Output vs Input subsidies in agriculture: a discrete choice experiment to estimate farmers' preferences for rice and electricity subsidies in Punjab

Sukhgeet Kaur and Michael Pollitt

Cambridge Working Papers in Economics from Faculty of Economics, University of Cambridge

Abstract: Stabilization of prices has been an important element of achieving food price stability in most countries - both developing and developed, including India. In this paper, we rethink the ex-tension of the price stabilization as a compensation strategy to stimulate change in favour of low-water crops in Punjab. Groundwater facilitated impressive agricultural production, particularly record increases in wheat and rice productivity in Punjab, but also accelerated depletion of aquifers. Free electricity and negligible pumping costs aggravated the problem and the resultant policy failure encouraged unregulated use of groundwater, lower relative profitability of water efficient crops and a shift in favour of water intensive crops. Questions are now being raised about the sustainability of this intensive agriculture strategy. The rapidly depleting water table level and soil deterioration from overuse of fertilizers and pesticides are attributed to farmers' preference for high-water rice variety. Drawing from the Payment for Ecosystem Services scheme, this stated preference experiment investigates farmers' preferences to change high-water rice variety by low-water variety with compensatory payments. Results show that majority of farmers are willing to accept compensation for substitution by low-water intensive rice variety. In addition, the scheme can be accompanied by significant willingness to pay for electricity, but the WTP is contingent upon the nature of electricity charge.

Keywords: Agriculture; energy water nexus; electricity; discrete choice; Punjab; India (search for similar items in EconPapers)
JEL-codes: O13 Q1 Q12 Q24 Q25 Q28 Q4 Q48 Q5 Q57 (search for similar items in EconPapers)
Date: 2024-06-18
New Economics Papers: this item is included in nep-agr, nep-dcm, nep-ene and nep-env
Note: mgp20
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Working Paper: Output vs input subsidies in agriculture: a discrete choice experiment to estimate farmers’ preferences for rice and electricity subsidies in Punjab (2024)
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Persistent link: https://EconPapers.repec.org/RePEc:cam:camdae:2433

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