Multiple Factors Hamper CCT Scheme

Cross-posted from the FSP India website written by Rachel Kohn

Women Farmers, Nalanda District, Bihar: Source (flickr) Divya Pandey, IFPRI
Women Farmers, Nalanda District, Bihar: Source (flickr) Divya Pandey, IFPRI

The increasing frequency of altered rainfall patterns in India has heightened the vulnerability of the agricultural sector, already susceptible to rainfall-related volatility. The impact extends beyond macroeconomics and into the households and lives of hundreds of millions of people. In Bihar, for instance, the poorest and third-largest state in India, 24 of its 38 districts are considered extremely vulnerable to climate change and a large portion of the state experienced droughts in four out of five years between 2009 and 2013.

In 2008, the government of Bihar launched one of the largest conditional cash transfer schemes (CCT) in the world in an effort to mitigate the effect of drought on crop area and farming. The CCT scheme uses a non-distortionary subsidy of diesel in drought-affected to encourage farmers to use groundwater for irrigation of their kharif crops. Paddy is Bihar’s staple crop and is primarily vulnerable to drought because of the high cost of irrigation.

Given the state’s great needs, limited resources, and the large-- and growing—investment in this program, it is important to have a clear impression its effectiveness. It is also a prime case study to research the impact and functioning of cash transfer programs in the agricultural sector and adaptation policies to mitigate the impact of climate shocks on crop production.  IFPRI researchers Avinash Kishore, P.K. Joshi and Divya Pandey present the first evaluation of this CCT scheme in their paper “Drought, distress, and a conditional cash transfer programme to mitigate the impact of drought in Bihar, India.”

The authors use several sources of data to conduct their evaluation including district-level rainfall during monsoon months combined with crop area and yield to measure the impact of drought on area and yield of paddy.  Relying upon the standards of the Indian Meteorological Department, they classify a district as drought-affected if the total rainfall from June–September is 80 percent or less of its long-term mean. The authors also use unpublished district-level data on allocation and uptake of the diesel subsidy from the state government’s records, published data from the minor irrigation census of India on the number of pumping sets in each district, and agricultural data (e.g. net sown area, crop yields total value of crop output) to identify factors that drive the large inter-district variation in use of the diesel subsidy. Last but not least, they survey 240 real and potential beneficiaries of the scheme in 16 villages of the Nalanda District, as well as block and panchayat-level government officials responsible for grass-roots monitoring and implementation.

The authors that between 2001 and 2012, drought reduced paddy yield by an average of 450 kilograms per hectare and the cropped area of paddy was reduced by 4750 hectares.  The authors note however, that although the diesel subsidy scheme launched in 2008 has steadily increased in value over time, has not had the intended effects.  They note an uptake ranging from 2% to 100% and from the primary survey, they note limited awareness of the scheme, high transaction costs, and poor targeting.  As a result, they find that the scheme has not been effective in mitigating the impact of drought on paddy production. The authors note “at present, it works more like a drought-relief programme where some farmers, especially the better-off ones, get some cash from the state in a poor monsoon season, and not like a CCT or a drought-mitigation programme that would encourage farmers to do something they would not otherwise do – maintain their cropped area and crop yields by using more groundwater to make up for the shortfall in rains.” The authors recommend changes in the subsidy transfer including doing away with the requirement to produce diesel purchase receipts, transparent mechanisms for declaring a block drought-affected, and information-sharing through mobile networks.  The authors also recommend creating permanent irrigation infrastructure as an affordable and sustainable way to provide assured irrigation to all farmers.

A fuel subsidy to lower the cost of irrigation is a popular policy for drought-proofing in South Asia, and the lessons learned in their study can be applied not only in the region but in other drought-prone parts of the world vulnerable to rainfall shocks.

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Striving for drought proof agriculture in Bihar, India

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