The ebbs and flows of India’s irrigation story

Akshara (0:04)

In today's episode, we'll do one deep dive and cover another story for the day. First, we'll talk about the ebbs and flows of India's irrigation story. And then we'll talk about the teak in your house, probably not being Indian.

Welcome back to The Daily Brief by Zerodha, where we cut through the noise to help you understand what's actually happening in the most important stories from business and markets. I am your host Akshara. Today is Monday, 28th September. Coming to the first story.

So earlier, we covered India's standoff with a super El Nino. And it's the kind of climate shock that can knock agriculture sideways as monsoons weaken, reservoirs drain, and sowing in the kharif season stalls. So when that happens, everything from food prices, to rural wages, to RBI rate decisions start trembling. But today, while the risks still loom large, especially because of climate change, India isn't as fragile to these shocks as it used to be.

In 1965, an 18% rainfall deficit wiped out 19% of our food grain production. But in contrast, in 2015, a comparable deficit shaved off just 0.2%.

Both Yersaw and El Nino.

Now part of the reason behind this resilience is that we expanded irrigation. The share of India's farmland that's irrigated has risen from about 21% in 1965 to 53% by 2015 So as far as insulating our food security from the vagaries but unpredictable monsoon goes, this is the most important shift in our agriculture.

But the way we got there involved some trade-offs, which include the technologies we chose, the subsidies we created, and the political incentives we locked in.

For one, it made us the world's largest user of groundwater by far, extracting more than the US and China combined. It also increased the energy consumed by farmers, which has, for a long time, been subsidized by the state. Around 11% of our groundwater assessment units are over-exploited, with many more under some form of critical stress.

This is the first of a two-part story. And today, we trace how India's irrigation system was built since we became independent, and how every solution created the next crisis. In part two, we look at some of the companies that work in this industry.

So after independence, India went on a dam-building spree. See, we needed both electricity and crop output or food security. And the US provided some interesting success cases of having achieved both with multipurpose dams. So, inspired by them, we decided to allocate huge amounts of public capital into huge establishments like dams and canal networks.

The largest of them, like the Bakra Nangal Dam, were deemed by Jawaharlal Nehru as one of the temples of modern India that would drive India's growth. The numbers were impressive on paper. Starting from a baseline of 22.6 million hectares or MHA in 1951, India had created cumulative irrigation potential of about 52 MHA by 1978

Plus, by 1965, hydroelectricity made up over half of our electricity production. But the data hid a gap between the potential created and potential actually utilized. Now, building a dam and filling a reservoir is one thing, but getting that water to a farmer's field is something else entirely. State engineering departments spent their budgets on the grand infrastructure while leaving the construction of last-mile channels to individual farmers. Smallholders who could barely afford seeds were expected to build their own watercourses, and predictably, they couldn't. Now, in the pre-plan period, 100% of created potential was used. But by the 5th plan of 1974-78, utilization had dropped to 93%.

This metric was down to 77% by 2011, and that 23% gap represented around 24 MHA of land, which is roughly the size of Uttar Pradesh. So this meant that trillions of liters of water sat impounded behind dams, with no physical channel to reach fields. And this has only worsened with each passing year. Meanwhile, major irrigation projects in India consistently breached their financial limits by no small margin. They averaged staggering cost overruns of over 1000%, and projects designed to take 15-20 years dragged on for 15-20 more. Delays occurred due to land acquisition issues, environmental clearances, and scope changes. Moreover, many dams were designed around exaggerated river flow assumptions, which never came to fruition. The Pakhra Dam, for instance, was over-designed relative to the Sutlej River's actual flows. And even after the Beas River was diverted into the reservoir, it rarely fell to capacity. There were also problems at the end of the dam where the canal network started. So farmers who were located closest to the start of the canal network often over-appropriated water to grow water-intensive crops like rice and sugarcane. Now once you account for this, as well as seepage and evaporation, farmers who were further downstream would receive little to nothing.