24 Sustainable Land Use Diversification and Investment Potential in Peri-urban, Semi-urban and Rural Areas of Telangana State, India M. Osman, G. Ravindra Chary, S.S. Balloli and Shaik Haffis Central Research Institute for Dryland Agriculture, Hyderabad-500 059, Telangana Email: mdosman@crida.in ABSTRACT: A study was carried out in Telangana State of India using net returns accrued from crops, fruit trees and livestock in three distressed districts namely Adilabad, Nalgonda and Warangal. The study identified sustainable and profitable land uses, estimated credit requirement and formulated credit investment action plan. A total of 270 respondents were selected from three districts at 90 respondents per district. Profitable annual and perennial crops and livestock enterprises were identified based on the calculated value of system index and benefit-cost ratio. Benefit-cost ratio varied from 1.58 in cotton + pigeonpea intercropping system in rural areas to 3.98 in soybean + pigeonpea in peri-urban agriculture in Adilabad, from 1.69 in the production of chillies to 2.65 in cotton + pigeonpea in rural areas of Nalgonda and from 1.71 in the production of vegetables in rural to 7.14 in the production of turmeric in peri-urban agriculture in Warangal. The economic indicators taking a lifespan of 15 years for fruit trees showed a payback period of 5 and 7 years; BCR of 1.61 and 2.07 and NPV of ` 267 crores and ` 109 crores constant at 2010 prices for sweet orange and mango in Nalgonda and Warangal districts, respectively. Every one rupee invested in sweet orange and mango fruit trees provide an income of ` 1.61 and ` 2.07, respectively. Every one rupee invested on rearing of large ruminants for dairy accrues ` 3.04, ` 3.44 and ` 3.32 while small ruminants rearing gives ` 4.05, ` 5.28 and ` 5.54 in Adilabad, Nalgonda and Warangal districts, respectively. A district level investment action plan taking full credit requirement for crops, fruit trees and livestock was formulated which has policy implication as there is a large credit demand from the farming community. Key words: Profitable and sustainable land use, credit requirement, system index, benefit-cost ratio, Telangana State Diversification in irrigated agriculture in general and in rainfed areas in particular has been identified as an important strategy to meet food, fodder and nutritional security, income growth, poverty alleviation, employment generation, development of rural sector, positive ecological and environmental impacts (FAO, 2001). Diversification helps in judicious use of available land, labour, water and other resources for realizing regular income flow to the farmers (Acharya, 2003). Diversification is a dynamic and continuous process to adjust with changing circumstances and market forces which act as an engine for agricultural growth (Hegde et al., 2003., Kumar and Mittal, 2003). Planning Commission, Government of India in its X Plan Document (Vol. II, Section 5.1.63) has also emphasized the importance of diversification of land use and needed support for higher profitability to the farmers in general while small and marginal farmers (SMFs) in particular. Osman et al. (2009) endorsed that the watershed development programme showed higher impact on deriving net returns per ha as well as higher index value of diversification compared to pre- programme period (before watershed). Rao and Sujatha (2006) emphasized that diversification of agriculture through alternate land use systems would not deprive farmers from production of arable crops. Diversification into horticulture is one of the potential sources for income growth in dryland areas with supplemental irrigation but requires higher investment. Thus, there is a need for formulating farmer- centric investment action plan of credit support as soft loan for promoting profitable and sustainable land uses involving promising crops, fruit trees and livestock. In this context, it is hypothesized that the sustainable and profitable land uses including crops, vegetables, fruit trees and livestock are more remunerative than that of conventional cropping systems. The objectives of the study are to: identify sustainable and profitable land uses, i. formulate an implementable action plan for ii. sustainable diversification, make an estimate of the credit requirement for iii. implementing the action plan in the study area, and suggest suitable policy measures and support iv. mechanism for up-scaling the promising land uses. Materials and Methods Study area The data used in this paper are part of a survey using structured questionnaire on land use diversification opportunities in three distressed districts, viz., Adilabad ( longitudes 77 0 46’ to 80 0 01’ E , latitudes 18 0 40’ to 19 0 56’ N, 264 m above mean sea level; black soils and mean annual rainfall 1050 mm), Nalgonda (78 0 40’to 80 0 05’ E, 16 0 25’ to 17 0 60’ N, 420 m above mean sea level; red soils & mean annual rainfall 650 mm) and Warangal (78 0 49’ to 84 0 43’ E, 17 0 19’ to 18 0 36’ N, 301 m above mean sea level, mixed red and black soils and mean annual rainfall 950 mm) of Telangana State in India. The study villages for survey were identified Indian J. Dryland Agric. Res. & Dev. 2015 30(1) : 24-34 DOI 10.5958/2231-6701.2015.00004.4