Why do so many farmers grow water-hungry crops in dry regions?

It seems irrational at first glance: why do farmers in Punjab, when facing severe groundwater depletion, continue growing water-intensive paddy? Why does Maharashtra’s sugarcane belt expand in drought-prone regions where water tables are falling? Are farmers simply unaware of the ecological damage they cause? Not at all. Farmers are responding logically to the incentives placed before them.

The government’s Minimum Support Price (MSP) system guarantees the purchase of paddy and wheat at announced prices. Farmers know that whatever they grow will be bought with no market risk. Contrast this with fruits, vegetables, pulses, or oilseeds, where prices fluctuate wildly, and procurement is limited or absent. Free or heavily subsidised electricity for irrigation makes pumping water seemingly costless. Fertiliser subsidies (skewed toward urea needed for paddy) further tip the scales. When the incremental cost of growing a water-hungry crop appears low, farmers will produce it.

The result? Punjab and Haryana became paddy-dominant zones despite falling aquifers. Maharashtra’s sugarcane occupies just 4% of the cropped area but consumes over 60% of the state’s irrigation water. Ask yourself: if you were a farmer in Punjab, would you grow less water-intensive but riskier alternatives like fruits and vegetables when paddy offers a guaranteed income? When your neighbour who grows paddy receives regular payments while the vegetable grower faces price crashes, what would you choose? Give them the right incentives, and behaviour shifts rapidly.