Economics of Stubble Burning: Incentives vs. Penalties in Western Uttar Pradesh

Abstract

Crop residue burning remains a persistent environmental and public health challenge across the Indo-Gangetic Plain, with Western Uttar Pradesh emerging as an increasingly significant contributor. This paper examines the economic rationality driving stubble burning by comparing the direct and opportunity costs of mechanical residue management against the statutory penalty regime. Using satellite-derived fire count data from NASA's Fire Information for Resource Management System (FIRMS) for the period 2019–2025, combined with state-level agriculture subsidy disbursement records under the Crop Residue Management (CRM) Scheme, we construct a district-level cost-benefit framework for six Western UP districts: Meerut, Saharanpur, Muzaffarnagar, Shamli, Baghpat, and Bijnor. Our analysis reveals a fundamental enforcement asymmetry: while the revised penalty structure imposes fines of Rs 2,500–30,000 per violation, actual collection rates in Uttar Pradesh remain below 1%, rendering the expected cost of burning near zero. Concurrently, the upfront machinery cost of Rs 1.35–1.65 lakh for a Happy Seeder or Super Straw Management System—even after the 50% central subsidy—represents a prohibitive capital outlay for marginal and small landholders operating fewer than two hectares. The paper estimates that mechanical management imposes a per-hectare cost of Rs 5,000–7,500 against an expected penalty cost of approximately Rs 12–150 per hectare when adjusted for enforcement probability. The study further quantifies the externality burden: crop residue burning in Western UP contributes an estimated 15–22% of seasonal PM2.5 loading in the Delhi-NCR airshed, translating to health and productivity losses exceeding Rs 14,000 crore annually. We conclude that the current policy mix of subsidies and penalties is economically incoherent, and propose a restructured framework combining output-based subsidies, community rental models for CRM machinery, and digitized penalty enforcement linked to land records.

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