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The ups and downs of India’s irrigation story | Why does India import teak? | The Daily Brief #559 — Transcript

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0:00In today's episode, we'll do one deep
0:02dive and cover another story for the
0:04day. First, we'll talk about the es and
0:06flows of India's irrigation story and
0:08then we'll talk about the teak in your
0:10house probably not being Indian. Welcome
0:13back to the daily brief by Zeroda where
0:15we cut through the noise to help you
0:17understand what's actually happening in
0:19the most important stories from business
0:20and markets. [music] I am your host
0:22Axara. Today is Monday 28th September.
0:31Coming to the first story. So earlier we
0:34covered India's standoff with a super El
0:37Nino and it's the kind of climate shock
0:39that can knock agriculture sideways as
0:41monsoons weaken, reservoirs drain and
0:44sewing in the karif season stalls. So
0:46when that happens, everything from food
0:48prices to rural wages to RBI rate
0:51decisions start trembling. But today,
0:53while the risks still loom large,
0:55especially because of climate change,
0:57India isn't as fragile to these shocks
0:59as it used to be. In 1965, an 18%
1:03rainfall deficit wiped out 19% of our
1:06food grain production. But in contrast,
1:08in 2015, a comparable deficit shaved off
1:11just 2%. Both years saw an El Nino. Now,
1:15part of the reason behind this
1:17resilience is that we expanded
1:19irrigation. The share of India's
1:21farmland that's irrigated has risen from
1:23about 21% in 1965 to 53% by 2015. So as
1:28far as insulating our food security from
1:30the vagaries but unpredictable monsoon
1:32goes, this is the most important shift
1:35in our agriculture. But the way we got
1:37there involved some trade-offs which
1:39include the technologies we chose, the
1:41subsidies we created, and the political
1:44incentives we locked in. For one, it
1:46made us the world's largest user of
1:48groundwater by far, extracting more than
1:50the US and China combined. It also
1:53increased the energy consumed by
1:55farmers, which has for a long time being
1:57subsidized by the state. Around 11% of
2:00our groundwater assessment units are
2:02overexploited with many more under some
2:04form of critical stress. This is the
2:07first of a two-part story and today we
2:09trace how India's irrigation system was
2:11built since we became independent and
2:14how every solution created the next
2:16crisis. In part two, we look at some of
2:18the companies that work in this
2:20industry.
2:23So after independence, India went on a
2:25dam building spree. See, we needed both
2:28electricity and crop output of food
2:30security and the US provided some
2:32interesting success cases of having
2:34achieved both with multi-purpose dams.
2:37So, inspired by them, we decided to
2:39allocate huge amounts of public capital
2:41into huge establishments like dams and
2:43canal networks. The largest of them like
2:46the Bakran Nangal Dam were deemed by
2:47Javaharlal Nehu as one of the temples of
2:50modern India that would drive India's
2:52growth. The numbers were impressive on
2:54paper. Starting from a baseline of 22.6
2:57million hectares or MHA in 1951, India
3:00had created cumulative irrigation
3:02potential of about 52 mha by 1978. Plus
3:06by 1965, hydroele electricity made up
3:09over half of our electricity production.
3:11But the data hid a gap between the
3:14potential created and potential actually
3:16utilized. Now building a dam and filling
3:18a reservoir is one thing, but getting
3:21that water to a farmer's field is
3:23something else entirely. State
3:25engineering departments spent their
3:26budgets on the grand infrastructure
3:28while leaving the construction of
3:29lastmile channels to individual farmers.
3:32Small holders who could barely afford
3:34seeds were expected to build their own
3:36water courses and predictably they
3:38couldn't. Now in the pre-planned period
3:41100% of created potential was used but
3:43by the fifth plan of 1974 to78
3:46utilization had dropped to 93%. This
3:49metric was down to 77% by 2011 and that
3:5223% gap represented around 24 mh of land
3:56which is roughly the size of Uttar
3:58Pradesh. So this meant that trillions of
4:00liters of water sat impounded behind
4:02dams with no physical channel to reach
4:05fields and this has only worsened with
4:08each passing year. Meanwhile, major
4:10irrigation projects in India
4:12consistently breach their financial
4:13limits by no small margin. They average
4:16staggering cost overruns of over 1,000%
4:19and projects designed to take 15 to 20
4:21years dragged on for 15 to 20 more.
4:24Delays occurred due to land acquisition
4:26issues, environmental clearances, and
4:29scope changes. Moreover, many dams were
4:32designed around exaggerated river flow
4:34assumptions which never came to
4:35fruition. The Parkra dam, for instance,
4:37was overdesigned relative to the Sutlage
4:39River's actual flows. And even after the
4:42BS river was diverted into the
4:44reservoir, it rarely fell to capacity.
4:46There were also problems at the end of
4:48the dam where the canal network started.
4:50So farmers who were located closest to
4:52the start of the canal network often
4:54overappropriated water to grow water
4:56intensive crops like rice and sugarcane.
4:58Now once you account for this as well as
5:00seepage and evaporation, farmers who are
5:03further downstream would receive little
5:05to nothing. By the 1970s, it was clear
5:08that the dam era, while important in the
5:10broad context of India's economic
5:12ambitions, had to now give way to a
5:15different approach.
5:18The pivot came just as many other pivots
5:20do because of crisis and not just one
5:24but several following each other. For
5:26one, India had just suffered severe
5:28backto-back droughts in 1964 to 1966.
5:32And in 1972, there was also an El Nino
5:34that destroyed our monsoon and cleared
5:36up our rivers, rendering dams useless.
5:39This only increased our already existing
5:41dependence on American food imports,
5:43which was politically embarrassing. Then
5:46India was also hit by a global oil
5:48crisis and the few groundwater pump sets
5:50that we had were using diesel at the
5:52time. Now diesel suddenly became more
5:54expensive and we were also attempting a
5:57green revolution with high yielding
5:58variety seeds but they demanded precise
6:01watering that rigid canal systems
6:02couldn't prove. Now to get a better
6:05sense of how much this overlapping of
6:07crisis influenced India's development
6:09trajectory, we recommend checking out
6:11our subtext episode with energy expert
6:13Rohit Chandra. Now one solution to this
6:16urgency was tube wells. So unlike a dam
6:18that took decades to build and delivered
6:20water on a fixed rotation schedule, a
6:23tube well could be drilled in days and
6:24operated whenever the farmer needed
6:26water. Unlike large command and control
6:29projects like dams, the shift to tube
6:31wells was far more decentralized and
6:33private driven. Informal tube wellwater
6:36markets had already sprung up before the
6:38government policy caught up as richer
6:40farmers who could afford to drill wells
6:42began selling surplus groundwater to
6:44their smaller neighbors. Even today over
6:4695% of tube wells in India are owned
6:49privately. Government policy then
6:51turbocharged this trend through three
6:53moves. First the nationalization of
6:55banks in 1969 opened rural credit lines
6:58allowing millions of farmers to borrow
7:00for pumps and bwells. Second, state
7:03electricity boards were directed to
7:04electrify rural areas at scale. And
7:07lastly and most crucially, states
7:09shifted from metered electricity pricing
7:11to flat rate tariffs based on pump
7:13horsepower. Now that last move changed
7:16everything. Under flat rate pricing,
7:19once a farmer paid a small fixed fee,
7:21the marginal cost of pumping an
7:23additional liter of groundwater dropped
7:25to zero. There was no financial penalty
7:27for running the pump longer or
7:29extracting more. Within some states like
7:31Punjab and Tamil Nadu, political
7:33competition eventually drove the flat
7:35tariff to zero. Even if power for
7:37farmers isn't completely free today or
7:39is rationed by time, even if free,
7:42farmers are still the most subsidized
7:44set of consumers in the power sector. In
7:46a past survey by the International Water
7:48Management Institute, electric tube well
7:50owners under flat tariffs were found to
7:52have pumped 40 to 150% more than diesel
7:55pump owners who faced real variable fuel
7:58costs per hour. By the 1980s,
8:00groundwater had overtaken surface water
8:03as the primary source of irrigation in
8:04India while making up only approximately
8:0730% share before 1967. By 2001,
8:11agricultural tupils consumed nearly 1/3
8:13of India's total national electricity.
8:16So the tube revolution had succeeded in
8:18at least delivering food security,
8:20converting India into a net exporter of
8:22grain. And this went handinhand with the
8:25development of a national power grid.
8:27But this shift also created an energy
8:29water nexus that would prove almost
8:31impossible to untangle. And with it came
8:34two problems of its own.
8:38The first problem is the groundwater
8:40itself. So annually India extracts over
8:43240 billion cubic meters or BCM of
8:46groundwater and approximately 90% of it
8:49is for irrigation. The national
8:51extraction rate is around 60% of annual
8:53recharge which sounds manageable until
8:56you look at the state level picture. So
8:58many states extract over 50% of their
9:00groundwater every year and some like
9:03Punjab, Rajasthan and Hana have already
9:06exceeded 100%. These states extract so
9:09much groundwater annually that the
9:11monsoon rains will probably never be
9:13enough to replenish what they pumped.
9:15Now, the overexploited assessment units
9:17did improve between 2017 and 2024 thanks
9:21to recharge structures, micro
9:22irrigation, and government schemes. But
9:2561% of total groundwater recharge still
9:27comes from rainfall. So, a weak monsoon
9:30simultaneously cuts recharge and
9:32increases pumping because farmers
9:34compensate for poor surface water by
9:36extracting more groundwater. And the
9:38flat power tariff for farmers only
9:40incentivizes this further. But even new
9:43technologies don't solve this. For
9:45instance, solar powered pumps which are
9:47promoted under the PM kusum scheme may
9:49be an improvement over grid electricity
9:51in many ways. They reduce discom losses,
9:54eliminate diesel costs for small holders
9:56and work off-rid, but they also make
9:59energy truly free at the point of use.
10:01States would often manage groundwater
10:03extraction by rationing grid power for
10:05farmers. But with offgrid solar power,
10:08that constraint goes away. So a farmer
10:10with a solar pump can run it from
10:12sunrise to sunset every day extracting
10:15far more groundwater than someone
10:17waiting for an 8 hour power window. The
10:20second problem is the fiscal crisis of
10:22the electricity grid. So flat rate and
10:25subsidized power to farms has
10:26financially gutted state discoms across
10:28India which as we know already have
10:31historically run into deep losses. Farm
10:34subsidies also prevent discoms from
10:36investing in rural grid infrastructure
10:38leading to frequent outages and that's
10:40why utilities started rationing farm
10:42power to limited hours. Now these two
10:44crises feed each other. Free power
10:47encourages over extraction which
10:49depletes aquifers and bad rains only
10:51force farmers to drill deeper and
10:53install more powerful pumps consuming
10:55more subsidized power. The discoms
10:58absorb the losses.
11:01So far we've only spoken about water
11:03extraction. But what about how the water
11:06is actually delivered to crops? For much
11:08of India's irrigation history, it wasn't
11:11very efficient. The traditional method
11:13was surface flooding where water pumped
11:15from a tube well or released from a
11:16canal would flow through unlined earn
11:19ditches which were dug directly into the
11:20soil. Now these channels lost enormous
11:23quantities of water to seepage and
11:25evaporation. And once there farmers
11:27would simply flood the entire plot
11:29instead of a more targeted conservative
11:31approach along with the issue of farmers
11:33near the head of the canal taking more
11:35water than needed. This is why canal
11:38efficiency often hovers around 35 to 40%
11:40in India. Now beyond waste there was a
11:43structural problem. Constructing these
11:45networks of open channels meant cutting
11:47through private farmland, fragmenting
11:50holdings and sparking community
11:51resistance. So land acquisition became a
11:54chronic obstacle for last mile
11:56irrigation infrastructure. So the
11:58response starting in the 1990s was a
12:00shift to underground pressurized pipes.
12:03Now buried below the soil PVC and
12:05polyethylene pipes eliminated sepedge
12:07losses didn't consume farmland and
12:09allowed farmers to cultivate directly on
12:11top of the pipe route. And the adoption
12:13doubled from about 4% of farmers in 1994
12:16to 8% by 2001 and has continued
12:19expanding since. More recently, drip and
12:22sprinkler systems or micro irrigation
12:24have pushed delivery efficiency even
12:26further. So instead of flooding a field,
12:28drip systems deliver measured water
12:30directly to the plant's root zone
12:32through pressurized emitter networks. So
12:35drip gained traction first among
12:36commercial farmers in Maharashtra,
12:38Gujarat and Tamil Nadu. And recently
12:41micro irrigation equipment also received
12:43a GST cut from 12% to 5%. But that being
12:47said, improved application and delivery
12:49technologies control where and how
12:51efficiently water reaches a plant, but
12:54they do not control how much water a
12:56farmer extracts from the ground in the
12:58first place. So you can have a perfectly
13:00efficient drip system connected to a
13:02tube well that's draining an
13:03overexploited aquifer. Now the
13:06incentives for over extraction of
13:07groundwater remain unchanged even when
13:10delivery has become more efficient.
13:14India's irrigation story is at its core
13:16a story about political incentives
13:18distorting every technical solution. The
13:21earliest dams built by independent India
13:24were grand but couldn't deliver to the
13:26last mile. Tube wells treaded where dams
13:28couldn't but ended up creating a spiral
13:30whose outcome was the depletion of our
13:32groundwater reserves. Improved delivery
13:35technologies made each drop go further
13:37but left extraction ungoverned. And
13:40solar pumps offer to free farmers from
13:42the grid but don't inherently provide a
13:44check against overping. So the question
13:47for part two is a different one. Within
13:49this landscape of subsidies, aquafer
13:52stress, and misaligned incentives, what
13:54are private companies actually building?
13:57That's where we'll go next. If you
13:59prefer reading the daily brief instead
14:01of watching the video, check out the
14:02link to the newsletter in the
14:04description. Coming to the second story,
14:06walk into a furniture shop in India and
14:08ask for a dining table that will last.
14:11The shopkeeper will probably point you
14:13to teik. So teik resists rot and
14:15termites and handles moisture well. And
14:18you will find it indoors, bed frames and
14:20cupboards. But the tree it came from may
14:22have grown a very long way from India.
14:25It may have grown in Colombia, Ecuador
14:27or Ghana. So teak is native to India and
14:30we hold roughly a fifth of the world's
14:32natural and planted teak area. Yet we
14:35buy an extraordinary amount of it from
14:37overseas. In 2022, India accounted for
14:40about 97% of internationally reported te
14:43roundwood imports by volume. So
14:45roundwood simply means unprocessed logs.
14:48We imported more than 950,000 cubic
14:51meters of teak logs worth about $292
14:54million that year. Now part of the
14:57explanation lies in how we manage
14:59forests and the rules farmers face when
15:01growing trees for sale. Now Maharashtra
15:03tried to ease one of those rules in June
15:052026 only for a code to pause the
15:07change. But first it helps to understand
15:10what made overseas te such a good fit
15:12for Indian buyers.
15:16So te's natural range stretches across
15:18parts of South and Southeast Asia.
15:20growers introduced it to Africa and
15:22Latin America and established
15:24plantations which are trees deliberately
15:26planted and managed to produce timber.
15:28So Latin America had only about 33,000
15:31hectares of teak plantations in 1995.
15:34That area has grown many times over
15:36since creating a source of timber just
15:38as Indian buyers were looking beyond
15:40their traditional suppliers. Now India
15:42had long bought mature Burma te from
15:45Myanmar. But West African te was already
15:48reaching India in the 1990s well before
15:50Myanmar banned raw log exports in 2014
15:53and the ban reinforced a shift that was
15:55already underway. Today most of India's
15:58imported de logs come from Latin America
16:00and Africa. Colombia, Ecuador and Ghana
16:03supplied about 2/3 of its de groundwood
16:05imports in 2022 and other major sources
16:08included Panama, Brazil, Costa Rica, Ben
16:11and Nigeria. Now these plantations
16:14offered a different kind of log.
16:16Conventional Indian tea plantations
16:18often follow harvest cycles of 50 to 80
16:20years to produce larger timber and many
16:23overseas growers harvest after roughly
16:2520 to 30 years accepting smaller younger
16:27logs. This is a difference in how trees
16:30are managed and when they're cut. Indian
16:32plantations can also follow shorter
16:34cycles. Now Indian mills are
16:36particularly good at using these thinner
16:38logs including sizes some processors
16:40elsewhere would reject. So that gave
16:42overseas growers a ready market.
16:46Now supplying that market from within
16:49India is more complicated. RT comes from
16:52natural forests, plantations and private
16:54farms. But those sources serve different
16:57purposes and face different roots. So
16:59much of India's natural teak is in
17:01government managed forests and these
17:03forests protect habitats as well as
17:05supply wood. So harvesting follows
17:07forest management plans that limit where
17:09and how much can be cut. Public
17:11plantations are deliberately planted and
17:14may be managed for timber production but
17:16their harvests are also planned. So a
17:18large area under te does not tell us how
17:21much wood is available to buy in any
17:23given year. Now the global teak
17:25assessment records about 1.69 million
17:27hectares of public te plantations in
17:29India. Privately grown te adds to that
17:32resource but its area and harvest are
17:34poorly measured. That makes it difficult
17:36to put a reliable figure on the
17:38country's total production. Now for a
17:40mill the practical problem is getting a
17:42steady supply. Buying from scattered
17:45farms means finding sellers, checking
17:47individual trees and arranging harvests
17:49and transport. Overseas plantations can
17:52supply fairly uniform logs in bulk on a
17:54regular schedule and Indian mills
17:56already have the skills to process
17:58younger timber. So imports offer an
18:00organized way to keep it coming.
18:04Now more tea grown on farms could help
18:07fill that gap. But the decision looks
18:09different from a farmer's side. Even the
18:11shorter plantation cycle means waiting
18:13two or three decades for the main timber
18:16harvest. Now farmers can grow other
18:18crops between young teak trees while
18:20there's enough light and space. But
18:22still growing teak means committing land
18:24and money for years before most of the
18:27return arrives. And then comes
18:29permission to harvest. So felling and
18:31transport rules for farm grown timber
18:33vary by state. In Maharashtra, one of
18:35India's major tea growing states, teik
18:37was listed under the Maharashtra felling
18:39of teas regulation act 1964. So on land
18:42covered by that law, cutting a teak tree
18:45required written permission from a
18:46forest official and moving the wood
18:48required a separate transit permit and
18:51owning the land did not by itself mean a
18:54farmer could harvest the tree whenever
18:55it was ready. Now the Union Environment
18:57Ministry has acknowledged that difficult
18:59felling rules discourage farmers from
19:01growing timber and has urged states to
19:03simplify them. Farmers also have to
19:06consider the quality of seedlings,
19:08access to credit, uncertain prices, and
19:10the difficulty of finding buyers. For
19:12someone making such a long investment,
19:15uncertainty about the eventual sale is
19:17another reason to hesitate.
19:21That was the requirement Maharashtra
19:22tried to remove on 9th June 2026. So the
19:25state took teik off the list of trees
19:27requiring prior felling permission under
19:29its 1964 act and senior forest official
19:32said the existing rule had discouraged
19:34planting on private land. Now te had
19:37been added to the list in January 1968
19:39and the state was reversing a
19:41restriction nearly six decades old.
19:43Transit permits would still be needed to
19:45move the wood, but conservationists
19:47worried that removing the check before a
19:49tree was cut would make it easier to
19:51pass illegally felt forest take off as
19:54farm timber. Illegal teak felling has
19:56been reported in Maharashtra. So that
19:58concern needs to be taken seriously. On
20:0119th June 2026, 10 days after the
20:04change, the Bombay High Court's
20:05Orurangabad bench put the notification
20:07on hold. The court had taken up the
20:09matter on its own and its interim order
20:12meant the earlier felling requirement
20:13continued to apply.
20:17Now demand fatigue doesn't disappear
20:19because supplying it locally is
20:20difficult. Furniture makers still need
20:23wood and overseas plantations are ready
20:25to sell it. India's $292 million T-Clog
20:29import bill in 2022 shows the size of
20:31that business. Though rules alone do not
20:34explain it. Protecting natural forests
20:37matters, but farmers also need a clear,
20:40workable route to harvest trees they've
20:41grown for sale. Registering plantations
20:44and tracing timber back to its source
20:46can help distinguish farm grown wood
20:48from illegal forest timber. And that
20:50gives regulators a way to check where
20:52the wood came from while making a legal
20:54harvest easier. But easier rules would
20:56take years to translate into more
20:58timber, and growers would still need
21:00good seedlings, finance, and buyers. But
21:03those investments become harder to
21:05justify if the eventual right to harvest
21:07remains uncertain. India has the tree,
21:10the buyers and the mills. So giving
21:13farmers confidence that they can grow,
21:15harvest and replant tee responsibly
21:17would give them a reason to supply more
21:19of that demand themselves. Now coming to
21:22the tidbits. One, Inox Clean Energy is
21:25preparing to file draft papers with Sebi
21:27for a rupees 10,000 cr initial public
21:29offering targeting a valuation of around
21:31rupees 1 lakh cr. The fresh proceeds are
21:34expected to fund acquisitions and reduce
21:36debt as the company expands its
21:38renewable power and solar manufacturing
21:40businesses. Two, the Securities and
21:42Exchange Board of India SEBI has
21:44approved the portfolio managers route
21:46for investing in mutual fund units or
21:48PRIM. The new framework allows portfolio
21:50managers to invest client funds into
21:52direct mutual fund plans, exchange
21:54traded funds and specialized investment
21:56funds or SIFS requiring a minimum
21:58investment ticket of rupees 25 lakh.
22:01Three, Bentley has unveiled the TCAL,
22:03its first fully electric model, joining
22:05Ferrari in bringing battery powered
22:07vehicles to the ultra luxury automotive
22:09market. Ferrari's first electric
22:11vehicle, the 550,000
22:13Luch was unveiled earlier this year.
22:16Four, the Adani Group has announced
22:18plans to invest over rupees 1 lakh cr in
22:20West Bengal by 2035 across sectors
22:22including ports, logistics, power
22:24generation, and hypers scale data
22:26centers. The road map includes an
22:28immediate rupees 4,000 cr comm
22:29commitment to build a 2,000 bed
22:31multispety hospital and medical college
22:33in Kolkata's new town. Five, the food
22:36safety and standards authority of India
22:38has issued draft rules barring products
22:40made from non-milk ingredients from
22:41being manufactured or sold as paneer. If
22:44finalized, existing analog products
22:46would also be required to drop the term
22:48from their names, labels, and marketing.
22:50That's all the news I have for you.
22:51Thank you so much for watching and see
22:53you in the next one. Disclaimer. This
22:56content is forformational purposes only.
22:58None of the stocks, brands, or products
23:01mentioned are recommendations or
23:02endorsements.

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