Impact of Mining on Agricultural Productivity

Abstract

Development activities in developed as well as developing countries have significant impacts at regional, state and national level. Most research on this kind of impact has traditionally focused on the broad macro economic level. The micro impacts generally at community level are largely neglected. However, most of the times these micro impacts are in form of externalities: a cause of market failure. It is a third party (or spill-over) effect arising from the production and/or consumption for goods and services for which no appropriate compensation is paid. In this paper we have attempted to analyze the agricultural productivity (paddy) in a coal mining region. Our study concentrated on the Ib Valley coal field of Orissa. Our sample consists of five villages situated near the coal mines (we call them as mining villages) and 2 villages, which are away from the coal mines (we call them as controlled villages). We use survey data of 132 plots owned by the farmers in the sample villages. We use the method of Fisher and Tornqvist indices for the present analysis, which show a negative impact on TFP due to mining activities. In terms of partial productivity measure (yield) mining villages also lagged behind. Further, as a robustness check, our regression results show a strong (significant) negative impact of mining on the TFP. Apart from this, we observe a shift in livelihood from agriculture to mining related work. This social change is an indicator of rural development in Ib Valley coal field area despite of reduction in agricultural productivity. Such rural development in terms of increased earning through mining activities in the study area has always a trade-off with reduction in agricultural productivity.

Keywords: Agricultural TFP, Fisher and Tornqvist Indices, Mining and Orissa.

JEL Classification: C43, D24, O13