Day1 S2 3 Economic Model

A STOCHASTIC DYNAMIC
PROGRAMMING APPROACH TO
ANALYZE ADAPTATION TO CLIMATE
CHANGE - APPLICATION TO
GROUNDWATER IRRIGATION IN INDIA
Marion ROBERT *
Alban THOMAS
Jacques-Eric BERGEZ
Objectives
Model decisions of farmers facing climate change

 decisions on investment in borewell irrigation
 decisions on cropping systems and irrigation water application rate on crops
Test socio-economic and water management policies under scenarios of

climate change
 subsidized rainfed crops
 reform of subsidized energy for irrigation
 water charge indexed on ambient groundwater level
2/16
Economic model
Framework: bio-economic model with season-specific crop choice and
yearly investment decision in irrigation facilities
Stochastic dynamic programming approach
Stages of the farmer decision-making process:

Beginning of the • Form expectation on several random variables (future climate
planning horizon
– probability of occurrence, future market prices for crops and
groundwater availability for irrigation)
Beginning of the year • Decide whether to invest or not in irrigation, or to rely on
At the beginning of
rainfall for the coming year
each growing season • Decide on the type of crops to grow and plot size
• Decide on the irrigation-water application rate for each crop,
For each growing
season given total water availability and observed rainfall
• Follow a set of irrigation rules to obtain the “best” crop yield,
For each growing
season given the irrigation equipment, the selected crop, the actual
climatic conditions.
Robert, M., Bergez, J.E., Thomas, A., (2016) A stochastic dynamic programming approach to analyze 3/16
adaptation to climate change - application to groundwater irrigation in India, European Journal of
Operational Research (to be submitted)
Economic model
T = years of the planning horizon
B = number of plots
C = number of crops
τ = S1, S2 cropping seasons
, = cropping season duration
Rainfall expectations:
Distributed according to a discrete distribution of five profiles (i = poor, below average,
average, above average or good)
and = average season-specific rainfall level
and = probability of occurrence of each rainfall regime (Maddur climatic series)
Crop price expectations:

=*
= reference price (district data - Indian Ministry of Agriculture and Cooperation / National Informatics Center)
= crop price elasticity with respect to rainfall regime i
Economic model

Yearly investment cost:
m-year loan with fixed interest rate of r percent
+)+ (big survey)
Cost of pumping groundwater for irrigating crops:
Flow rate of the well:

maximum water abstraction capacity from the irrigation system
¿ 0 if 𝑊𝐸𝐿𝐿𝑑𝑒𝑝𝑡h >𝑊𝑇 𝑑𝑒𝑝𝑡h

0 otherwise
Economic model

State variable:
W = flow rate a specific time-period
= **79.93*
= **79.93*
Expected water available for irrigation:
Total irrigation capacity expected for the year:

=+
( = 10%)
Economic model

Crop yield:
quadratic function of irrigation water distributed to the crop (Jalota et al., 2007)
Expected profit from crop c at season and on plot b:

[
]
[x
]]
Economic model
The farmer’s problem over the planning horizon with T years:
R = constant discount rate

if crop c is grown on plot b at season and 0 otherwise
Bellman approach:
= transition equation: ,) )
= value function
= discount factor
Collocation method:
,
= Chebyshev polynomial of order p
= associated coefficient (to be evaluated)
Economic model - scenarios
Baseline scenario
Average values for climate, crop marketing, water
pumping conditions
Y1: invests in a borewell (100m)

Þ irrigated system (sunflower/turmeric)
Þ Decreasing groundwater level
Y20: borewell dried
Y21: new borewell (150m)
=> groundwater depletion from 60 m.b.g.l. to 116

m.b.g.l.
Economic model- scenarios
Climate change scenarios
+1% to the proportions of low and below
average rain regimes by year
Þ similar to baseline scenario
Þ groundwater depletion from 60 m.b.g.l. to

118 m.b.g.l
Water management policy: subsidized rainfed crops
7000 Rs/ha
Subsidy to farmers by unit of surface of land managed
under rainfed condition (1000Rs/ha to 7000Rs/ha)
LIMITED policy
4000 Rs/ha
Þ requires more than
7000Rs/ha to reduce
water pumping
Þ 7000Rs.ha =>
1000 Rs/ha
groundwater
depletion from 60
m.b.g.l. to 82 m.b.g.l
Water management policy: subsidized energy supply
3,5 Rs/ha
Electricity user charge (0.50Rs/kWh to 3.50Rs/kWh)
Þ If invest in a borewell => profit highly impacted
Þ stop rabi irrigation
2 Rs/ha
Þ Less kharif irrigation
EFFICIENT policy
Þ But electricity cost >

2.5Rs/kWh
0,5 Rs/ha
groundwater
depletion from 60
m.b.g.l. to 80 m.b.g.l
Water management policy: piezometric tax
Annual tax when the groundwater level reaches 10 percent
below its initial height (from 200Rs to 1000Rs per %)
EFFICIENT policy
Maintain groundwater
depletion < 10%
Important issues:
Discussion
1. subsistence crops
Þ systematically allocate a plot to a subsistence crop (sorghum) and the size
of the plot will be optimized in order to fill up the stock for the coming
year
Þ estimate the costs of buying all subsistence grain at the market to cover
the family needs and ensure that each season and each year the farm as
enough capital to cover it
2. preferences of farmers regarding risk and uncertainty

Þ risk preferences from field surveys or literature
Þ expected-utility framework or the prospect theory
3. Variables and estimation functions

Þ Price data (district level) – collect data on the watershed
Þ Yield production function – to be calibrated based on STICS or even
replace by STICS
Þ Groudwater level function – to be calibrated with AMBHAS
4. Uncertainty Analysis
CONCLUSION
ECONOMIC MODEL:
• Simulation of decision on investments in borewell irrigation and on cropping
system under climate uncertainty
 an original dynamic stochastic programming model with recursive

programming
 test socio-economic and water management policies under scenarios of
climate change
 initially developed to address critical issues of groundwater depletion and
farming practices in a watershed in southwestern India
 it structure can be used in other agricultural settings
Contact: marion.robert@toulouse.inra.fr
ACKNOWLEDGEMENTS
This research work was funded by the Indo-French Centre for the Promotion of Advanced Research (CEFIPRA), the INRA flagship program
on Adaptation to Climate Change of Agriculture and Forest (ACCAF) and the Doctoral School of the University of Toulouse (EDT). We are
grateful to all the experts, farmers, and trainees who helped getting the data. A special thanks to Tony Raveneau and Ronan Trepos for
their help with the computer implementation.
15/16
Thank you for your attention!

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A STOCHASTIC DYNAMIC

Model decisions of farmers facing climate change

Test socio-economic and water management policies under scenarios of

Stages of the farmer decision-making process:

Crop price expectations:

Cost of pumping groundwater for irrigating crops:

Flow rate of the well:

¿ 0 if 𝑊𝐸𝐿𝐿𝑑𝑒𝑝𝑡h >𝑊𝑇 𝑑𝑒𝑝𝑡h

Expected water available for irrigation:

Total irrigation capacity expected for the year:

Expected profit from crop c at season and on plot b:

R = constant discount rate

Y1: invests in a borewell (100m)

=> groundwater depletion from 60 m.b.g.l. to 116

Þ similar to baseline scenario

Þ groundwater depletion from 60 m.b.g.l. to

Þ stop rabi irrigation

Þ But electricity cost >

2. preferences of farmers regarding risk and uncertainty

3. Variables and estimation functions

 an original dynamic stochastic programming model with recursive

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