Rs 2.5 cr as carbon credits: In a first, farmers reap harvest of good practices

Why in the News

Farmers in India have received carbon credit payments for improved agricultural practices for the first time. About 2,500 farmers, roughly 1,400 of them in Punjab and the rest in Haryana, were paid for practices that cut greenhouse gas emissions and retain carbon in the soil. The payment is attributed to verified credits rather than to the acreage a farmer holds, which is what separates it from an area based subsidy. The programme puts a price on practice change that regulation and penalties have tried to compel for years, and whether that price is large enough to hold the change in place is now the open question.

How does an agricultural carbon credit work?

1. The unit: A carbon credit represents one tonne of carbon dioxide equivalent either kept out of the atmosphere or stored, and it is sold to a buyer seeking to offset its own emissions.
2. What generates it on a farm: Credits arise from a documented change in practice that lowers emissions or raises carbon held in the soil, measured against what the farmer would otherwise have done.
3. Payment basis: The payout follows the number of verified credits attributed to a farmer, not the area cultivated, so two farmers with the same holding can be paid differently.

Which practices earned the credits?

1. Direct seeded rice: Sowing paddy directly into the field instead of transplanting seedlings into puddled soil cuts water use and the methane released from flooded fields.
2. Zero and reduced tillage: Disturbing the soil less keeps carbon stored in it rather than releasing it on ploughing.
3. Residue management: Handling paddy straw instead of burning it removes a direct emission source and returns organic matter to the soil.
4. Efficient fertiliser use: Applying nitrogen to soil test recommendations cuts nitrous oxide release from over application.
5. Why these fit Punjab: All four are directly relevant to the rice and wheat based cropping system that dominates the State.

How were the claims verified?

1. Remote sensing: Satellite and remote sensing systems monitor fields and detect residue burning across the season.
2. Geo-fencing: A digital boundary drawn around a registered field ties the observed activity to the specific farmer claiming the credit.
3. Soil sampling: Sampling assesses changes in soil properties, including soil organic carbon, which is the stock the credit claims to have raised.
4. Institutional backing: The programme runs with technical guidance from the Indian Council of Agricultural Research (ICAR), and the ICAR-Agricultural Technology Application Research Institute (ATARI), Ludhiana has a memorandum of understanding with the agri-technology firm operating it.
5. The stated role of the public institution: Its function is to educate farmers and to ensure practices are documented and verified through field evidence and technology.

What did farmers actually receive?

1. The aggregate: Over 50,000 carbon credits were generated across thousands of acres, with payments totalling around Rs 2.50 crore.
2. The individual range: Farmers received between about Rs 3,000 and Rs 15,000 each.
3. Payments track practice history, not size: A farmer with about 13 acres in Bathinda who stopped burning paddy residue seven to eight years ago received Rs 5,700, while two others in the same village received Rs 19,000 and Rs 14,000.
4. Larger holdings, moderate payouts: A farmer cultivating about 20 acres near Jagraon received Rs 6,070 and one farming about 90 acres in Sirsa using ex-situ residue management received Rs 12,000.
5. The floor: Two farmers, in Ludhiana and in Sirsa, received Rs 3,000 each, and an 8.5 acre farmer in Bathinda using soil testing and recommended fertiliser received Rs 9,075.
6. Design as a continuing process: The programme is structured as a recurring payment for continued adoption rather than a one time transfer.

What is the wider policy context this sits in?

1. Origins: The programme was initiated by an agri-technology firm in 2019, so the first payouts follow six years of building the practice and verification base.
2. Farm fires have already fallen: Punjab recorded a decline in farm fire incidents from over 83,000 in 2020 to fewer than 5,000 in 2025, according to ICAR.
3. A parallel State scheme exists: Punjab has paid farmers since August 2024 for raising and maintaining trees on agricultural land under an agroforestry based carbon credit programme.
4. Its terms differ: Under that scheme farmers must maintain trees for at least five years, with the carbon benefit linked to tree growth and the subsequent use of the wood in paper, furniture and plywood.
5. The multilateral layer: The recent BRICS Summit in New Delhi adopted a declaration establishing a BRICS Network of Centres of Excellence on Agroecology and Regenerative Agriculture for Climate Resilience and Productivity, and a BRICS Network on Digital Agriculture.

Challenges to farm carbon credit programmes

1. Price volatility in the voluntary market: Payments depend on voluntary market prices for credits, which move with corporate offset demand rather than with farm economics. Eg. Voluntary carbon credit prices fell sharply after 2023 as buyers questioned offset quality.
   The Fix: Contract a floor price with farmers for the full crop cycle rather than passing through spot credit prices.
2. Additionality: A farmer already following the practice is paid for abatement that would have happened anyway, which produces no new emission reduction. Eg. Several payouts went to farmers who had not burnt paddy residue for five to eight years.
   The Fix: Set the baseline against district level practice adoption rather than against the individual farmer’s own past.
3. Soil carbon measurement: Soil organic carbon changes slowly and varies within a single field, so the sampling design decides the credit count. Eg. Gains from zero tillage can take several seasons before they register above sampling error.
   The Fix: Fix a permanent monitoring grid per cluster and re-measure at set intervals before credits are issued.
4. Permanence: Carbon stored in soil returns to the atmosphere the moment the farmer resumes deep tillage or burning. Eg. One season of deep ploughing can release carbon accumulated over years of zero tillage.
   The Fix: Hold back a share of each payout in a buffer pool released only after repeated years of verified compliance.
5. Switching costs exceed the payment: The sums are small against the machinery and the yield risk that practice change requires. Eg. Direct seeded rice needs a seed drill and far tighter weed control than transplanted paddy.
   The Fix: Stack the credit payment on top of State machinery subsidy so the two together cover the cost of switching.
6. Coverage: A few thousand farmers in two States is a fraction of the rice and wheat belt the practices are meant to change. Eg. Punjab alone has over ten lakh operational holdings.
   The Fix: Aggregate smallholders through Farmer Producer Organisations so they clear the minimum volume verification requires.

Conclusion

The significance of this payout is not its size but its direction. Public policy on residue burning has worked through penalties and machinery subsidy, and this is the first time the same behaviour has been rewarded through a market. What remains unsettled is whether the reward survives a bad credit price year or a season when direct seeded rice underperforms, because a farmer who switched for the money will switch back for the same reason. Watch whether the second round of payments reaches farmers outside the Punjab and Haryana pilot and whether a floor price is written into the contracts.

Back2Basics

1. Indian Council of Agricultural Research: An autonomous body under the Department of Agricultural Research and Education (DARE), Ministry of Agriculture and Farmers’ Welfare, established in 1929.
2. Mandate: It coordinates, guides and manages agricultural research and education across horticulture, fisheries and animal sciences.
3. Field network: It runs Krishi Vigyan Kendras at district level and the Agricultural Technology Application Research Institutes that coordinate them zonally.
4. Scale: It is among the largest national agricultural research systems in the world, with institutes and All India Coordinated Research Projects across crops and regions.

Matching Previous Year Question

“Regarding “carbon credits’’, which one of the following statements is not correct?”