Technology, Cost Reduction, and Returns in Agriculture: A Study of Wheat and Rice in Punjab Vasant P Gandhi This study examines the impact of new technology on costs and returns in agricul- ture, taking the leading cases of wheat and rice in Punjab. Apart from boosting production, has the new technology achieved the fundamental objectives of reducing per unit costs and raising re- turns? The study finds that reduction in real per unit cost of production has indeed been achieved for both wheat and rice. However, real returns in wheat have been stagnant, since yield increases are offset by declining real domestic prices. Real returns in rice have, however, risen substantially. Curiously, the upward pressures on costs have come not from new technology inputs but from conven- tional inputs such as labour and draught power. Vasant P Gandhi is a member of the faculty in the Centre for Management in Agriculture, Indian Institute of Management, Ahmedabad. This paper, in part, draws upon an earlier work done by the author with S. S. Johl, R. S. Sidhu and Gunvant Desai, which is referred. Their contributions as well as. research assistance provided by Gyanendra Mani at liMA are gratefully acknowledged. Revised paper received ori 9.8.1996. Vol. 22, No. 2, April- June 1997 1·--_--.- __ - Introduction Change in technology has been fundamental to post- green revolution agricultural growth in India as well as many other developing countries. This has been particularly significant in areas such as Punjab in India which were central to the green revolution (for recent works see Johl et al. 1994; Johl, 1988, Sims, 1988, Bhalla et al. 1990, Sidhu and Byerlee, 1991, 1992). Frequently, government policies such as for research and input/ output prices have played a significant role in influ- encing technology-based growth in such regions. How- ever, new technology and the price environment to- gether may lead to changes in the input use patterns, factor proportions, costs, and returns. These may have long-term implications for national goals of produc- tion, efficiency, employment, and sustainability. This paper examines the impact of the developments, par- ticularly new technology, on costs and returns for wheat and rice in Punjab. Background India has had an impressive record in raising foodgrain production since the green revolution (see Sarma and Gandhi, 1990) and within this, the agricultural growth record of Punjab is well-known. Table 1 outlines some features of this growth. The green revolution started with the introduction of dwarf high yielding Mexican wheat varieties which were introduced in the state in 1965, followed by dwarf high yielding rice varieties which were introduced in the late 60s. Wheat and rice occupy about 76 per cent of the gross cropped area of the state (1993/94) and almost all of this is now under high yielding varieties. There has been rapid expan- sion in the rice area in the recent years. The irrigated area rose from 71 to 90 per cent from 1970/71 and 1988/89. The high yielding variety (HYV) coverage rose from 69.1 and 37.5 per cent in wheat and rice respectively in 1970/71 to nearly 100 per cent for both by 1988/89. The consumption of the fertilizers in the state rose from 37.5 kg/ha in 1970/71 to 151.2 kg/ ha in 1988189, the latter being twice the national average. Mechanization of many farm operations, such as ploughing, harvesting, threshing, and transporta- tion of produce was another feature. The number of 35
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