The Union government released the latest version of the Crop Residue Management Operational Guidelines in March 2024 to promote better stubble management, especially in the states of Punjab, Haryana, Uttar Pradesh, Madhya Pradesh, and the National Capital Territory (NCT) of Delhi. The government has been periodically updating these guidelines since they were first introduced after the launch of the Crop Residue Management (CRM) Scheme in 2018. The 2024 guidelines have made an effort to solve the inefficiencies in the previous editions by attempting to improve access to CRM solutions for farmers, ensuring efficient use of CRM machinery, and providing an opportunity to make biomass aggregators more profitable. Doing this can enhance the uptake of crop residue management in states and reduce farm fires.
With the Kharif harvest season in September, which sees a high number of farm fires every year, we unpack the major changes in the 2024 guidelines, their anticipated impact on the adoption of CRM practices, and what the government can do to make these modifications more effective.
1. Subsidising tractors for Custom Hiring Centres could boost machinery rentals
The use of crop residue management machines on any farm, such as Super Seeders and Happy Seeders, requires compatible high horsepower (HP) tractors of more than 45-50 HP for operation. While the previous guidelines allowed an 80 per cent subsidy on CRM machines for Custom Hiring Centres (CHCs) which act as machinery banks renting out machines to other farmers, such subsidies were missing for tractors.
The 2024 guidelines have introduced an 80 per cent subsidy on tractors of 60 HP and above, allowing one subsidised tractor per CHC for the first time. Farmers will now be able to rent the CRM machines along with tractors at a single point.
According to a Council on Energy, Environment and Water (CEEW) report, renting CRM machines along with tractors is a common practice in Punjab due to the limited ownership of high-HP tractors among farmers. Despite this demand, there is a current shortage of tractors with CHCs in the state. Only 15 per cent of farmers who manage their residue on-farm rented the machines from CHCs during the 2022 Kharif season. Access to tractors, therefore, has the potential to increase the usage of CHCs for renting machines.
Our analysis indicates that providing one subsidised tractor (with a maximum subsidy of INR 9.6 lakh per unit) to over 40,000 CHCs in Punjab, Haryana, Uttar Pradesh, and Delhi would cost a total of nearly INR 3,896 crore, surpassing the INR 3,333 crore disbursed under the CRM scheme since its inception in 2018. As a result, providing tractors to all the CHCs in the first year of the scheme's implementation is unlikely.
States should therefore institutionalise a performance-based due diligence mechanism for monitoring and evaluation of the CHCs for optimal tractor allocation. For this, the Union government should develop a unified digital platform for machinery management and service delivery tracking of CHCs, akin to the e-NAM portal, which is used for trading agricultural produce. The existing e-NAM portal’s network of 1.7 crore farmers and over 3,500 Farmer Producer Organisations (FPOs) across 1400 mandis can serve as inspiration to develop a similar platform dedicated for CRM practices like CHC’s performance based due diligence, CRM machine rental and monitoring.
2. Empowering biomass aggregators to set up independent aggregation units
Biomass aggregators collect crop residue from fields and supply it to biomass-based industries for energy production. Setting up and running the aggregation business requires procurement of CRM machines, undertaking baling activities on farms, and efficient storage and transportation of residue. Starting such businesses requires high capital investment and assured residue buyers.
CEEW researchers in conversation with a biomass aggregator in Patiala district of Punjab on challenges faced in the aggregation business.
Considering these factors, the 2023 guidelines allowed aggregators to establish their business through agreements with biomass-based industries that would act as the primary promoters and consumers of the biomass collected. In such agreements, the industry stakeholder would contribute 25 per cent of the project cost, with the government funding 65 per cent, and the remaining 10 per cent coming from the aggregators.
In addition to the previous model, the 2024 guidelines provide another option for aggregators to set up their business, with the government contributing 65 per cent and aggregators pitching in 35 per cent of the cost. This is beneficial as it would provide aggregators with an option of being independent of the industry and improve their bargaining power for better feedstock prices. However, finding viable markets for the residue will be crucial until the biomass-based sectors become more established in aggregators’ areas of operation.
3. Enhancing beneficiary accountability through the credit-linked capital subsidy mechanism
While the financial assistance under the CRM scheme was previously paid through direct benefit transfers to the beneficiaries, this has been replaced by a credit-linked capital subsidy mechanism in 2024. It will apply to farmers and entrepreneurs seeking financial assistance to start Custom Hiring Centres or paddy straw supply chain-related projects.
We break down this new mechanism using an example.
Consider a CHC that needs INR 1 lakh to buy a CRM machine. Under the CRM scheme, this machine is available to the CHC at an 80 per cent subsidy. To finance the machine, the CHC borrows INR 1 lakh from a financial institution. Under the credit-linked, back-ended subsidy mechanism, of INR 1 lakh, the CHC has to pay 20,000 while the government will pay the subsidy amount of INR 80,000 ( i.e. 80 per cent of the machine cost) to the financial institution.
Let us see how the back-ended subsidy mechanism will work in this case.
Figure 1: The credit-linked subsidy mechanism for subsidy disbursement
Source: Crop Residue Management Operational Guidelines, 2024
Through inspection and machinery verification, this mechanism aims to bring accountability to the system and ensure that government resources are used efficiently for crop residue management. According to government officials in Punjab, certifying the performance of the machines before the full disbursal of the subsidy and loan clearance will ensure CHCs utilise the machines properly.
A roto-seed drill used for farm preparation and seed sowing sits idle at a cooperative in Sangrur, Punjab | CEEW
These guidelines take a pragmatic approach to improve the adoption of CRM practices among farmers. However, familiarising the farmers, CHCs, and biomass aggregators regarding these changes will be crucial to see results on the ground. To find out if the guidelines were successful in improving the adoption of CRM practices and reducing burning incidents this Kharif season, track the latest fire numbers here.
Notes
1In-situ crop residue management involves retaining, incorporating, or mulching the crop residues directly in the field and decomposing them using consortia of microbes. This helps retain the nutrients in the soil without burning the residues.
2Ex-situ management refers to the baling and transportation of crop residue for the creation of products like biofuels and briquettes for power generation.
3Custom Hiring Centres (CHCs) are established to provide farmers access to crop residue management machines and equipment. The government provides financial assistance of 80% of the project cost (up to Rs. 15 lakhs) to rural entrepreneurs, farmer cooperatives, SHGs, farmer societies, FPOs, and Panchayats for setting up CHCs.
4Direct Benefit Transfers allow the government to transfer subsidies and benefits directly to the recipient's bank account, bypassing intermediaries.
Srishti Jain, Harsha Arya, and Navjot Singh Sarao are Consultants at the Council on Energy, Environment and Water (CEEW). Send your comments to [email protected]
Clean Air
Add new comment