle of the per capita income rankings of India’s major states. However, agriculture also desperately needs attention, even if it cannot be the only sector that must change to address Punjab’s economic problems. The reasons for not neglecting agriculture are several. First, there is the immediate problem of economic distress in the sector, concentrated among small farmers and agricultural laborers. Second, the current pattern of cropping and water use is leading to a rapid decline in the groundwater table, threatening complete ecological collapse of much of the state’s agriculture. Third, the Green Revolution economy has little or no room for further innovation that would enhance productivity and rural incomes. Any one of these reasons is significant, but put together, they imply a compelling case for considering how innovation in Punjab agriculture can be spurred. This paper considers five challenges to effecting meaningful innovation in Punjab’s agricultural economy. It does not present solutions, but it is hoped that an analysis of obstacles to change can provide fundamental inputs into the process of seeking positive change. The first challenge to innovation is that, in contrast to the 1960s Green Revolution, a post-innovation agricultural economy will be much more complex, with a wider range of crops, requiring more sophisticated production technologies, as well as greater complexity in the entire supply chain.
The second challenge is that this more complex agriculture will need more sophisticated infrastructure,greenhouse snap on clamp since fruits and vegetables are much more perishable than grains such as wheat and rice . Other complementary inputs, such as water, fertilizer, farm equipment and management, will also need to be provided in innovative ways. A third challenge flows from the first two characteristics of complexity and complementarity: the costs of switching to new products and modes of production will entail significant one-time switching costs, as well as new and ongoing risks. Future risks, even if partly covered by insurance, represent a kind of switching cost, albeit less direct than explicit expenditures on shifting farm operations from one set of routines and activities to another. The fourth challenge considered here is more subtle, in that it concerns questions of appropriate balance, rather than movement to a well-defined post-innovation future. Indeed, the challenge is to assess what kinds of innovations can best be implemented in which contexts or situations: in some cases, incremental innovations or adaptation of existing frontier techniques from elsewhere may work, while in other cases, frontier innovations spurred by fundamental research may be required. A fifth and final challenge is also a question of balance, in this case, of identifying the relative roles of the public and private sectors in enabling appropriate innovation. Fundamental research in seed varieties can be done by either the public or private sector, with the latter having more resources, but with incentives that may not lead to optimal diffusion. Innovations in infrastructure may require public-private partnerships, something India has been struggling with on many fronts.
The issue of constraints imposed by current public food grains procurement policies also looms large. The five challenges just listed provide the framework for this paper, with each receiving attention in the next five sections. A conclusion then briefly examines an overarching challenge, one that affects all aspects of Punjab’s economy and society. Arguably, Punjab currently has a governance deficit that is severe even in comparison to other Indian states. This governance problem is partly due to structural factors , and partly due to the state’s recent history of political and social conflict – itself partly, but not entirely, driven by the underlying structural factors. Punjab’s political economy also acts as an obstacle to innovation, much more broadly than just in the case of agricultural innovation. It may be noted, however, that achieving some tangible innovations in agriculture may be the first step in overcoming some of the political economy barriers to broader structural transformation. Essentially, those with a stake in the status quo – the main beneficiaries of the Green Revolution economic system – may find that they can support broader changes, if they are among the first to benefit from innovation and change.Crop diversification has been part of Punjab’s supposed agricultural policy for several decades, but progress has been well below targets. For example, the second Johl committee on crop diversification in 2002 suggested that one million hectares be shifted from wheat and rice to other crops, especially pulses and oil seeds. The Punjab Agro Food grains Corporation planned to achieve this goal by 2007, but its web site reports only one-tenth of this area with alternative crops through contract farming.
Pulses and oil seeds are each broad categories, and diversification also includes vegetables, fruits and flowers. Until other pieces of the supply chain are in place, diversification may have to take place at the farm level, rather than just at the aggregate level, requiring farmers to master production techniques for several crops at once. Aside from this basic complexity, the relative fragility, compared to food grains, of many fruits, vegetables and flowers during growing as well as post-production increases farming challenges. In these cases, specialization, while reducing complexity of production operations, may increase risks beyond what is experienced with food grains. Again, the different nature of markets is relevant here, with wheat and rice having an elaborate public procurement system that diminishes some aspects of risk. Sukhpal Singh describes a couple of examples of the challenges of alternatives to wheat and rice. Drawing on Singh, Kaur and Arora , he notes that sunflowers had become a significant oilseed crop in Punjab by the early 1990s, but subsequently declined because of factors such as high water requirements, non-availability of quality seeds, and sensitivity to adverse weather conditions. Further, he reports on a study of floriculture by Garg and Sharma , which lists every possible challenge in production, namely, “high risk of production, lack of weed control, high incidence of insects and pests, non-availability of good quality planting material and problems of seed collection.” It is certainly the case that some of these issues are due to lack of the kind of infrastructure that has grown to support wheat and rice cultivation, but it is likely that flowers simply have more complex and uncertain growing processes, especially for market sale versus home consumption, with the former requiring higher quality standards.Sidhu, Kumar and Singh make similar points in considering vegetable cultivation. They note the greater perishability and production risks associated with vegetable cultivation, and based on a study by Birthal et al. , they emphasize that high value vegetable crops may require high quality inputs, and greater knowledge of production technologies to be successfully grown. In some cases, more capital may be required, and in others,snap clamp labor-intensive precision farming. These can be severe limiting factors on diversification, which has tended to be restricted in Punjab to larger farmers. Munjal Institute for Global Manufacturing highlights some of the challenges in growing kinnows in Punjab: “During 1990s Punjab used to export kinnows to distant markets like the UK, Mauritius, Sri Lanka, Netherlands, Dubai but since then export to these markets has not taken place on account of substandard quality of the produce.”
Problems of post-harvest infrastructure and marketing are discussed later in this paper, but the relevant point here is that farmers do not have access to the requisite knowledge for growing new seedless varieties, and achieving quality standards for export markets. Another aspect of complexity that this study highlights is the long growth cycles for tree crops such as kinnows. The study also notes problems of availability of the right kinds of seeds and appropriate resistance to disease for crops such as maize, moong and turmeric. These are not necessarily all problems that are inherent to these kinds of crops, but partly reflect the relative backwardness of research, as compared to the main food grains such as wheat and rice.This last point is a complex one, since production decisions are tied up with market demand – farmers must deal with much greater challenges in deciding not only on what crops to grow, but also choosing varieties, and achieving minimum quality standards for varied markets. These challenges are not absent in the case of grains such as wheat and rice – ITC, for example, works with farmers in Madhya Pradesh to educate them on quality gradations in wheat that it purchases for making bread and biscuits – but the public procurement system tends to suppress such issues for the two major food grains. To summarize, innovation through diversification of agricultural production places demands on the knowledge base of farmers, as well as their risk-bearing capacities, that act as barriers to such innovation. Innovation requires dealing with complexity that can be an order of magnitude higher for farmers, in aspects of their production ranging from obtaining inputs, to operations decisions, to selling their produce.At a generic level, the problem of providing new infrastructure for agricultural diversification and innovation is well-recognized. There is a particular emphasis on the “cold-chain” for preserving fruits, vegetables and flowers that are almost without exception more perishable than the current staple crops of wheat and rice. The absence of adequate processing facilities is another major deficit in the farm-to-fork chain for many food crops. Physical infrastructure is not the only problem, and many studies highlight the poor quality of the institutions needed to channel alternative crops from the farm to the next stage of the value chain. From an innovation perspective, the problem is that individual farmers do not have the scale or resources to create all of this new infrastructure, without which innovation in crop choices may not make economic sense. There is a coordination problem, which can potentially be solved by large actors, whether public or private. The public-private issue is taken up later in this paper, but the coordination problem is worth noting at this stage. In practice, “contract farming,” which relies on large downstream private actors, has been the defacto institutional arrangement for providing the needed new infrastructure. Case studies illustrate the problems that have arisen for farmers, which have hampered further innovation and scaling up of new and alternative crop choices. Sukhpal Singh begins with a relatively positive account of the early 1990s entry of Pepsi into Punjab for crops such as tomatoes for processing. In this account , Pepsi introduced new varieties, new production methods and increased yields as well as reduced costs of production for its contract farmers. The company invested heavily in food processing, and other companies such as Hindustan Lever also became part of this value chain. On the other hand, there were problems with managing the contractual relationships with farmers. These included inadequate technical advice, poor coordination, delayed payments, and even cheating. Many of these problems seemed to be associated with the use of intermediaries, such as large farmers or local companies. Farmers found themselves bearing greater risks than they had anticipated, and even faced competition from non-contract farmers who could purchase Pepsi’s seeds. This account also implies that shifts in the multinational firm’s strategy, along with political economy factors wherein government actors and other political entities did not see gains accruing to themselves, hampered the consolidation and spread of the initial innovations. Kumar provides a similar account of inadequate provision of complementary technical and marketing services, and inputs such as seeds, to farmers in the Punjab contract farming experience. His discussion covers a variety of crops, including maize and sunflowers, though it does not go into the same detail as Sukhpal Singh’s case study. Kumar also highlights the relative failure of government and quasi-government institutions such as the PAFC to provide their share of the soft infrastructure needed. Dhillon and Singh echo the need for better government regulation in dealings between individual farmers and large agribusiness, with the implicit understanding that the pure market solution does not maximize social welfare – this would appear to be a combination of imperfect competition and externalities as a source of market failure.