2. Challenges of Rice Cultivation - System of Rice

The constraints of rice production vary from region to region across the country. For example, the major rice growing areas are concentrated in the Eastern region, which generally experiences high rainfall and severe floods almost every year, due to which large amounts of rice crops are affected. Similarly, in upland areas, the crops face setback either from high rainfall or drought-like conditions. However, some generic constraints/challenges in cultivation of rice are being discussed in this section.

3. Project Idea- System of Rice

India has the highest area under rice cultivation, and is the second largest producer of rice in the world. However, the per ha production of rice in India is much lower than that of other leading rice producers. Low productivity of rice means low returns for farmers.

SRI as a methodology for rice cultivation has been developed since the 1980s. It is believed to contribute towards higher productivity, optimum use of capital labour, less input costs, and lesser water requirements (Mohammed, 20183).

Research across several countries has revealed that SRI techniques are not only more productive, but also use less resources while being environmentally benign as compared to conventional or traditional rice production techniques (Sinha and Talati, 20074).

In fact, SRI not only uses lesser quantity of seed per ha but also uses lesser quantity of water for irrigation. SRI alternative water management methods can reduce water use by 25-50%, while raising yields by 50-100% or more (Mohammed, 2018). Moreover, farmers can also reduce the use of costly and environmentally damaging chemical fertilisers and pesticides, thereby lowering their production costs.

The project idea is to support groups of rice growing farmers in adopting the SRI method of rice cultivation that will result in higher yields for them while reducing their input costs. The project seeks to build capacities of farmers in SRI methods while simultaneously providing them with the financial support to adopt improved irrigation and post- harvest technologies.

It is envisaged that at the village level, farmers will be organised in the form of Producer Groups (PGs), Joint Liability Groups (JLGs), or Farmer Interest Groups (FIGs). These groups will be federated in the form of cluster level organisations or Farmer Producer Organisations (FPOs) of smallholders to promote rice cultivation using SRI.

4. Impacts and Sustainability - System of Rice

4.1 Impacts – Social, Economic and Environmental

Social impacts

1. Building social capital and social cohesion through organisation of farmers.
2. Federating the farmer groups into FPOs thereby creating a socio-economic network of farmers at the cluster level.
3. Building capacity of individual farmers and also farmer groups.
4. Generating additional employment for a number of people through the FPO and other business activities.
5. Facilitating farmers to buy enabling equipment for time and cost saving.

Economic impacts

1. Ensuring higher yields for farmers per acre.
2. Reducing input costs for farmers (reduced use of seeds, chemical fertilisers, pesticides, insecticides etc.)
3. Reducing economic risks for farmers by facilitating crop insurance.
4. Assisting farmers in value addition to paddy (de-husking) for enabling them to get higher prices.
5. Linkages with buyers to ensure higher prices for farmers’ produce and eliminating intermediaries.

Environmental impacts

1. Reduction of soil, water, and air pollution because of reduction in the use of chemical fertilisers, pesticides and insecticides.
2. Conserving water - SRI method uses less water than conventional paddy cultivation.

4.2 Mainstreaming Options

This model has a high potential to be replicated, in rice growing belts of the country, particularly in the states of West Bengal, Uttar Pradesh, Punjab, Tamil Nadu, Bihar and Karnataka. This model could be promoted through financial support from banks and other financial institutions while technical agencies and NGOs may take the lead in popularising and mainstreaming this model.

4.3 Sustainability

Based on the experiences of SKDRDP, which has been implementing a similar model in Karnataka, it can be seen that the present model has the potential to become self-sustainable after support for the initial 3 to 4 years.

In fact, while designing this model, certain key components have been incorporated that will help ensure that it will become self-sustainable. These are:

1. Facilitating agency to provide initial facilitation, startup and handholding support.
2. Capacity building of farmer groups and FPOs in governance, business planning and financial management.
3. Farmer groups to be linked with banks and bank loans provided to farmers.
4. Convergence with ongoing government schemes to be achieved.
5. The economics of this model indicate good returns from the farmers and the FPO.
6. FPO to provide machinery to the farmers on reasonable rent for performing all major agricultural operations.
7. The farmers are able to get the services of FPO for processing of their produce while only paying a very nominal fee.
8. The cost-benefit calculated under the model does not include any grant or subsidy for the FPO.
9. This model factors in the cost benefit of rice cultivation only, and that too for one crop per year. However, in case of farmers having irrigated land, SKDRDP is encouraging them to cultivate 2 to 3 paddy crops per year that

would result in higher revenues. Even in other geographical areas, farmers would take up at least one more crop (in addition to paddy) per year, thereby resulting in higher economic gains for the farmers.

5. Financial Details - System of Rice

5.1 Scope of financing and subsidy

Although farmers generally do not usually require financial support in the case of rice cultivation, they may require some financial support in case of rice cultivation using SRI in order purchase equipment that aids in enhancing crop productivity.

It is suggested that in addition to getting bank loans, the farmers may also access various schemes at the state level that provide subsidies for rice cultivation using the SRI method. FPOs may also facilitate the farmers to obtain loans for meeting their cultivation costs. These loans would be sourced from NABARD or other banks. It is estimated that individual farmers may require loans up to INR 20000, although a majority of them may seek lesser amounts as loans.

Under this business model, the FPO would require a loan of up to INR 98.25 lakhs for meeting capital costs, and a working capital loan of INR 53 lakhs for meeting the operational costs. However, the capital requirements of the FPO could be reduced in case they decided to keep less machinery. Working capital requirements would primarily

be met through loans from NABARD and other banks, while capital costs would be met partially through loans and partially through grant assistance from NABARD.

NABARD: NABARD provides financial grants of up to INR 10 lakhs per FPO to meet the initial expenses of each FPO. In addition to this, NABARD also provides loans of up to INR 1 crore to FPOs to meet working capital requirements. These loans are provided directly by NABARD or routed through other banks.

Custom Hire Service Centres (CHSC): The Department of Agriculture, Government of Karnataka is setting up a CHSC at Hubli (cluster level) to assist small and marginal farmers, and to provide agriculture machinery at their doorstep. SKDRDP has collaborated with the Government of Karanataka to set up various CHSCs. The objective of this programme is to provide machinery to the farmers at affordable rental rates to help reduce labour costs as well as to enhance farm productivity. FPOs could establish such centres whereever applicable.

For individual farmers, there are a number of schemes of the central government as well as respective state governments that provide grants and subsidies that they can access. The individual farmers may be supported by their FPO (through farmer groups) to access such schemes. The details of some of the schemes are given below:

Pradhan Mantri Krishi Sinchai Yojana (PMKSY): Irrigation is critical for paddy cultivation and under the PDMC component of PMKSY, financial assistance is available up to 55% for small and marginal farmers and 45% for other farmers for the adoption of micro irrigation systems.

At the state level, there are a number of schemes that give financial assistance to farmers for paddy cultivation, including assistance for seeds, demonstration on SRI, incentives on Conoweeder and other farm equipment, subsidy on rice transplanters, subsidy on farm mechanisation etc. Such schemes can be accessed by the farmers through the FPO.

5.2 Cost Economics

The proposed business model provides estimates of cost-benefits at two levels i.e. at the level of individual farmer and at the level of the FPO for rice cultivation through SRI method, processing and marketing.

5.2.1 Cost-benefit for farmers

The following table provides details of the expected cost of cultivation and the expected net revenue for individual farmers engaged in rice cultivation using SRI method on one acre of land.

Table 3: Cost-benefits for individual farmers engaged in SRI rice cultivation (1 acre landholding)

Assumptions

• All agricultural operations (such as land preparation, seed bed preparation, transplantation, de-weeding, harvesting and baling straw) would be performed using machinery. The machinery would be hired on rent from the FPO.
• Under this model only one paddy crop per year has been considered under irrigated conditions, although SKDRDP is enabling farmers to take two to three paddy crops per year.
• FPO may facilitate a loan for farmers of around INR 20000 to enable them to meet initial production costs.
• Convergence with existing schemes of government for getting subsidy on equipment such as power tiller could be availed by interested farmers.
• Inflation at the rate of 5% per annum has been factored in while calculating all costs as well as revenues.
• This model is based on yield estimates from Uttara Kannada district of Karnataka. In case of other regions, the yield may show slight variations.
• The FPO would charge a processing fee from the farmers for de-husking and polishing of rice.
• The FPO would offer farm equipment on rent to the farmers.
• The revenue from sale of husk would be given by the FPO to the farmers.

Economic analysis

Under the proposed model, farmers are able to get a return of around INR 2.85 lakhs – annualised over 5 years. The net annual returns are around INR 0.35 lakhs (Year 1) to INR 0.72 lakhs (Year 5) – assuming a capital cost of INR 20000 in Year 1 for meeting operational costs.

The Benefit Cost ratio for an individual farmer is calculated to be 1.82 which is quite good.

Table 4: Economic analysis of rice cultivation using SRI method in one-acre landholding

IRR for a farmer taking one paddy crop per year from one acre land is greater than 150 over a period of 5 years.

5.2.2 Cost-benefit for FPOs

Details of cost-benefit of FPOs engaged in processing and assisting in marketing of rice is provided is as follows:

Table 5: Cost-benefits for FPOs engaged in processing of rice and assisting in marketing (1000 acres)

6. Recommendations and Way Forward - System of Rice

Rice is an important crop for Indian farmers, a large majority whom are engaged in paddy cultivation. Unusually low yields from paddy have a significant impact upon the economic well-being of the farmers. Rice cultivation using the SRI method has the potential to significantly enhance crop yields for farmers while also reducing input costs.

The present model has been developed with an aim to popularise rice cultivation using the SRI method. Based on the concept of farmer groups federated at the cluster level, the proposed model requires adoption by NGOs who will facilitate the implementation of this model.

Financial institutions need to get an opportunity to analyse this business model and, if found suitable, they may support such a model.

Technical support groups or other enabling agencies need may consider developing publicity materials (printed as well as audio-visual) that may help publicise and popularise this model.

The channel partner of GIZ India i.e. SKDRDP, Dharmasthala may be roped in to conduct exposure visits for organisations that take up this model/are interested in taking up this model.