Production Linked Incentive for Rice ( Paddy )

 

 

Dear Shri Tomarji,

In my following e mail of yesterday, I suggested introduction of a Production Linked  Incentive ( PLI ) scheme for agricultural crops ( in addition to continuation of existing MSP scheme )

https://myblogepage.blogspot.com/2020/12/how-about-introducing-pli-for.html

 

Here is a Conceptual Frame-work :

Ø  Through the proposed INCENTIVE FORMULA , we want to INCENTIVIZE all farmers to implement latest technology and DOUBLE the “ Ave Yield ( Kg / Hactare ) “

Ø  In such a scheme, we want MORE INCENTIVE for marginal / small farm-holdings and LESS INCENTIVE for medium / large farm-holdings

Ø  For Rice , ( Paddy – A grade ) ( taken for demonstration purpose ) :

#    Current MSP is Rs 1888 / quintal ( Rs 18.88 / Kg )

       #    Average Output / Hactare is >  4679 Kg ( World Ave )  and  > 2638 Kg ( India Ave )

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INCENTIVE MATRIX

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Incentive Amount in Rs / Kg ( for incremental output over India Ave of 2638 Kg / Hactare, is shown below (  There will be NIL incentive for a farm whose yield is below the India average )

Type of Farm	Farm Size in Hectare	No of Farm Holdings ( Mill. )	2700 kg	2900 kg	3300 kg	3700 kg	4100 kg	4500 kg	4900 kg
Marginal	Below 1	71.12	-	13	14	15	16	17	18
Small	1 to 2	21.64	-	8	9	10	11	12	13
Small - Medium	2 to 4	14.26	-	3	4	5	6	7	8
Medium	4 to 10	7.09	-	2	3	4	5	6	7
Large	Above 10	24.16	-	1	2	3	4	5	6
Total		138.27

 

( source : Agriculture Census )

Implication for a Marginal Farmer who manages to raise his yield from India Ave ( 2638 Kg / hectare ) , all the way upto ( say ) 4900 Kg / hectare [ see first row of this table ] :

( A ) for the BASE figure ( 2638 Kg )  >  NIL incentive

( B ) for next 200 Kg ( reaching 2900 Kg ) > Rs 13 x 200 = Rs 2600 / -

( C ) for next 400 Kg ( reaching 3300 Kg )  > Rs 14 x 400 = Rs 5600 / -

( D ) for next 400 Kg ( reaching 3700 Kg ) >  Rs 15 x 400 = Rs 6000 / -

( F ) for next 400 kg ( reaching 4100 Kg )  >  Rs 16 x 400 = Rs 6400 / -

( G ) for next 400 Kg ( reaching 4500 Kg ) >  Rs 17 x 400 = Rs 6800 / -

( H ) for next 400 Kg ( exceed World Ave ) > Rs 18 x 400 = Rs 7200 / -

Total …………………………………………………………… Rs 34,600 / -

In the topmost slab ( 4900 kg / hectare ), a farmer gets :

Ø  Rs 18.88 / kg by way of MSP,  and

Ø  Rs 18.00 / Kg by way of PLI

      Hence DOUBLING of income !

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This is similar to our Personal Income Tax system, where the “ Tax Rate “ goes on increasing with each higher slab of income ( except , here it works in reverse considering that the farm income is TAX FREE  ! )

Of course, this is merely a CONCEPTUAL FRAME-WORK for getting the farmers to quickly adopt latest technologies in order to increase farm yield in line with the rest of the world

This incentive scheme will eliminate all resistance to introduction of technology . In fact, this will make the farmers to pro-actively engage with various government “ Agricultural Research “ Agencies for help / assistance

To sell this idea [ to farm experts and to general public ] , Government should carefully calculate and widely publish, how “ Per Kg “ Cost of Production would dramatically FALL , due to “ Economies of Scale ( factory-like mass-production ) “

And when there is huge decrease in per kg “ Cost of Production “ ,  that will make our agricultural produce “ price competitive “ with international prices and give a huge boost to Agri-Exports !

I assume PLI will not attract any sanctions from WTO as any kind of “Farm Subsidy “ – which USA – EU etc are giving to their farmers

This incentive scheme will spur “ Farm Mechanization “and boost use of Tractors – Harvesters – Combines etc ( a big boost to the Farm Machinery Industry, without having to subsidize its production )

Dear Shri Tomarji,

During your talks with the farmer leaders this afternoon , you may want to ask them what they think about such a scheme , which may be tried out with just ONE CROP and just ONE STATE , for knowing its results

If successful, it can be  extended all over India for that ONE CROP and subsequently to all 23 crops covered by MSP

As an alternative , it could be considered for NON-MSP crops to begin with before extending to MSP crops

If everyone is happy with the results of this scheme , then after 5 years of successful operations , it could take the form of a FARM INCENTIVES ACT , with in-built provisions for modifying the OUTPUT NORMS ( per hectare ) from time to time

 

Wishing you all luck  

With regards,

Hemen Parekh / hcp@RcruitGuru.com / 09 Dec 2020

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Added  on  09  June  2023 :

In the context of the revised " higher " MSP for Paddy , announced by the Central Govt., 2 days ago, I got BARD to produce following TABULATION / Comments :

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Sure, here is the table with an additional row for "PLI Scheme for Paddy" and a comment in the last column on the relevance of your logic to raise India's "Output per Acre" of rice, to match the World Average and how it will benefit Paddy Farmers:

Scheme	Objective	Advantage of your proposal	Relevance to paddy farming	How it will benefit paddy farmers
PLI for Mobile Manufacturing and Specified Electronic Components	To boost domestic manufacturing of mobile phones and electronic components	Could also be used to boost productivity of input resources used in mobile phone manufacturing, such as labor and capital.	Not relevant to paddy farming	May not benefit paddy farmers directly.
PLI for White Goods (ACs and LED)	To boost domestic manufacturing of air conditioners and LED lights	Could also be used to boost productivity of input resources used in the production of air conditioners and LED lights, such as labor and capital.	Not relevant to paddy farming	May not benefit paddy farmers directly.
PLI for Telecom and Networking Products	To boost domestic manufacturing of telecom and networking products	Could also be used to boost productivity of input resources used in the production of telecom and networking products, such as labor and capital.	Not relevant to paddy farming	May not benefit paddy farmers directly.
PLI Scheme for Paddy	To boost domestic production of paddy	Could be used to provide incentives to farmers to adopt more productive farming practices, such as improved irrigation, better crop varieties, and modern farming techniques. =========================================== Your logic is relevant to paddy farming because it could be used to raise India's output per acre of rice, to match the World Average. This could be done by providing incentives to farmers to adopt more productive farming practices, such as improved irrigation, better crop varieties, and modern farming techniques. This would lead to increased yields and incomes for paddy farmers. Here are some specific ways in which your logic could be used to benefit paddy farmers: Improved irrigation: Providing farmers with access to improved irrigation systems would allow them to grow rice in areas where it is currently not possible. This would expand the area under cultivation and increase yields. Better crop varieties: Developing and distributing better crop varieties that are resistant to pests and diseases would improve yields and reduce the cost of production. Modern farming techniques: Training farmers in modern farming techniques, such as precision agriculture and integrated pest management, would help them to improve their yields and reduce their costs. By providing incentives for farmers to adopt these practices, the PLI Scheme for Paddy could help to raise India's output per acre of rice and improve the incomes of paddy farmers.	Relevant to paddy farming	Could benefit paddy farmers by increasing their yields and incomes.