Economic evaluation of PKV Dal mill

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1 Internationl Research Journal of Agricultural Economics and Statistics Volume 5 Issue 1 March, Research Paper Economic evaluation of PKV Dal mill H.J. WAGH, B.N. GANVIR, M.M. KADAM AND J.A. LAMTULE See end of the paper for authors affiliations Correspondence to : B.N. GANVIR Department of Agricultural Economics and Statistics, Dr. Panjabrao Deshmukh Krishi Vidyapeeth, AKOLA (M.S.) INDIA bnganvir@gmail. com Paper History : Received : ; Revised : ; Accepted: ABSTRACT : The present study was conducted in Akola and Amravati districts based on primary data collected from 10 PKV Dal mill owners from each district. The economic analysis was done by different cost concepts i.e. fixed cost, variable cost, total cost etc., which revealed that the average capital investment in PKV Dal mill per unit was Rs. 1, 31,000. The average fixed cost of PKV Dal mill was Rs. 1, 33,849 and average total cost per unit per year was Rs. 1, 55,949. The total average quantity of raw material processed by PKV Dal mill was 820 quintals and finished product obtained was quintals. Tur and gramdal were the major commodities processed at PKV Dal mill. The fixed cost per quintal was highest in udid i.e. Rs followed by mung, gram, and tur, i.e. Rs , Rs. 100, and Rs , respectively. The variable cost per quintal for udid was estimated to be Rs , for tur Rs. 168, for mung Rs , and for gram Rs Total cost incurred per quintal by PKV Dal mill owner was Rs for tur, Rs for mung, Rs for udid and Rs for gram. For all commodities, the gross return per quintal of processed raw material was highest in tur and mung which was Rs and Rs. 5338, respectively. The recovery of main product (Dal) per quintal obtained was highest in tur and gram which was 74 kg and 79 kg, respectively. The net returns per quintal after processing were found to be higher in tur followed by mung which was Rs and Rs , respectively. The cost benefit ratio for tur was 1:1.40, for mung 1:1.10, for udid 1:1.04 and for gram 1:1.12.The PKV Dal mill owners faced major problems like inadequate supply of raw material for processing, inadequate supply of electricity to run the unit and breakage of sieves while processing, etc. KEY WORDS : Economics, Processing, Fixed cost, Variable cost, Cost benefit ratio HOW TO CITE THIS PAPER : Wagh, H.J., Ganvir, B.N., Kadam, M.M. and Lamtule, J.A. (2014). Economic evaluation of PKV Dal mill. Internat. Res. J. Agric. Eco. & Stat., 5 (1) : INTRODUCTION The ongoing structural changes in the economy have resulted in the major shifts in the Indian agricultural scenario. The primacy of subsistence orientation is yielding place to commercialization, opening up vast opportunities for value addition, packaging and exports of agricultural products, with strikingly high levels of technology. The modernization of technology in Indian agriculture paved way to the growth of many agro based industries. Hence, processing of agricultural products has become of great importance. Processing creates Form Utility in the agricultural products which help in fetching high prices. Some of the agricultural products need processing so as to convert them in edible form viz., pulses, paddy, sugarcane and oilseed crops need processing to make them suitable for final consumption, which is of great importance for present situation. Processing and value addition of pulses has boosted agro- processing industry in the rural area, which can generate large employment opportunities. Experience has shown that in rural areas where agro-industries came up in a big way have set in motion the forces that change the socio-economic structure of the area. Therefore, development of agriculture, simultaneously development of industries at rural level that cater to the needs of the masses in a decentralized fashion. Produce from producing centre to consumption places goes through various channels. These include, farm producer to village trader or wholesaler or Dal miller or consumption agent. From these middlemen, produce moves to milling centres for processing and the processed Dal is channeled to retailers

2 H.J. WAGH, B.N. GANVIR, M.M. KADAM AND J.A. LAMTULE through wholesalers and finally to consumers. In this process, commodity gets value addition through storage and transportation cost. In India, split of pulses are prepared called as Dal or Dhal and are used as a food material. Commonly, it is prepared at Dal mills processing unit. Dal milling industry is originated as a house hold process and has been practiced not both as a cottage industry but also as a commercial milling operation. Last few decades have developed considerably and now about Dal mills are in India. The processing is generally done in two steps, loosening of husk by wet or dry method and dehusking and splitting using suitable machines. The beneficial effects of processing on the nutritive values of food pulses are envisaged in two areas: (a) Improved bio-availability of nutrients and (b) Partial or complete removal of anti-nutritional and toxic compounds. Milling of pulses means removal of husk and splitting the grains into two equal halves. In the existing economic structure of pulse Dal milling, it is estimated that the farmers share is only about 60 per cent which constitutes the production and hardly a margin of 5 to 10 per cent if the produce does not fetch good prices, his prices might to even lower than 40 per cent. The remaining share is by the processors, traders and middlemen of the trade. Thus, it could be described unfavourable to the farmers who put in more risk of production. Study of economic performance of pulse processing units like PKV Dal mill in terms of cost is thus very essential for accelerating the growth of agriculture processing industries. MATERIALS AND METHODS Akola and Amravati districts were purposively selected as majority of PKV Dal mill units which are concentrated in urban and rural area. It was found that the pulse processing units (PKV Dal mills) had installed processing capacity of 8-10 qt/day. In the present study, a sample of 10 Dal mill owners from Akola and 10 Dal mill owners from Amravati districts were studied purposively to accomplish the objectives of the present study on the basis of existing status of PKV Dal mills (Appendix 1). Four major pulses such as Tur (Arhar), Mung, Udid (Urd) and gram were selected, as these major pulses are processed mostly at PKV Dal mills. The primary data from selected PKV Dal mill owners were collected in the questionnaire by personal interview. The Dal mill owners of processing units were interviewed separately for the collection of information on various economic aspects related to processing. The data pertained to the year RESULTS AND DATA ANALYSIS It is observed from Table 1 that, the average capital investment in PKV Dal mill along with its accessories worked out to be Rs Average capital investment in PKV Dal mill (Rs. /unit) revealed that more than 61 per cent of capital investment was in PKV Dal mill along with its accessories, followed by land and building with drying platform which constituted per cent of total capital investment. Further, distributed average capital investment in furniture and fixture, and electrical installation and other charges accounted 3.71 per cent and 4.21 per cent, respectively. The total average capital investment for the PKV Dal mill was worked out to Rs / unit. As revealed from Table 2 that, the total average fixed cost per unit per year for PKV Dal mill was Rs It was observed that interest on fixed capital was accounted per cent followed by depreciation on PKV Dal mill along with its accessories which constituted per cent whereas taxes Appendix 1 : Details of selected PKV Dal mill owners in Akola and Amravati districts Akola district Amravati district Sr. No. Tahsil Village Tahsil Village 1. Akola Bhaurat (1) Naygaon (1) Borgavmanju (1) 2. Murtizapur Karanja (1) Gunjwada (1) Anjangaon-Surji Malkapur (1) Anjangaon-Surji (2) Daryapur Gaywadi (1) Yeoda (1) Ganeshpur (1) Daryapur (1) 3. Patur Saywani (1) Dhamangaon Rly. Dhamangaon Rly. (1) 4. Balapur Dadham (1) Chandur Bazar Karajgaon (1) 5. Akot Jitapur (Rupgad) (1) Morshi Adgaon (Yawali) (1) 6. Telhara Hiwarkhed (1) Barshitakli Mahan (1) - - Total 10 Total 10 Figures in parentheses indicates number of PKV Dal mill owners 99

3 ECONOMIC EVALUATION OF PKV Dal MILL and insurance formed major contribution which accounted per cent as they were not exempted from taxes. Depreciation on building constituted 9.01 per cent to total fixed cost. Depreciation on furniture and fixtures accounted 2.20 per cent to total average fixed cost. It is evident from Table 3 that, the average variable cost for tur processing worked out to Rs , for mung it worked out to Rs , followed by udid and gram which were worked out to Rs and Rs , respectively. The total variable cost for all the crops worked out to Rs per unit per year. The composition of variable cost revealed that the causal labour charges, energy charges, edible oil cost, interest on working 6 per cent formed the major share in total average variable cost in all crops i.e. tur, mung, udid and gram, followed by repair, maintenance and replacement of machinery and miscellaneous expenditures such as purchase of gunny bags. It is revealed from Table 4 that average total cost (i.e. total fixed cost + total variable cost) worked out to Rs per unit per year. The share of total fixed cost accounted for per cent, whereas total variable cost accounted to the extent of per cent to the total average cost per unit per year. It is observed from the Table 5 that, on an average 151 days per year, PKV Dal mill was running because of their storage facility, availability of credit facilities and major problems of raw material availability and inadequate supply of skilled labour and a common factor of irregular electricity supply resulted into shutdown of processing units and inadequate processing in the month of July to November. The total quantity of raw material processed from PKV Dal mill per unit per year Table 1 : Average capital investment in PKV Dal mill (Rs. /unit) Sr. No. Particulars Amount in (Rs.) 1. Investment in PKV Dal mill along with accessories (61.66) 2. Investment in land, building with drying platform (30.42) 3. Investment in furniture and fixtures 4850 (3.71) 4. Electrical installation and other charges 5510 (4.21) Total (Rs.) (100.00) Figures in parenthesis indicate the percentage to total investment Table 2 : Annual average fixed cost of PKV Dal mill (Per unit / year) Sr. No. Particulars Amount in (Rs.) 1. Depreciation on PKV Dal mill along with accessories 4039 (18.27) 2. Depreciation on building 1993 (9.01) 3. Depreciation on furniture and fixtures 485 (2.20) 4. Interest on fixed 10% per annum (59.28) 5. Taxes, insurance and license fees 2483 (11.24) Total fixed cost (100.00) Figures in parenthesis indicate the percentage to average fixed cost Table 3 : Annual average variable cost of different processed commodities from PKV Dal mill (Per unit per year) Sr. Amount in (Rs.) Particulars No. Tur Mung Udid Gram Total (Rs.) 1. Casual labour charges (28.69) 6344 (26.64) 4106 (25.16) (31.09) (28.57) 2. Repair, maintenance and replacement of machinery 1690 (3.03) 850 (3.58) 586 (3.60) 1230 (3.26) 4356 (3.26) 3. Energy charges (19.64) 4825 (20.27) 3085 (18.90) 6350 (16.81) (18.89) 4. Edible oil cost 4995 (8.92) 2130 (8.95) 1860 (11.40) 3315 (8.78) (9.18) 5. Miscellaneous such as purchase of gunny bags 1240 (2.22) 730 (3.07) 560 (3.44) 970 (2.56) 3500 (2.61) 6. Interest on working 6% (37.5) 8927 (37.49) 6118 (37.50) (37.5) (37.49) 7. Total variable cost (100) (100) (100) (100) (100) Figures in parenthesis indicate the percentage to annual average variable cost Table 4 : Average total cost per unit per year Sr. No. Particulars Amount in (Rs.) 1. Total fixed cost (14.17) 2. Total variable cost (85.83) 3. Total cost (100.00) Figures in parenthesis indicate the percentage to total cost (Rs. / per unit) 100

4 H.J. WAGH, B.N. GANVIR, M.M. KADAM AND J.A. LAMTULE was 820 quintals. Out of which tur raw material processed constituted 333 quintals, followed by mung (142 quintals), udid (124 quintals) and gram (221 quintals). The total finished products ( Dal), broken Dal, and byproduct (Churri) obtained from the processed raw material i.e. tur, mung, udid and gram were worked out to qt, qt, and qt, respectively. Among all these commodities, the percentage of finished product (Dal), broken Dal and byproduct constituted more in case of Tur, due to more raw material processing at PKV Dal mill. It is revealed from Table 6 that, the total cost incurred per quintal by Dal mill owners for tur, mung, udid and gram Table 5 : Average quantity of raw material processed and processed product obtained from PKV Dal mill (Qtl. / unit) Commodity processed Sr. No Particulars Tur Mung Udid Gram Total 1. Plant operated (days/yr.) Raw material processed (qt.) 333 (100) 142 (100) 124 (100) 221 (100) 820 (100) Products (a) Dal (finished product) (qt.) (73.55) (71.92) (71.31) (79.30) (74.48) (b) Broken Dal (qt.) (5.60) 5.03 (3.55) 5.12 (4.12) (5.41) (4.97) (c) By-product (churri) (qt.) (20.85) (24.53) (24.57) (15.29) (20.55) 3. Percentage of finished product to raw material Figures in parenthesis indicate the percentage to annual quantity of raw material processed Table 6 : Cost of different processed commodities from PKV Dal mill Sr. No. Particulars Tur Mung Udid Gram 1. Total fixed cost Total variable cost Total cost (1+2) Quantity processed / day (qt.) Average no. of working days in a year Quantity of processed product per unit (qt.) Fixed cost per quintal Variable cost per quintal Total processing cost / qt Cost of raw material / qt Total cost incurred / qt. by Dal mill owner (9+10) Table 7 : Economics of processing of different commodities from PKV Dal mill Sr. No. Particulars Commodity processed (Rs/qt.) Tur Mung Udid Gram (A) Production (kg) (i) Main product (Dal) (ii) Broken Dal (iii) By product (Churri) (B) Value of product (Rs/Kg) (i) Main product Rs.70/ (ii) Broken Rs. 48/ (iii) By-product Rs.15/ (C) Gross returns (Rs.) (D) Cost incurred (Rs.) (i) Cost of raw material (ii) Total processing cost (iii) Total cost incurred (i+ii) (E) Net returns (C-D) (F) Cost benefit ratio 1:1.40 1:1.10 1:1.04 1:

5 ECONOMIC EVALUATION OF PKV Dal MILL Table 8 : Problems faced by Dal mill owners Sr. No. Problems Frequency (n=20) 1. Inadequate supply of raw material for processing 18 (90) 2. Inadequate skilled labour supply 16 (80) 3. Inadequate supply of electricity to run the unit 20 (100) 4. Inadequate availability of funds for purchasing of raw material 20 (100) 5. Lack of technical knowledge about operating of machinery 16 (80) 6. Breakage of sieves while processing 12 (60) Figures in parenthesis indicate the percentage to total processing worked out to Rs , , , and per quintal, respectively. The fixed cost per quintal obtained was more in case of Udid i.e. Rs compared to tur, mung and gram. Whereas, variable cost per quintal was more in gram i.e. Rs Processing cost per quintal is calculated by adding fixed cost per quintal and variable cost per quintal together. The cost of raw material is taken at the market rates at the time to which data pertain. It is evident from Table 7 that, main product of Dal obtained was more in gram i.e. 79 kg, followed by tur, udid and mung, respectively. The gross return per quintal obtained from various commodities i.e. tur, mung, udid and gram was more in mung i.e. Rs The net return received was calculated by subtracting total cost incurred by Dal mill owner from gross returns, it was obtained more in tur i.e. Rs compared to mung, udid and gram. The cost-benefit ratio worked out to 1: 1.40, 1: 1.10, 1: 1.04 and 1: 1.12 for tur, mung, udid and gram, respectively. It is a ratio of total returns received from processing of commodities to its total cost including cost of raw material. It is revealed from Table 8, that the inadequate supply of raw material for processing was the major problem faced by per cent PKV Dal mill owners; this was due to seasonal variation, location specific, and price variation of raw material. Inadequate skilled labour supply was another problem faced by per cent PKV Dal mill owners. Irregular electricity supply was another problem faced by all PKV Dal mill owners due to single phase electricity. This problem has resulted into shutdown of processing units for few hours in a day regularly. Inadequate availability of funds for purchasing of raw material was the problem faced by all selected PKV Dal mill owners. Another major problem was lack of technical knowledge about operating of machinery and it was expressed by per cent PKV Dal mill owners. Other than this problem breakage of sieves while processing was important problem faced by per cent PKV Dal mill owners, this was due to lack of technical knowledge about operating of machinery. Desale et al. (2003), Gauraha et al. (2003). Sharma and Athwale (2003) and Gupta and Kale (2010) have also supplied some information on economic analysis and processing of pulses. Conclusion : The actual processing of pulses through PKV Dal mill was low. The major reasons for that were, inadequate supply of skilled labour, irregular electricity supply, insufficient quantity of raw material procured, inadequate supply of fund for processing. The employment will be generation from PKV Dal mill leads to the conclusion that, on an average 151 to 240 man days / annum employment will be generated, if there is continuous supply of raw material, adequate supply of skilled labour and regular supply of electricity. There is scope for starting new PKV Dal mill units in Akola and Amravati districts, if the present state of production of pulses is considered since they can get the raw material at village level and market the processed product. Authors affiliations: H.J. WAGH, M.M. KADAM AND J.A. LAMTULE Department of Agricultural Economics and Statistics, Dr. Punjabrao Deshmukh Krishi Vidyapeeth, AKOLA (M.S.) INDIA harshwagh25@yahoo.com, maheshkadam600@yahoo.com, jaysingh.lamtule@gmail.com LITERATURE CITED Ahmed, Ateeq (2010). Value chain analysis for coffee in Kodagu district of Karnataka. The Mysore J. Agric. Sci., 44(2) : 441. Awasthi, P.K., Rathi, Deepak and Gupta, J.K. (2003). Economic analysis of processing of Lentil and constraints to future development of Agro processing units in central Madhya Pradesh. Indian J. Agric. Econ., 58(3) : Desale, P.G., Dorge, J.T., Birari, K.S. and Thakar, V.P. (2003). An economic analysis of small scale pulses processing sectors. Indian J. Agric. Econ., 58(3) : 627. Gauraha, A.K., Srivastava, R.S.L. and Mathur, P. (2003). An economic analysis of pulses in Durg district of Chhattisgarh. Indian J. Agric. Econ., 58(3): Gulve, Y.J. (2007). Economics of value addition in pulses in Nagpur district. M.Sc. (Ag.) Thesis, Dr. Panjabrao Deshmukh Krishi Vidyapeeth, Akola, Gupta, S.V. and Kale, P.B. (2010). Pulse processing industries as opportunity in rural entrepreneurship and employment. Financing Agric., 42(9):

6 H.J. WAGH, B.N. GANVIR, M.M. KADAM AND J.A. LAMTULE Malthane, G.B., Thorve, P.V., Nagpure, S.C. and Thakare, P.D. (2005). Economics of Dr. PDKV, Akola Dal Mill- AGRESCO REPORT,Dr. PDKV, Akola t h Year of Excellence Sharma, K.G. and Athwale, M.C. (2003). Economics of processing of gram and emerging problems: A case study. Indian. J. Agric. Econo., 58(3) :

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