# COST AND RETURNS ESTIMATES

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1 CHAPTER - VII COST AND RETURNS ESTIMATES 208

2 COST AND RETURNS ESTIMATES Introduction: Estimate of farm (Agriculture) based on the cost of production of different crops are basic to formulate measures for the provision of incentives to s, fixation of minimum support price (MSP), control and stabilization of prices. Agricultural of late has become a un remunerative activity due to escalation of cost and low monetary returns. For this state of affairs, there are number of macro and micro level causes. At the macro level the causes are the price policy of the government with regards to output, various inputs and trade restrictions, that have an impact on the cost of cultivation and the value of output which have baring on s. At the micro level the causes are the supply of inputs and their supply price, soil conditions etc. The estimation of cost of cultivation for any crop has certain limitation. For eg. there are certain common items of cost of cultivation such as those relating to farm fixed assets and farm management etc., pose problem in estimating the cost. The problem is really with apportionment of cost on items like own land, own capital equipment and assets. This difficulty sometimes result in the extreme view that the individual farm product has know final cost that can be determinable independently of the cost of other products. However, actually a major part of the cost of cultivation consisting expenditure on human labour, machinery, seed, fertilizers, manure, pesticides and irrigation charges are determinable. Keeping these aspects the analysis of cost of cultivation is attempted. This chapter presents discussion on estimation of and cost of sugarcane cultivation in the study area. The focus is on economics of sugarcane cultivation. Generally the cost and returns are expected to vary with the size of the farm. Therefore, the analysis focused on economics of sugarcane cultivation relating to different farm size groups. The cost of cultivation is analyzed from two 209

3 angles 1) Economic cost analysis 2) Cost concepts used in Farm management studies. As sugarcane in Andhra Pradesh is grown in two types namely 1) Plant crop 2) Ratoon crop. The analysis is also made separately for these two types of crops for both gur and sugar. Further, to capture the difference in the cost of cultivation on own land and leased land (land hired on rent basis) cultivation. Economics of sugarcane cultivation is separately estimated for own land as well as on leased in land. The problems in sugarcane cultivation as stated by the cultivators is also given Economic Analysis of Cost of Production: (a). Sugarcane Gur Plant Crop: For estimation of costs, data is elicited from the sample sugarcane s on different inputs that go into the production. The market prices are considered for converting the physical units into monetary cost. As pointed out earlier the data relates to the agricultural year In the economic analysis, the Total Cost of production (TC) comprises of Total Fixed Cost (TFC) and Total Variable Cost (TVC). For Gur s, the TC of production per hectare is estimated Rs.1.33 lakhs of which TVC accounts for Rs.1.03 lakhs (78% of TC) and TFC accounts for about Rs.0.30 lakhs (22% of TC) (table 7.1). 210

4 Table: 7.1 Gur Plant Cultivation Item Marginal % Small % Medium % Total % s Hired human labour Own human labour Seed Bullock labour Machinery (tractor) Machinery (crusher) Irrigation Transport Manure Fertilizer & pesticides Land revenue/ rent Interest on working capital TVC Interest on fixed capital Rental value of own land TFC TC Note: Percentage to Total Cost (TC) 211

5 Among different components of TVC, labour charges account for nearly 36% followed by machinery and cost of the seed. These four items put together accounts for nearly 60% of the total cost. Rental value of own land is the single cost component accounting for 19.04% of the total cost. But this cost is not actually incurred by the it is an imputed cost. Among the three size group the cost of production is comparatively more for medium size group. In fact the estimated cost of production of this size group is more than what is observed for the total sample. 212

6 Item Marginal Table: 7.2 TVC/ TFC for Gur Plant Cultivation % Small % Medium % Total s Hired human labour Own human labour Seed Bullock labour Machinery (tractor) Machinery (crusher) Irrigation Transport Manure Fertilizer & pesticides Land revenue/ rent Interest on working capital TVC Interest on fixed capital Rental value of own land TFC TC Note: Percentage to TVC and TFC % 213

7 Table 7.2 presents data relating cost of production wherein the cost of each item of cost expressed as percentage to TVC and TFC separately. Labour cost, seed, hiring of machinery constitutes about 60% of TVC. This is noticed for the total sample and also for different size groups. The TC, TVC, and TFC are observed to be highest for medium s and lowest for marginal s. As far as composition of the cost of cultivation and item wise distribution of the cost do not show striking differences among the three categories of s. One important point that can be noticed from the details presented in table 7.1 and 7.2 is that the TC of production has positive relationship with the size of the farm. This is noticed for both TVC and TFC also. 214

8 Table: 7.3 Gur Ratoon Cultivation Item Marginal % Small % Medium % Total % s Hired human labour Own human labour Seed Bullock labour Machinery (tractor) Machinery (crusher) Irrigation Transport Manure Fertilizer & pesticides Land revenue/ rent Interest on working capital TVC Interest on fixed capital Rental value of own land TFC TC Note: Percentage to Total Cost (TC) 215

9 Table: 7.4 TVC/ TFC for Gur Ratoon Item Marginal % Small % Medium % Total % s Hired human labour Own human labour Seed Bullock labour Machinery (tractor) Machinery (crusher) Irrigation Transport Manure Fertilizer & pesticides Land revenue/ rent Interest on working capital TVC Interest on fixed capital Rental value of own land TFC TC Source: Primary survey Note: Percentage on TVC and TFC 216

10 Table 7.3 and 7.4 present details of cost of cultivation of sugarcane Gur ratoon crop. The TC of production per hectare is estimated Rs.1.11 lakhs of which TVC accounts for 0.84 lakhs (about 75% in TC) and TFC accounts for about Rs.0.27 lakhs (24% of TC). Among different categories of s the TC is highest for medium s and lowest for marginal s. There is no difference in the distribution of TC between TVC and TFC for the three categories of s. Among different components of TVC, labour charges is the single item accounts for about 40% of TVC followed by machinery (crushing) and fertilizers and pesticides. These four items put together accounts for 60% of the total cost. The interest paid on working capital is also another cost item that is accounts for considerable amount. In case of TFC, Rental value of own land is the single cost component accounting for 24.08% of the total cost. But this cost is not actually incurred by the it is an imputed cost. It is the highest for small s and lowest for marginal s. TC, TVC and TFC and the size of the farm have a positive relationship. From the above discussion the conclusions are 1) cost on hired human labour in TVC and 2) cost relating to rent on own land in TFC are predominant 3) TC, TVC, TFC are comparatively more for medium s than the other two categories of s. 217

11 (c). Comparison of Cost between Plant and Ratoon Crop (GUR): Table: 7.5 Total Cost Differences Gur Cultivation (Value in Rupees per Hectare) Farm size Plant Ratoon Difference Marginal Small Medium Total sample Table: 7.6 TVC Cost Differences Gur Cultivation (Value in Rupees per Hectare) Farm size Plant Ratoon Difference Marginal Small Medium Total sample Table: 7.7 TFC Cost Differences Gur Cultivation (Value in Rupees per Hectare) Farm size Plant Ratoon Difference Marginal Small Medium Total sample Comparison of cost of production between plant crop and ratoon crop of gur is shown in table 7.5 to 7.7. The cost of production is comparatively low for ratoon crop. The cost differences between two crops are noticed in TVC only. The 218

12 cost differences is observed in case of cost of seed, labour charges for (a) land preparation, (b) seed planting and weeding (c) tractor charges for ploughing. The cost difference between plant and ratoon is comparatively more for medium s than the other two categories. 219

13 Table: 7.8 Sugar Plant Cultivation Item Marginal % Small % Medium % Total % s Hired human labour Own human labour Seed Bullock labour Machinery (tractor) Irrigation Transport Manure Fertilizer & pesticides Land revenue/ rent Interest on working capital TVC Interest on fixed capital Rental value of own land TFC TC Note: Percentage to Total Cost (TC) 220

14 Table: 7.9 TVC/ TFC for Sugar Plant Cultivation Item Marginal % Small % Medium % Total % s Hired human labour Own human labour Seed Bullock labour Machinery (tractor) Irrigation Transport Manure Fertilizer & pesticides Land revenue/ rent Interest on working capital TVC Interest on fixed capital Rental value of own land TFC TC Note: Percentage to TVC and TFC. 221

15 The TC of production of sugarcane s who sells produce to sugar mills is separately analyzed for both plant and ratoon types. Table 7.8 and 7.9 present these details. The TC of production per hectare is estimated Rs.1.04 lakhs of which TVC accounts for Rs.0.74 lakhs (72% of TC) and TFC accounts for about Rs.0.30 lakhs (28% of TC). Among different categories of s the TC is highest for medium size s and lowest for marginal s. However, there is no difference in the distribution of TC between TVC and TFC for the three categories of s. Among different components of TVC, cost incurred on human labour accounts for nearly 25% of TVC followed by machinery (tractor) charges, and cost of the seed. These four items put together accounts for 40% of the total cost. The interest paid on working capital is another important item cost i.e. accounts for 5.54% considerable amount. In TFC, Rental value of own land is the single cost component accounting for 24.55% in the total cost. It is highest for medium s and lowest for marginal s. There is positive relationship between the size of the farm and the cost of production. 222

16 Item Marginal Table: 7.10 Sugar Ratoon Cultivation % Small % Medium % Total s Hired human labour Own human labour Seed Bullock labour Machinery (tractor) Irrigation Transport Manure Fertilizer & pesticides Land revenue/ rent Interest on working capital TVC Interest on fixed capital Rental value of own land TFC TC Note: Percentage to Total Cost (TC) % 223

17 Table: 7.11 TVC/ TFC for Sugar Ratoon Cultivation Item Marginal % Small % Medium % Total % s Hired human labour Own human labour Seed Bullock labour Machinery (tractor) Irrigation Transport Manure Fertilizer & pesticides Land revenue/ rent Interest on working capital TVC Interest on fixed capital Rental value of own land TFC TC Note: Percentage to TVC and TFC. 224

18 The TC of production of ratoon crop per hectare is estimated Rs.0.83 lakhs of which TVC accounts for Rs.0.54 lakhs (65% of TC) and TFC accounts for about Rs.0.29 lakhs (35% of TC). Among different categories of s the TC is highest for medium s and lowest for marginal s. Among different components of TVC, labour charges account for nearly 28% of TVC followed by transport charges and fertilizers and pesticides. These four items put together accounts for 43% of the total cost. The value of interest paid on working capital is another important item cost that is accounted for 7.08% of TC. In TFC, Rental value of own land is the single cost component accounting for 31.38% of the total cost. TFC has positive relationship with the farm size. But this cost is not actually incurred by the it is an imputed cost. The cost of production and size of farm has positive relationship as is evident from table 7.10 and From the above discussion the conclusions are 1) cost of human labour in TVC and 2) cost relating to rent on own land in TFC are predominant. 3) TC, TVC, TFC are comparatively more for medium s than the other two categories of s. (f). Comparison of Cost between Plant and Ratoon Crops: Table: 7.12 Total Cost Differences for Sugar Cultivation (Value in Rupees per Hectare) Farm size Plant Ratoon Difference Marginal Small Medium Total sample

19 TABLE: 7.13 TVC Differences for Sugar Cultivation (Value in Rupees per Hectare) Farm size Plant Ratoon Difference Marginal Small Medium Total sample Table: 7.14 TFC Differences for Sugar Cultivation (Value in Rupees per Hectare) Farm size Plant Ratoon Difference Marginal Small Medium Total sample Comparison of cost of production between plant and ratoon crop is shows in tables 12 to 14. The cost of production is comparatively low for ratoon crop. Lower cost of production for ratoon crop is due to difference in cost relating to certain items of TVC. These are cost of seed, labour charges on land preparation, seed planting and weeding tractor charges for ploughing. The cost difference between two types is more comparatively for medium s. In order to know whether the variation (difference) in a total cost of production of sample s is significant or not value of coefficient of variation (CV) is estimated. This is attempted for all categories of s and for the total sample for two types of cultivation (plant and ratoon). These values are given in table. C.V. = X

20 Category Table: 7.15 Values of CV of Total Cost (TC) Marginal Small Medium Total s Gur plant Gur ratoon Sugar plant Sugar ratoon The evidence provided in table 7.15 suggests that there is no much variation in the total cost of cultivation for each category of sample s and for the total sample. However, from the values of CV there is conclusive evidence showing that whatever the variation exists it is comparatively high for marginal s in Gur (plant and ratoon) cultivation. In sugar cultivation it is high for marginal in the plant crop and high for medium in the ratoon crop. 227

21 Comparison between Gur Farmers and Sugar Farmers: Table: 7.16 Cost Differences between Owner and Tenant Cultivators of all Sugar Farmers (Value in Rupees per Hectare) Category Owner Cultivator Tenant Cultivator Gur Plant Marginal Small Medium Total Marginal Small Medium Total Cost A Cost A Cost C Cost C Difference Difference Gur Ratoon Cost A Cost A Cost C Cost C Difference Difference Sugar Plant Cost A Cost A Cost C Cost C Difference Difference Sugar Ratoon Cost A Cost A Cost C Cost C Difference Difference

22 7.2. Cost of Cultivation analysis based on Farm Management Survey Costs: Costs involved in cultivation fall into two categories, paid out or actual costs and unpaid or imputed costs. Expenses on hired labour, seed, manure, fertilizer, machinery etc., are example of items in category while, rent on own land, interest on own capital, managerial allowance and family labour are items in the later category. The cost of cultivation of sugarcane farming is analyzed from angle of cost concepts used in Farm Management Studies (FMS). In farm management studies there are four important concepts of cost. And two important concepts of are used. These are, Cost A 1 = this cost approximated actual expenditure incurred in cash and kind and included the following cost items: (a) Hired human labour (b) Owned and hired bullock labour (c) Seed (d) Manures and fertilizers (e) Implements charges (f) Land revenue and other taxes (g) Irrigation charges and transport (h) Interest paid on working capital. Cost A 2 = Cost A plus Actual rent paid (tenant s) Cost B = Cost A 1 plus (a) rent paid or (b) evaluated on owned land and (c) interest on fixed capital (excluding land only) Cost C = Cost B plus the value of family labour used (both paid out cost + imputed cost). The Farm Business Income (FBI): The surplus obtained by deducting Cost-A 2 from value of total output is known as Farm Business Income (FBI). This is the real measure of earnings of the and his family for management of risk, labour, use of land and capital. Farm Income: Farm Income is the surplus earned over cost C is another measure of earning of the. 229

23 The analysis of the cost of production of agricultural crops based on farm management cost approach provides insights regarding the cost incurred actually and imputed. The worked out on this basis will provide an understanding about the economics of cost cultivation. The farm management cost concepts mentioned above have two broad classifications. (1) Actual paid out cost which is cost A 1 (owner ). This cost is in fact the actual expenditure incurred by the towards cultivation on their own land. For tenant s the paid out cost also include rent actually paid on leased in land (Cost A 2 ). Before presenting explanation of cost of cultivation analysis based on FMS it is necessary to discuss some issues relating to (1) hiring of capital equipment and (2) hiring in of human labour by marginal and small s. Does hiring of labour on smaller holdings necessarily imply full utilization of family labour possessed by them? The argument is, in dual labour system (family and hired), it has been pointed out that the marginal and small s not only hire out labour but also hire causal labour to carry out farm operations. The hired human labour mostly used for crop harvesting in sugarcane cultivation. In this context it is necessary to understand the factors lying behind such hiring of labour. In harvesting period in order to ensure that the yield is not adversely affected, operations may have to be conducted within a very short period. This urgency to complete a certain volume of work may necessitate the hiring of labour even on small farms particularly in case of crops like sugarcane. Further even on small farms there is deficiency of family labour to carry out farm operation in a specified time period in such a case hiring of labour is often resorted to supplement family labour. In case capital equipment, due to cost of purchase and indivisibility of machinery, quite a number of sample s reported that they relay completely on hiring these. These include tractor for ploughing and sugarcane crushers. The Gur manufacturing s generally own crushers to extract sugarcane juice to prepare Gur. Many s of this category reported hiring of crushers. Keeping these aspects, the analysis and discussion is attempted. 230

24 Table: 7.17 Cost of Cultivation: Gur Plant crop (Value in Rupees per Hectare) S.N Item Marginal s Small s Medium s Total s o Amount To % Cost C Amount To % Cost C Amoun t To % Cost C Amount To % Cost C 1) Hired human labour ) Bullock charges ) Machine ) Seed ) Manure ) Irrigation ) Fertilizer & pesticides ) Transport ) Interest on working capital Total cost A ) Land rent paid Cost A 2 (tenant) ) Money value of family labour Cost A 2 (A 1 + item 11) (A 2 + item 11) (tenant) ) Interest on own capital ) Rent on own land Cost B (Cost A and 13 items) (Cost A and 13 items) (tenant) Cost C (Cost B + item 11) Cost C (tenant)

25 Table 7.17 present details of cost of production. For the total s the paid out cost per hectare (Cost A 1 ) is estimated at Rs for owner and Cost A 2 is estimated at Rs for tenant. Among different components of Cost A 1 it is expenditure towards human labour is the predominant item of expenditure. The other important item on which considerable amount is spent are charges paid for machinery, includes tractor for ploughing, cost of seed and charges paid for crusher to crush the sugarcane and to extract juice and the cost of seed. There are three important items of expenditure, the cost of which is estimated by imputing prevailing market price. These costs items include a) money value of family labour b) interest on own capital and c) rent on own land. If these costs are added to Cost A 1, Cost C is arrived. Per hectare Cost C is estimated at Rs.1, 24,805 for owner cultivator and Rs.1,33,003 for tenant cultivator for the total sample. Among different categories of s both Cost A 1 and Cost C are comparatively more for medium than the other two categories of s. When individual items of expenditure are considered, labour cost, charges on machinery and seed cost is predominant. Among imputed costs, it is imputed rent on own land is predominant. For medium s imputed value on own family labour is comparatively low as these s have less family labour working on farms. 232

26 Table: 7.18 Cost of Cultivation: Gur Ratoon crop (Value in Rupees per Hectare) S.No Item Marginal s Small s Medium s Total s Amount To % Cost C Amount To % Cost C Amount To % Cost C Amount To % Cost C 1) Hired human labour ) Bullock charges ) Machine ) Seed ) Manure ) Irrigation ) Fertilizer & pesticides ) Transport ) Interest on working capital Total cost A ) Land rent paid Cost A 2 (tenant) ) Money value of family labour Cost A 2 (A 1 + item 11) (A 2 + item 11) (tenant) ) Interest on own capital ) Rent on own land Cost B (Cost A and 13 items) (Cost A and 13 items) (tenant) Cost C (Cost B + item 11) Cost C (tenant)

27 Table 7.18 present details of cost of cultivation of sugarcane gur ratoon crop the paid out cost (Cost A 1 ) is estimated at Rs.67,788 for owner, Cost A 2 is estimated at Rs.75,986 for tenant. Among different components of Cost A 1 it is expenditure towards human labour is the principle item of payments. The other item is charges paid for crusher to crush the sugarcane, charges paid for manures and fertilizers. In fact, as pointed out previously this is the actual money paid by the from his pocket. Cost C is estimated at Rs.1,03,178 for owner cultivator and Rs.1,11,376 for tenant cultivator. Among different categories of s both Cost A 1 and Cost C are comparatively more for medium than the other two categories of s. When individual items of expenditure are considered, labour cost charges, on machinery are predominant. Among imputed costs, it is imputed rent on own land is prime. 234

28 Table: 7.19 Cost of cultivation: Sugar Plant crop (Value in Rupees per Hectare) S.No Item Marginal s Small s Medium s Total s Amount To % Cost C Amount To % Cost C Amount To % Cost C Amount To % Cost C 1) Hired human labour ) Bullock charges ) Machine ) Seed ) Manure ) Irrigation ) Fertilizer & pesticides ) Transport ) Interest on working capital Total cost A ) Land rent paid Cost A 2 (tenant) ) Money value of family labour Cost A 2 (A 1 + item 11) (A 2 + item 11) (tenant) ) Interest on own capital ) Rent on own land Cost B (Cost A and 13 items) (Cost A and 13 items) (tenant) Cost C (Cost B + item 11) Cost C (tenant)

29 Table 7.19 present details of cost of cultivation of sugar plant crop. Cost A 1 is estimated at Rs.61, 581 for owner cultivator, Cost A 2 is estimated at Rs.69, 799 for tenant cultivator. Among different components of Cost A 1 it is expenditure towards human labour is the major item of expenditure. The other items are charges paid for machinery, charges paid for seed, charges paid for transport on which considerable amount is spent. In fact, as pointed out earlier this is the actual money paid by the from his pocket. Cost C is estimated at Rs.96,187 per hectare for owner cultivator and Rs.1, 04,385 for tenant cultivator. Both Cost A 1 and Cost C are comparatively more for medium than the other two categories of s. When individual items of expenditure are considered, labour cost charges on machinery and seed cost are predominant. Among imputed costs, it is imputed rent on own land is predominant. For medium s imputed value on own family labour is comparatively low. 236

30 Table: 7.20 Cost of Cultivation: Sugar Ratoon crop (Value in Rupees per Hectare) Marginal s Small s Medium s Total s S.No Item To % To % To % To % Amount Amount Amount Amount Cost C Cost C Cost C Cost C 1 Hired human labour Bullock charges Machine Seed Manure Irrigation Fertilizer & pesticides Transport Interest on working capital Total cost A Land rent paid Cost A 2 (tenant) Money value of family labour Cost A 2 (A 1 + item 11) (A 2 + item 11) (tenant) Interest on own capital Rent on own land Cost B (Cost A and 13 items) (Cost A and 13 items) (tenant) Cost C (Cost B + item 11) Cost C (tenant)

31 Table 7.20 present details of cost of cultivation of sugar ratoon crop. The paid out cost (Cost A 1 ) is estimated at Rs.42,833 per hectare for owner cultivator and Cost A 2 is estimated at Rs.51,137 for tenant among with different components of cost A 1 it is expenditure towards human labour is the most important item of costs. The other item is charges paid for transport, charges paid on manures and fertilizers. In fact, as discussed earlier this is the actual money paid by the from his concise. Cost C is estimated at Rs.75,345 for owner cultivator and Rs for tenant cultivator. Both Cost A 1 and Cost C are comparatively more for medium than the other two categories of s. When individual items of expenditure are considered, labour cost charges on machinery and seed cost are predominant. Among imputed costs, it is imputed rent on own land is predominant. It is observed that there are variations in the cost of production among s belonging to different size groups. In view of this, it is pertinent to know whether the observed differences in the cost of cultivation are statistically significant or not coefficient of variation is estimated. For this analysis Cost A 1, Cost A 2 and Cost C are considered. Tables 7.21 to 7.23 give these details. The estimated values of CV do not reveal marked variation among different categories of s. In fact the variation is comparatively less for Cost-C than other two costs. Table: 7.21 Values of CV of Cost A Category Marginal Small Medium Total s Gur plant Gur ratoon Sugar plant Sugar ratoon

32 Category Marginal Table: 7.22 Values of CV of Cost A 1 Small Medium Total s Gur plant Gur ratoon Sugar plant Sugar ratoon Category Marginal Table: 7.23 Values of CV of Cost C Small Medium Total s Gur plant Gur ratoon Sugar plant Sugar ratoon Returns of Sugarcane Cultivation: To judge the profitability of sugarcane cultivation, it is necessary to estimate the returns against the cost of cultivation. This analysis is attempted from different angles. 1) Estimation of Gross Value of Output or Gross Income 2) Estimation of Farm Business Income (FBI) 3) Estimation of Farm Income (FI) 1) Estimation of Gross Income: The Gross Value of Output or Gross Income estimated for sugarcane Gur s and Sugarcane Sugar s. The gross value of output of gur s is estimated by taking into consideration the weight of the manufactured gur and prevailing price of gur in the local wholesale market. In the study area the gur prices are fixed by auction in the local Anakapalli gur market. 239

33 The s who sell their sugarcane to local sugar factories receive price from these factories. [in fact, the Commission of Agriculture Cost and Prices (CACP), Government of India (GOI) fixes the Statutory Minimum Price (SMP). All the sugar factories in the country expected to purchase sugarcane from the s by paying this SMP]. Data on the prices received by the sample s are used for Gross Income calculation. 2) Estimation of Farm Business : Farm Business Income = Gross Income Cost A 1 Cost A 2 is separately estimated for owners and tenants. For owner = Cost A 1 + money value of family labour. For tenant s = Cost A 2 + money value of family labour. 3) Estimation of Farm Income: Farm Income = Gross Income Cost-C (both actual and imputed cost) (a). Sugarcane Gur Farmers: Table: 7.24 GI/FI/FBI of Gur on own land (Value in Rupees) Farm size Sugarcane Gur own cultivator s Plant crop Ratoon crop Gross Cost-C Farm Gross Cost-C Farm Marginal s Small s Medium s Total s Farm size Gross FBI of Sugarcane Gur own cultivator s Plant crop Ratoon crop Cost-A Farm Gross Cost-A Business Farm Business Marginal s Small s Medium s Total s

34 With the help of this data the gross is estimated. Table presents information relating to the gur s. The gross per hectare for plant crop amounted to Rs lakhs as against Rs lakhs for ratoon crop. Further, among different size groups of s the small s gross value of output is highest for medium size s and for marginal s it is lowest. Though the gross for plant crop is more. Farm is more for ratoon crop. This is noticed for the three size groups of s examined. This is mostly due to the differences in cost of production. The total cost of production for ratoon crop is relatively less than their counter parts in plant cultivation. As pointed out earlier for ratoon crop the cost relating to seed plantation, ploughing and land preparation are not incurred. Thus, whatever the advantage the plant crop has in gross value of output is nullified by its high cost of production. In case of plant crop surprisingly the F.I of medium is comparatively low than the other two. This may be attributable to 1) lower yield and 2) high cost. The profitability of sugarcane cultivation analyzing from the angle of imputed cost may not give the true picture. Normally A does not feel that he is cultivating under a loss as long as his output covers all inputs for which he pays from his pocket. That is paid out cost (Cost A 1 ). The FBI obtained after deducting Cost A from G.I, is the real measure of earnings of the and his family. The methodology of estimation is already stated. A perusal of table-24 reveals that the FBI is estimated at Rs for plant crop and Rs. 55,143 for ratoon crop for total sample. FBI is comparatively more for small s than marginal and medium s. This is noticed for both plant and ratoon cultivation. This analysis of estimation both FI and FBI does not show any conclusive evidence, regarding the pattern of relationship between the size of the farm FI and FBI. It can be noticed from the table that the small size s have comparatively high than the other two categories in both plant and ratoon cultivation. 241

35 Table: 7.25 GI/FI/FBI of Gur Tenant cultivation (Value in Rupees) Gur tenant cultivator s (in Rupees) Farm size Plant crop Ratoon crop Gross Cost-C Farm Gross Cost-C Farm Marginal s Small s Medium s Total s Farm size Gross FBI of Gur tenant cultivator s Plant crop Ratoon crop Cost-A Farm Gross Cost-A Business Farm Business Marginal s Small s Medium s Total s Table 7.25 presents the details of of tenant s relating sugarcane gur cultivation. In case of plant crop the F.I after adjusting to Cost C is estimated at around Rs Among three categories small s have comparatively higher F.I. this is mostly due to higher value of gross output. In case of ratoon crop the average F.I of the sample is estimated that Rs per hectare. In case of ratoon crop also the small s have comparatively higher F.I. For another important observation is F.I is higher for ratoon crop. Which is as pointed out earlier is due to low cost of production. FBI is estimated at Rs.52, 230 for plant crop and Rs for ratoon crop for total s. In case of both types of cultivation, the small s have comparatively high FBI. 242

36 (b). Sugarcane Sugar Farmers: Farm size Table: 7.26 GI/FI/FBI of Sugar on Own Farm Gross Plant crop Cost-C rupees) owner cultivator s Farm Gross Ratoon crop Cost-C (in farm Marginal s Small s Medium s Total s Farm size Gross FBI of owner cultivator s (in rupees) Plant crop Cost-A Farm Business Gross Ratoon crop Cost-A Farm Business Marginal s Small s Medium s Total s Table 7.26 presents information relating to the of sugar s. The gross Income per hectare amounted to Rs in the case of sugar plant crop as against Rs for ratoon crop. Further, among different size groups the G.I is high for medium s and for marginal s it is lowest in both types of cultivation. Estimates of FI shows distressing picture in both types of cultivation. FI is shows losses to s as GI is less than the Cost C. This is observed for all size groups for both plant and ratoon cultivation. However it has been argued that it is FBI than FI is the real measure of the earnings of the cultivator 243

37 as FBI estimation takes into consideration the actual expenditure incurred by the cultivator. The estimated FBI the three categories of s do not reveal an encouraging scenario. The sugarcane s who are selling cane to sugar factories are able to earn an amount of about Rs.15, 000 to Rs.17, 000 per hectare is really distressing. The estimated FBI is highest for small s an lowest for medium s. Further, relatively for ratoon crop the FBI is more than plant crop for all the three categories. Farm size Table: 7.27 GI/FI/FBI of Sugar tenant cultivation Gross (in rupees) Sugar tenant cultivator s Plant crop Ratoon crop Cost-C Farm Gross Cost-C Farm Marginal s Small s Medium s Total s Farm size Gross FBI of Sugar tenant cultivator s (in rupees) Plant crop Cost-A Farm Business Gross Ratoon crop Cost-A Farm Business Marginal s Small s Medium s Total s Table 7.27 presents the details of of tenant s relating to sugarcane sugar cultivation. In case of plant crop the F.I for the total sample is estimated at around Rs All s are getting losses. However small 244

38 s the loss is comparatively high. This is mostly due to higher value of gross output. In case of ratoon crop the average F.I of the sample total s is estimated that Rs per hectare. In case of ratoon crop also the small s the loss is comparatively high. Another important observation is, comparatively the loss is less for ratoon crop than plant crop. Which as pointed out earlier is due to low cost of production in case of ratoon crop. The FBI of both types of cultivation is given in table It is evident from the table that, for the total sample the FBI is Rs.7698 and Rs for plant and ratoon crop respectively. The estimated FBI though positive as against FI, yet it is very less indicating that sugarcane s are not able earn enough even for all the toil of their family. There is no marked difference in the FBI among different size group. The only silver living is that for ratoon crop FBI is relatively more than plant crop. This is noticed for the total sample and also for individual s also. Among gur and sugar cultivators it is Gur cultivation the s are comparatively high. This is attributable to lowest cost of production and high Gur prices. 245

39 7.4. Cost Returns Ratio Table: 7.28 Cost Returns Ratio of Gur and Sugar s for TC (Value in Rupees) Cost Returns Ratio for Gur own cultivators S.No Farm size Plant crop Ratoon crop and above Total Cost Returns Ratio for Gur tenant cultivators and above Total Cost Returns Ratio for Sugar own cultivators and above Total Cost Returns Ratio for Sugar tenant cultivators and above Total The Cost Returns Ratio (CRR) is estimated. Considering the Gross Income (G.I) and Total Cost (T.C). Table 7.28 gives these details. For Gur s, the ratio is comparatively high for ratoon crop. It is estimated at 1.19 for owner and 1.10 for tenant. There is much difference in the CRR among the three categories of s. In sugar s, the CRR values show very distressing and discouraging picture. The situation is much worse for tenant s. The estimated CRR for tenant s, for total sample is 0.74 and 0.75 for plant 246

40 and ratoon crop respectively. The estimated CRR for sugar owner cultivator is marginally better than tenant cultivator. This situation is a result of steep hike in the prices of various inputs that goes into production and MSP of sugarcane crop is not adjusted proportionately to changes in cost. This low CRR in sugarcane cultivation is to be viewed seriously by policy makers to avoid, further distress among sugarcane growers. If this problem is not addressed with appropriate policy measures, may lead to crop holiday or shifting to other crops Problems of sugarcane in the study area The technical analysis on the input output relationship, input use efficiency and cost and returns throws light on the technical aspect of the sugarcane cultivation. The researcher during his course of visit to different sample villages for collecting data has noted down the problems being faced by the sugarcane s as expressed by them. Some of these the important of these problems are given below which help to suggest appropriate policy measures. These problems are: Increase in the cost of production due to increase input cost, especially the cost of labour. There is scarcity of labour as stated by is largely due to implementation of Mahatma Gandhi national Rural Employment Guarantee Act during the season of agriculture operation. This scarcity of labour has increased the wages. In fact this scheme is to be implemented during non agriculture but the local implementing authority is not adhering to this norm. These s are not aware of recent techniques of production and farm management which help to increase output and reduce cost. As bore wells are important source of irrigation for sugarcane cultivation in the study area, electricity power failures, lack of adequate power supply are affecting the irrigation which in turn affect the output, and weight of crop. 247

41 The MSP fixed by the government is not remunerative to the s in view of steep rise in cost of production, transportation and incidental costs. Unless these problems faced by sugarcane s is solved by appropriate policy measures, sugarcane s may declare crop holiday (as happened recently for Paddy crop in Andhra Pradesh) which affect the sugar mills and eventually on the supply of sugar and gur Conclusion: The TC of production per hectare for Gur s is estimated Rs.1.33 lakhs. Among the three size group the cost of production is comparatively more for medium size group. As far as composition of the cost of cultivation and item wise distribution of the cost do not show striking differences among the three categories of s. The TC of production has positive relationship with the size of the farm. This is noticed for both TVC and TFC also. The TC of production of gur ratoon crop per hectare is estimated Rs.1.11 lakhs. Among different categories of s the TC is highest for medium s and lowest for marginal s. However, (1) Cost on hired human labour in TVC and (2) cost relating to rent on own land in TFC are predominant (3) TC, TVC, TFC are comparatively more for medium s than the other two categories of s. The cost of production is comparatively low for ratoon crop. The cost difference between plant and ratoon is comparatively more for marginal s than the other two categories. The TC of production of sugarcane s per hectare is estimated Rs.1.04 lakhs. There is positive relationship between the size of the farm and the cost of production. Among different categories of s the TC is highest for medium s and lowest for marginal s. In case of sugar s 1) cost of human labour in TVC and 2) cost relating to rent on own land in TFC are predominant. TC, TVC, TFC are comparatively more for medium s than the other two categories of s. There is no much variation in the total cost of cultivation for each category of sample s and for the total sample. However, from the values of CV there is conclusive evidence showing that whatever the variation exists it is comparatively high for marginal s in Gur (plant and 248