In a landmark step for Indian agriculture, more than 2,500 smallholder paddy farmers in Punjab and Haryana are set to receive their first financial payouts from carbon credits earned through sustainable practices such as direct seeding of rice and low-tillage residue management. The digital transfers, ranging mostly between ₹3,000 and ₹15,000 per farmer, will be disbursed at an event at Punjab Agricultural University in Ludhiana. These credits stem from farming activities carried out between 2019 and 2022 and represent India’s pioneering large-scale issuance of soil carbon credits to smallholders under a rigorous international standard.
The programme is run by Grow Indigo, a joint venture between Indian seed major Mahyco and US-based Indigo Ag. The company is making the initial payments from its own funds ahead of the full sale of the credits, ensuring complete digital traceability. Farmers who enrolled after 2022 remain under audit and will receive payments once their credits are verified and sold. The first batch covers roughly 30,000 acres across the two states and has generated more than 50,000 carbon credits.
Historic Payouts for Climate-Friendly Farming
This marks the first time Indian farmers are being directly compensated for the carbon their soils sequester and the greenhouse-gas emissions they avoid. Grow Indigo’s executive director Usha Barwale Zehr described it as a turning point: “For the first time in India, a farmer is being paid for the carbon their soil holds. This will impact smallholder farmer livelihoods positively in a sustainable manner.”
The payments reward two core practices. Direct seeded rice (DSR) replaces the traditional method of transplanting seedlings into flooded fields. By sowing seeds directly into the soil, farmers eliminate the need for nursery beds and continuous flooding. Low-tillage or no-tillage residue management involves incorporating or retaining crop residue rather than burning it, which builds soil organic carbon and reduces particulate pollution. Together these methods lower methane emissions from flooded paddies, cut nitrous-oxide emissions linked to intensive tillage, and increase the carbon stored in the soil.
Water Savings and Cleaner Air
The environmental gains are substantial. Direct seeding of rice saves an estimated 1.4 million litres of water per hectare compared with conventional transplanting. In the groundwater-stressed regions of Punjab and Haryana, where the water table has declined sharply over decades of intensive rice-wheat cultivation, this reduction is critical.
Equally important is the cut in crop-residue burning. Burning of paddy straw is a major seasonal source of PM2.5 pollution that blankets northern India each autumn and winter. By managing residue through incorporation or other low-tillage methods, participating farmers reduce this toxic particulate matter. Company data and independent assessments confirm that these practices deliver measurable emission reductions while maintaining or even improving yields once farmers master the techniques.
Verra Certification and Growing Scale
The credits have been audited and issued under Verra’s Verified Carbon Standard (VCS), one of the world’s most widely recognised voluntary carbon-market protocols. Verra’s methodology for agricultural land management is considered among the most rigorous available for smallholder projects, requiring detailed baseline data, ongoing monitoring, and third-party verification.
Grow Indigo is already working with more than 100,000 farmers across nearly one million acres in Punjab and Haryana. The company aims to generate one million carbon credits annually by 2027. Farmers typically earn about one credit per acre each year; current market prices for high-quality agricultural credits range from roughly $10 to $40 per tonne of CO₂ equivalent. In earlier phases of the programme, 75 per cent of revenue from credit sales was designed to flow back to the farmers, providing a meaningful supplementary income stream.
Why Punjab and Haryana Matter
Punjab and Haryana form the heartland of India’s Green Revolution. The two states produce a disproportionate share of the country’s rice and wheat and contribute heavily to central foodgrain procurement. Yet the intensive, water- and fertiliser-heavy system has exacted a heavy environmental toll. Scientific estimates place greenhouse-gas emissions from paddy cultivation in Punjab at around 5 tonnes of CO₂ equivalent per hectare – well above the national average of about 3.1 tonnes. Haryana is only slightly lower. Continuous monoculture has also depleted soil organic carbon and accelerated groundwater depletion.
Stubble burning remains a persistent public-health challenge despite legal bans. Carbon-credit programmes that reward residue retention and direct seeding therefore address multiple problems at once: climate mitigation, air quality, water conservation and soil health. The Union agriculture ministry has already released a framework for a voluntary carbon market aimed at helping small and marginal farmers access such benefits. India’s emergence as the world’s largest rice producer – surpassing China with roughly 154 million tonnes in the 2025-26 crop year – adds further urgency to making rice cultivation more sustainable.
Corporate Demand and Future Diversification
Demand for the credits comes primarily from hard-to-abate sectors such as aviation, mining and fertiliser manufacturing. Companies in these industries often cannot eliminate their own emissions quickly and therefore purchase high-integrity offsets to meet climate commitments. Agricultural carbon credits that deliver verified emission reductions and co-benefits for smallholders are particularly attractive in voluntary markets.
Looking ahead, Grow Indigo and policymakers both see carbon finance as a bridge toward broader crop diversification. Water-intensive rice occupies large areas in the two states that could eventually shift toward less thirsty crops such as maize, oilseeds or pulses. Carbon payments can soften the transition risk for farmers while governments explore complementary incentives, including assured procurement and reoriented subsidies.
A Model for Indian Agriculture
The Ludhiana payout event is more than a ceremonial first. It demonstrates that rigorous, internationally certified carbon markets can work for India’s smallholders when technology, monitoring and transparent revenue sharing are combined. Satellite-based monitoring, digital payment systems and third-party verification under Verra have made the programme scalable and credible.
Challenges remain. Expanding the programme while maintaining additionality and data integrity will require continued investment in farmer training, soil sampling and remote sensing. Market prices for credits can fluctuate, and farmers need clear, predictable income streams. Yet the early results are encouraging: thousands of farmers are already receiving tangible returns for practices that also protect scarce water resources, improve air quality and rebuild soil health.
As more credits from post-2022 cohorts move through the audit pipeline and the company scales toward its one-million-credit target, the Punjab-Haryana model could influence similar initiatives across India’s rice-growing belt. For the first time, the carbon stored in a farmer’s field has a clear market value – and that value is beginning to reach the people who manage the land.
(Credit: owsa.in)
