COST-BENEFIT ANALYSIS IN PADDY CULTIVATION

Transcription

1 CHAPTER - IV COST-BENEFIT ANALYSIS IN PADDY CULTIVATION 4.1 PADDY CULTIVATION PRACTICES IN THENI DISTRICT 4.2 RESPONDENTS REASONS FOR CULTIVATION 4.3 COST CONCEPTS 4.4 MEASUREMENT OF OUTPUTS IN PADDY CULTIVATION: 4.5 YIELD GAP 4.6 YIELD INCREASING METHODS 4.7 REVENUE 4.8 COST-BENEFIT ANALYSIS FOR SAMPLE CULTIVATORS 4.9 CONSTRAINTS IN PADDY CULTIVATION 4.10 SUMMARY

2 In production theory resources used for the production of a product are known as factors of production or inputs. The term output refers to the commodity produced by various inputs. Production is the process of converting the different factors or inputs into a required form of output. It is the process of manufacturing, making, creating or growing something. In this way any activity that transforms inputs into output is said to be production. The inputs include land, labour, capital, organization/entrepreneurship, technology and energy. Production is the outcome of the co-operative effort on the part of various factors involved in the process of production. Kohls and Damcy define production as the creation of utility in the process of making useful goods and services. 1 According to this definition production is the creation of utility not only for goods but also for services. In agriculture, a farm as a production unit combines capital in the form of seeds, fertilizer, pesticides, and also as machinery and irrigation facilities on a fixed area of land with the help of labour, to produce the desired crop. A farmer, as a producer, organises the different factors of production on his farm, in a manner liked by him. 2 Thus, in agriculture the process of converting different factors or inputs like labour, seeds, fertilizers and irrigation facilities by farmers to produce the desired produce is carried out on the production unit called land. 1 2 R.L. Kohls and W.D. Damcy, Marketing of Agricultural Products, Mc Millan Company, New York, 1972, p.72. S.V. Benjamin Hariharan and M. Karunakaran, ECONOMICS of AGRICULTURE, S. Chand & Company Ltd., New Delhi, 1989, p.85.

3 PADDY CULTIVATION PRACTICES IN THENI DISTRICT The practices followed in the cultivation of paddy and the seasons of cultivation may vary across different agro-climatic regions depending upon the sowing and harvesting times as well as the duration of the crop. The paddy crop raised in the study area, Cumbum Valley of Theni district, is of lowland type. An idea of the practices followed in the cultivation of irrigated rice in the area will help to understand the different activities and to estimate the cost associated with them. Since the study is confined to paddy cultivation in the Cumbum Valley, the practices followed therein are outlined. In the district, the paddy lands are cultivated either by irrigated water or by ground water. The first crop called Kodai/Kuruvai is raised between June and October and the second crop called Kalam/Thaladi is raised between October and March. For the first crop, the land is ploughed in the month of March/April (after harvesting the paddy crop in the previous agricultural season) and crops of small duration like sun hemp, green gram are grown in the fields for green manures or for making an income. With the release of water in the canals during the first week of June nurseries are prepared for raising seedlings. Seeds soaked in water the previous night and mixed with microbial nitrogen like azospirllum are manually broadcast in nurseries. For raising seedlings sufficient to transplant one acre of land 40 to 45 Kgs of seeds are applied. Two medium duration varieties are raised in the first crop. Nurseries are carefully tended with the application of fertilizers, spraying of pesticides and controlling weeds. When seedlings complete 30 days from the date

4 132 of sowing the lands to be transplanted are flooded, the crops grown for green manures are chopped by wet ploughing and farm yard manures are evenly spread in the fields. After that fields are worked into a soft mud so as to make the surface smooth with a slight slope. Next, the field bunds are trimmed and two to three seedlings are transplanted per hill. The transplanting is normally done by women workers. The optimum water level of 3 to 5 cm. is maintained in the fields. For controlling weeds weedicide (weed killer) is applied within 5 days from transplanting. Weedicide weighing 20 grams (for one acre of land) is dissolved in water and the dissolved water is mixed with sand and broadcast. After two weeks from transplantation dead plants are removed and fresh seedlings are transplanted in the place of the dead plants. For one acre of land about kgs. of fertilizers, mostly urea, mixed with 25 kgs. of neem cakes are applied between 25 and 30 days from transplanting, and weeds, if any, are manually removed. Spraying pesticides and insecticides is done according to requirements. Water in the fields is drained off at least 10 days before harvesting. The crops are manually harvested. For raising the second crop, a small portion of the field is harvested 15 to 20 days before the main harvest. This portion is used as the nursery bed for raising seedlings for the second crop. During this season cultivators do not raise any crop in the fields for green manures. Three medium duration varieties namely ADT 39, 509 and Senthuram are cultivated. The cultivation practices and the sequence thereof as followed in the first crop are followed in the second crop also.

5 133 Cultivation is undertaken mainly for the end produce. Therefore timely harvesting is the most essential operation in crop production for getting a good yield. The time of paddy harvesting is determined by the percentage of ripe grains in the panicles. Usually harvesting is done after 130 days from the sowing in nurseries. In the study area the manual harvesting system is followed. Manual harvesting is done with the help of sickle. The plants are cut nearly 10 cm. above the ground. After cutting, the paddy stalks are tied in bundles with straw rope and transported to the thrashing yard either by head-load or by tractors/trucks. Thrashing is the detachment of paddy kernel from the panicles of the rice plants. The rice grains are separated through rubbing action by trampling by men, animals or tractors. Lastly, thrashed grains are separated from straw, the husks and other unwanted particles are removed by winnowing, and the paddy obtained after this stage is sold or stocked. Using a combine harvester to reap rice crop is relatively easier and economical way of harvesting. The activities of cutting, detaching the kernels and removing the unwanted particles are all done by the combine harvester machine. 4.2 RESPONDENTS REASONS FOR CULTIVATION The lands available with the sample cultivators may be used to cultivate any crop and the cultivation of paddy is one of the options they have, which may be done due to various reasons. The respondents were asked to rank the select six factors/reasons on the order of priority and the mean scores, calculated by Garrett s Ranking Technique, of the ranks assigned by them are presented in the following table.

6 134 Table 4.1 Reasons for Cultivating Paddy Crop S. No. Reasons for Choosing Paddy Cultivation All Small Medium Large Mean Ranks Mean Ranks Mean Ranks Mean Ranks Scores Scores Scores Scores 1. Expertise in paddy cultivation 2. The product has ready market VI VI VI IV V V V VI 3. It gives more profit IV IV IV V 4. The land is more suitable for paddy I I I I 5. Family consumption II II II III 6. Tradition III III III II Source: Primary Data By analysing the mean scores given in Table 4.1 it can be decided that the fourth reason The Land is More Suitable for Paddy cultivation was regarded as the first cause for undertaking paddy cultivation by all respondents and also by each size group of sample respondents. Similarly all respondents and the size groups except the large farmers regarded Family Consumption the second cause for cultivation of this cereal. But Tradition was the second reason for the large farmers, and it was ranked third by the other farmers. Ranks four, five and six were given by all farmers and by each size group but by large farmers to the third, second and first reasons respectively. The large farmers regarded the produce s ready marketability as the last reason for cultivation.

7 COST CONCEPTS Cost of Production in Paddy Cultivation Costs of production are assumed to be the money expenditure incurred for the resources used to produce its product output. It is the aggregate of prices paid for the factors of production used in producing that commodity or produce. But according to some economists, there is a distinction between cost of production and the expenses. In their view all efforts and sacrifices made by the producer is the real costs of production, while the money paid to other factors of production for these efforts is termed as expenses on production. 3 The data on the cost of production of paddy for different farm sizes across areas and across seasons are collected from the 250 sample respondents from three taluks. The number of sample respondents, area cultivated (in acres) and the average size of operational holdings are presented in the following table. Table 4.2 Sample Respondents Average size of Operational Land Holdings Size Number Area Average Operational Holdings (acre) Small Medium Large Total Source: Computed from Primary Data 3 H.S. Agarwal, op.cit., p.392.

8 136 Cost of Production The Cost of production of paddy is the total expenses incurred in obtaining the produce, paddy. These costs include wages to labourers, cost of seeds, expenditures on fertilizers and pesticides, rental value of lands and farm harvesting expenses. Generally, cost of production includes both variable costs and fixed costs. Nirmala 4 classified total cost into a) Variable or Operational Cost, and b) Fixed Cost. Variable cost varies with the changes in the quantity of output produced and it is the driving factor which determines how much and what is to be produced. Fixed cost remains constant over time and does not vary with the changes in the levels of output. Fixed cost helps to decide on the technological practice to be adopted and the quantity to be produced. It exists even in the absence of cultivation Variable Cost Variable cost varies across farmers depending upon the levels of inputs used. It includes the cost of inputs like seeds, manures, fertilisers, pesticides, labour charges including the imputed value of family labour, interest on working capital etc Fixed Cost Fixed cost otherwise known as period cost includes rental values of lands and interest on fixed assets. 4 V. Nirmala, op.cit.

9 137 The cost concepts which are in frequent use in farm management are Cost A, Cost B and Cost C. Cost A includes the following items: i) Value of hired human labour (permanent and casual). ii) Value of owned or hired bullock labour. iii) Value of owned or hired machinery charges. iv) Value of fertilisers. v) Value of manures (produced on the farm and purchased). vi) Value of seed (both farm produced and purchased). vii) Value of pesticide, insecticides and fungicides. viii) Irrigation charges (both of the owned and hired tubewells, pumping sets, etc). ix) Land revenue, cesses and other taxes. x) Depreciation on farm implements (both bullock drawn and worked with human labour). xi) Depreciation on farm buildings, farm machinery and irrigation structures. xii) Interest on working capital. xiii) Miscellaneous expenses like wages of artisans, cost of ropes and repairs to small farm implements. Cost B : Cost A + (i) Imputed rental value of owned or leased in land + (ii) Value of paddy yield given to landlord + (iii) Imputed interest on owned fixed capital

10 138 The values of the components in Cost B are computed i - when the cultivated land is owned or leased in by the cultivator. The rental value is = Quantity of imputed rent x Ruling price ii - when the cultivated land is tenancy cultivation. The rent in this type of cultivation is the value of paddy given to landlord. Hence, The value of the rent = Quantity of land lord share x Ruling price. iii - when fixed asset owned by the cultivator is used for paddy cultivation. Cost C : Cost B + imputed value of family labour. The total cost (Cost C) has been grouped into Operating Cost and Fixed Cost as under. Operating Cost: Cost A Fixed Cost: Cost C Operating cost Measurements of Inputs Used in Paddy Cultivation The cost incurred in the production is computed by applying the formula Sum of Cost Cost = Area under Paddy cultivation i) Human Labour Human labour cost includes days labour wages and wages paid for spraying or application of inputs like seeds, fertilisers, manures, etc. Days labour wage is calculated by multiplying the number of days worked with the prevailing wage rate which is Rs.100 for male and Rs. 50 for female workers. This cost is calculated separately for male and female labourers and added to get the total labour cost.

11 139 ii) Rental Value In the case of ownership or leased in cultivation the rental value per season is calculated by multiplying the imputed quantity or volume of rent with the ruling price prevailing in the season. For tenancy cultivation the rent is paid in kind i.e. as a fixed share of paddy. This share varies from 15 to 20 bags of paddy each weighing 60 Kgs. The rental value is calculated by multiplying the number of bags paid to the landlord according to the ruling prices. iii) Seeds, manures, fertilisers, pesticides and weedicides Actual amount spent on the purchase of these inputs is taken as the cost. In the case of seeds and manures, if they are farm-produced and used for cultivation, the prevailing rate of these farm produced inputs is taken as the cost. iv) Irrigation Charges The water required for irrigating the farm is supplied from canals, river or tanks. Therefore, irrigation charge includes only the value of produce paid to workers to water and guard the fields. Since this charge is also paid in kind the market value of paddy given is considered as the cost. v) Permanent Hired Labour Cost This is the labour cost paid for the permanent hired labour for supervising. These types of labourers are paid either a fixed number of bags of paddy after harvest or money on a monthly basis. The actual amount of salary paid or the market value of the paddy given to them in each crop is taken as the permanent labour cost.

12 140 vi) Transportation Cost from farmyard to home This expense is incurred by cultivators who store their produce to sell it after the harvest season is over. The amount spent on this expenditure is included in the carrying/storage cost. vii) Carrying and Storage Cost Carrying cost includes transportation cost from farmyard to home, loading and unloading the produce as well as interest for the storage period calculated at the rate paid on short term deposits by nationalised banks which is 6 % per annum on the value of paddy stored. The value of that paddy is computed at the rate prevailed during the time of harvest. viii) Maintenance Cost The total amount of expenditure on the maintenance of pumpsets, oil engines, tractor, warehouse and live stock is worked out for a one-year period and is equally divided and apportioned for each crop. xi) Land Revenue Tax amount paid annually on the land is land revenue. This annual charge is equally apportioned for each crop. x) Depreciations Agarwal et al., 5 computed depreciation at the rate of 5 % on farm assets like building and at 15 percent on farm equipments per annum in determining the total cost in the production of poultry. These rates of depreciation were adopted in calculating the total cost in the present study. 5 C.K. Agarwal, S.C. Gupta, R.A. Singh and R.N. Pal, Components of Expenditure and Total Cost involved in Producing Duck and Chicken for Meat, The Indian Veterinary Journal, 58(3), 1981, pp

13 141 xi) Interest on working capital The amount spent on purchase of inputs, labour cost and tractor hiring are considered for calculating the interest on the working capital. For each season the interest on this amount is calculated for 6 months at 8 % per annum. The cost structure for different types of farmers is presented in Tables 4.3 and 4.4 for both the seasons. Table 4.3 Cost of Production for Different Types of in Season I Expenses Small % Medium % Large (Rs./Per acre) % All Operating Cost (Cost A) Seeds Manures Fertilisers Pesticides Human labour Machine Labour Hired labour (Permanent) Watering Interest on Working Capital Land revenue Depreciation on Farm equipments Miscellaneous Total of Cost A Fixed Cost Rental value of land Interest on Fixed Assets Total Fixed Cost Cost B (Cost A + Fixed Cost) Imputed Value of Family Labour Total Cost (C) (Cost B+ Imputed Value of Family labour) Yield (kgs) Cost of Production (per Kg.) Source: Primary Data %

14 142 FIGURE 4.1 Cost of Production of Paddy in Season I (All ) Seeds Fertilisers Human labour Hired labour (Permanent) Interest on Working Capital Depreciation on Farm equipments Rental value of land Imputed Value of Family Labour Manures Pesticides Machine Labour Watering Land revenue Miscellaneous Interest on Fixed Assets

15 143 Table 4.3 shows the cost structure for different size group of farmers in Season I. An analysis of the above table indicates that Cost A (Operating Cost) cost, total fixed cost and total cost of production (Cost C) decreased as the farm size increases. For the small farmers the Operating cost was Rs ; for the medium farmers it was Rs and for the large farmers Rs Each of the components included in the Operating Cost decreased as the farm size increased, except fertilizers cost, wages paid to permanent hired workers and depreciation on farm equipment. Among the components of operating cost, the amount spent on Human Labour was the highest followed by fertilizers. They were Rs , and representing 10.92, and per cent of the total costs for the small, medium and large farmers respectively. The Rental Value of lands declined from Rs for small farmers to for medium farmers and to Rs for large farmers. But the Rental Value as a percentage of the total cost is per cent for small, per cent for medium, and per cent for large farmers. While the Imputed value of Family labour decreased, the interest on fixed assets increased as the farm size increases. The total cost for overall farmers was Rs per acre and the average yield for overall farmers in Season I was 2570 kgs. per acre. The cost incurred by the small farmers for producing one kg. of paddy was Rs. 4.69, by medium farmers Rs. 4.43, by large farmers Rs per kg. and by overall farmers Rs Hence it may be concluded that paddy yield per acre increased as the farm size increased but the total cost incurred for cultivating one acre of land declined.

16 144 Table 4.4 Cost of Production for Different Types of in Season II (Rs./ Per acre) Expenses Small % Medium % Large % All % Operating Cost (Cost A) Seeds Manures Fertilisers Pesticides Human labour Machine Labour Hired labour Watering Interest on Working Capital Land revenue Depreciation on Farm equipments Miscellaneous Total of Cost A Fixed Cost Rental value of land Interest on Fixed Assets Total Fixed Cost Cost B(Cost A + Fixed Cost) Imputed Value of Family Labour Total Cost (C) (Cost B+ Imputed Value of Family labour) Yield(kgs) Cost of Production (per Kg.) Source: Primary Data

17 145 FIGURE 4.2 Cost of Production of Paddy in Season II (All ) Seeds Fertilisers Human labour Hired labour (Permanent) Interest on Working Capital Depreciation on Farm equipments Rental value of land Imputed Value of Family Labour Manures Pesticides Machine Labour Watering Land revenue Miscellaneous Interest on Fixed Assets

18 146 Table 4.4 shows the cost structure for the three types of farmers and also for all that farmers combined in Season II. As in the first season, in the second season also the Operating, Fixed and Total Costs decreased across the increase in farm sizes. However, the total cost of production per acre for each size group increased from that in the first season. The total costs of production per acre for small, medium and large farmers in the first season were Rs , Rs and Rs respectively and they increased to Rs , Rs and Rs The percentage of Operating Cost to Total cost decreased from per cent in first the season to per cent in the second season for small farmers. But for the medium and large farmers the percentages have respectively increased from 42.35and in the first season to and in second the season. The increase in the cost of production may be because of changes in climatic conditions demanding the application of more fertilizers and pesticides. The Rental Values, computed at the prevailing price of paddy, was also high except for large farmers in the second season. The Rental Value constitutes 50.17, and per cent of total costs for small, medium and large farmers respectively. The yield per acre increased along with the increase in the area under paddy cultivation. But compared to the first season the yield per acre was lower in the second season for each size group of farmers resulting in an increase in the cost of production per kg. of paddy. The lower yield in the second season may be due to the commencement of farming operations immediately after the first crop is harvested. The cost of production per kg. of paddy for small,

19 147 medium and large farmers were Rs.5.24, 5.00 and 4.72 respectively. For all farmers combined the cost of production of per kg. paddy was Rs.4.72 in the second season, an increase of Rs per kg. over the Rs in first season. Thus it is observed that the larger the farm size the higher the yield per acre and lower cost of production. 4.4 MEASUREMENT OF OUTPUTS IN PADDY CULTIVATION: The outputs obtained in paddy cultivation are measured as given under. Paddy Yield Paddy yield is the factor used to measure the performance of paddy cultivation operations. It refers to the volume of output obtained per unit of land used for that cultivation. Harvesting wage paid in kind (fixed volume of harvested paddy) is not included in the total volume of paddy output. The gross output or returns have been defined as the sum of gross value of output, main plus by products. Gross output per hectare is a crude general index of farm level efficiency in resource use. It provides a rough indication of the profitability of the farm business. 6 In the present study Paddy yield is measured by applying the following formula. Total volume of paddy output Paddy yield = Area under Paddy cultivation 6 Sikander Kumar and Sandeep Kumar, Resource Use Efficiency and Returns From Selected Foodgrain Crops of Himachal Pradesh: A Study of Low Hill Zone, Agricultural Situation in India, 2004, Vol.LXI, No.7, pp

20 YIELD GAP Yield Gap is said to be the difference between the maximum yield and the average yield obtained. J.S. Sidhu and R.S. Sidhu 7 stated that the issue of yield gaps can be conceptualized from various angles. First, the yield gap may be thought of between the potential yield as determined by the genetic production potential and the yield obtained at the research level under controlled conditions. This theoretical yield gap may be termed as the research level yield gap. Second, the gap between the research level yield and the yield obtained in national demonstrations and the fields of the best farmers can be termed as the field level yield gap. Third, the difference between the yield of national demonstrations and that of the average farmers can be called the farm level yield gap. Lastly, the difference between the long run economic yield potential which corresponds to the minimum average cost and the actual yield obtained at the farm level can be termed as the economic yield gap. Yield Gap is defined as the difference between the potential yield and the actual yield. It can be decomposed into two parts, viz., yield gap I and yield gap II. Yield gap I is the difference between an experiment station s average yield and an on-farm experiment s average yield. This yield gap arises from differences in the environment that can not be managed in the farmer s field. Yield gap II is the difference between the actual farm yield and the yield attained in on-farm 7 J.S. Sidhu and R.S. Sidhu, Growth and Area Response of Commercial Crops in Punjab: Some Policy Issues, Indian Journal of Agricultural Economics, 1988, Vol.43, No.3, pp

21 149 experiments. This gap reflects the effects of various biotic, abiotic and socioeconomic constraints. 8 The respondents mean, maximum and minimum yields and the range of (Difference between maximum and minimum) yield and the yield gap for different size groups of farmers are given in the following table. Table 4.5 Mean, maximum and minimum Paddy yields for Sample Respondents (Kgs./ Acre) S. Season I Season II Particulars No. Small Medium Large Overall Small Medium Large Overall 1. Mean Yield Maximum Yield 3. Minimum Yield 4. Range (2-3) 5. Yield Gap (2-1) Source: Primary Data The mean, maximum and minimum yields of paddy per acre by sample respondents in the study period are given in the above table. The average yield per acre was the highest for large farmers in both seasons. Per acre maximum yield in both the seasons was made by the large farmers. It may be noted that per acre minimum yield in both the seasons was also made by this group of farmers. It was 2010 kgs. in Season I and 1900 kgs. in Season II. Of the range between per acre maximum yield and the minimum yield was the highest for the large farmers in 8 B.C. Roy and K.K. Datta, op.cit., p.675.

22 150 both the seasons. But the Yield Gap (Maximum Yield Average Yield) was the highest for the medium farmers in both the Seasons. It was 517 Kgs. in Season I and 555 Kgs. in Season II. The lowest Yield Gap was for the small farmers (428 kgs.) in Season I and the large farmers (400 kgs.) in Season II. It may be understood that though the large farmers per acre mean yield was the highest in both seasons, this group has reported the maximum and minimum per acre yield. 4.6 YIELD INCREASING METHODS The reason for cultivation is to get more yields and thereby more income. To increase farm yield farmers may adopt improved techniques of cultivation, apply more manures, fertilisers and pesticides, cultivate hybrid varieties of paddy or optimally utilise the resources or inputs. The methods followed by the sample respondents for increasing paddy yield and the mean scores of ranks calculated by Garrett s Ranking Method are furnished in the following table. S. No. Yield increasing methods 1. Employing New techniques 2. Attempting hybrid varieties 3. Applying More Manures 4. Applying more fertilizers 5. Adopting pest and diseases control methods Source: Primary Data Table 4.6 Yield Increasing Methods (Ranks) All Small Medium Large Mean Scores Ranks Mean Scores Ranks Mean Scores Ranks Scores Ranks V V IV V III II III III IV IV V IV I I II I II III I II

23 151 Of the methods followed for increasing yield All combined, Small and Large applied more fertilisers, whereas, pest and disease control methods were preferred first by the Medium. Employing New Techniques in cultivation was given the fifth place by all size groups except by the Medium. Like the first method the second method Attempting Hybrid Varieties was not preferred as the first reason by any size group. The third method Applying More Manures was ranked fourth by all but by the Medium. The application of more fertilizers for increasing yield was considered as the foremost method by all groups of farmers but by the medium farmers. 4.7 REVENUE The cultivator has to play the dual role of producer and seller. He performs all activities to get the maximum yield. Once the produce is ready he selects a purchaser to sell it. The amount that a cultivator gets from the sale of his produce is Revenue and it is calculated by multiplying the total quantity sold by the price at which the produce is sold. Various types of returns as given by the ICAR 9 are given below. i) Gross Income / Return It is a measure of the size as well as volume of business. It is derived by adding the gross sales value, the value of paddy retained for home consumption and for seed and sale of by product (straw). 9 HANDBOOK OF AGRICULTURE, Indian Council of Agricultural Research, New Delhi, 2005.

24 152 ii) Cash Income This relates to cash receipts from farm sales and from custom hiring out of the farm resources. iii) Net Operating Income Gross Income (operating expenses + Depreciation on working assets). iv) Net Farm Income Net Operating Income (Fixed expenses + Depreciation on Fixed assets). v) Net Family Income Net Farm Income + off farm income. Return or Gross Income Total income earned by a cultivator is calculated by adding the sales value of the by product (straw) with the sales value of main product (paddy). If paddy is stored for home consumption and for seed its value is calculated at the prevailing price and included in the total income. In the study the value of paddy retained by farmers was calculated at Rs.5.20 per Kg. in the first season and at Rs in the second season. These prices were the average selling prices during the period of harvest in the respective seasons as reported by market intermediaries. Net Return/Yield Net Profit or Net Return is the gross farm income minus the total farm expenditures. Net Return is the economic incentive to the farmers and is an important motivating factor to the farmers to increase the paddy yield.

25 153 The types of incomes for respondent cultivators are given in the following table. Table 4.7 Incomes of Respondent Cultivators (Rs./Acre) Seasons Season I Season II Particulars Small Medium Large Overall Small Medium Large Overall Income 1.a) Income from sale of paddy 1.b) Value of Paddy Retained 1.c) Income from Sale of straw 1. Gross Income Cash Income Net Operating Income 4. Net Farm Income 5. Net Family Income # Net Profit * Source: Primary Data. # Net Income = Gross Income Gross Cost (excluding imputed value of family labour). * Net Profit = Gross income Gross Cost (including imputed value of family labour)

26 154 FIGURE 4.3 Income, Cost of Production and Profits for Difference Sizes of in Season I Rupees Small Medium Large All Gross Income Cost of Production Profit

27 155 FIGURE 4.4 Income, Cost of Production and Profits for Difference Sizes of in Season II Rupees Small Medium Large All Gross Income Cost of Production Profit

28 156 Table 4.7 shows the incomes for different size groups of farmers. It may be observed that in both seasons the per acre income from the sale of the marketed surplus of paddy, the income from the sale of by product (straw) and the total income increased as the area under cultivation increased, whereas the value of paddy retained per acre decreased. The cash income (sales value of paddy + sales value of straw) for small farmers was Rs , for medium farmers Rs , for large farmers Rs and for all farmers combined Rs in the first season and these values were at Rs , Rs , Rs and Rs in the second season. The value of paddy retained per acre of land was Rs for small, Rs for medium, Rs for large and Rs for overall farmers in the first season. But the value of paddy retained by small farmers in the second season increased by Rs , that for the medium farmers by Rs.88.40, that for the large farmers by Rs and that for overall farmers by Rs The Net Operating Income (Gross Income minus Operating Cost including depreciation on farm equipment) and the Net Farm Income (Net Operating Income minus Fixed Cost) also increased along with the increase in the area under paddy cultivation. The Net Family Income (excluding the Imputed Value of family labour in total cost) earned by small farmers by cultivating one acre of land in the first season was Rs But it declined to Rs in the second season. A similar tendency was noticed for other size groups and for all farmers combined. The Net Family Income for the medium farmers was Rs , for large farmers Rs and for all farmers combined Rs in the first season and it declined to Rs , Rs and Rs for the size groups

29 157 respectively in the second season. The Net Profit earned (after including the value of family labour in total cost) by cultivating one acre of paddy by the small farmers was Rs , by the medium farmers Rs , by the large farmers Rs and by overall farmers Rs But these values declined by Rs for small, by Rs for medium, by Rs for large and by Rs for overall farmers in the second season. To sum up it may be said that net profit increased as the area under paddy cultivation increased. The reasons for the increase in the net profits may be explored by observing the mean yield, marketed surplus, cost of production and selling prices presented in the following table. Table 4.8 Average Yield, Cost of Production, Marketed Surplus and Selling Prices of Respondent Cultivators Particulars Season I Season II Small Medium Large Overall Small Medium Large Overall Mean Yield Marketed Surplus * 1939 (79.86) 2211 (89.30) 2499 (93.77) 2330 (90.66) 1795 (78.04) 2068 (88.38) 2329 (93.01) 2173 (89.72) Cost of Production (Rs./Kg.) Value of Paddy Retained (Rs./Kg.) Average Selling Price of Marketed Surplus (Rs./Kg) Source: Primary Data. * Figures in parenthesis indicate percentage of Marketed Surplus to Yield.

30 158 In both seasons the average yield for the medium and large farmers increased from that for the small farmers. In Season I the per acre mean yield for the medium farmers increased by 1.98 per cent from small farmers 2428 kgs. and per acre yield increase for large farmers was by 9.76 per cent more than the small farmers and by 7.63 per cent more than the medium farmers. In Season II the increase in per acre yield for medium farmers was by 1.74 per cent more than small farmers, and that for large farmers by 8.87 per cent more than small farmers and by 7.00 per cent more than medium farmers yields. The cost of producing one kg. of paddy in Season I by small, medium and large farmers was Rs.4.69, Rs.4.43 and Rs respectively, and that in Season II was Rs.5.24, Rs.5.00 and Rs The average selling prices also increased as the farm size increased. Per kilograms average selling prices of marketed surplus for small, medium and large farmers were Rs.5.42, Rs.5.51 and Rs.5.84 in Season I and that were Rs.5.74, Rs.5.90 and Rs.6.28 respectively in Season II. The following reasons may be pointed out for increase in profits. As the area under paddy cultivation increased i) The mean yield per acre increased ii) The mean value of paddy retained per acre for home and seeds declined. iii) The percentage of marketed surplus per acre to per acre mean yield increased. iv) Per acre average income from sale of straw increased.

31 159 v) The average cost of producing per kilogram of paddy declined. vi) The per kilograms average selling price of marketed surplus increased. 4.8 COST-BENEFIT ANALYSIS FOR SAMPLE CULTIVATORS The relationship between benefits and costs or income and expenditure can be explained with the help of ratios. The benefits to cost in paddy cultivation for sample farmers are examined by the application of the following ratios. i) Operational Cost Ratio Variable Cost Operationa l Cost Ratio = Gross Income ii) Fixed Cost Ratio Fixed Cost Fixed Cost Ratio = Gross Income iii) Gross Cost Ratio Gross Cost Gross Cost Ratio = Gross Income iv) Input Output Ratio Gross Income Input Output Ratio = Gross Cost v) Benefit-Cost Ratio (BCR) Nurunnaher et al., stated that the Benefit-Cost Ratio is the ratio of the present worth of the gross benefit to the present worth of the gross cost. It refers to

32 160 the return per monetary unit of cash cost. This ratio is a common technique used to evaluate the profitability of farming in relation to farm management. 10 Net Profit Cost Benefit Ratio = Gross Cost Table 4.9 Cost- Benefit Ratios for Sample Cultivators (in %) Season I Season II Ratios Small Medium Large Overall Small Medium Large Overall Operational cost Ratio Fixed Cost Ratio Gross Cost Ratio Input output Ratio Benefit- Cost Ratio Source: Primary Data. Computed from Tables 4.3, 4.4 and 4.7. The Operational Cost, Fixed Cost and Gross Cost ratios to total income decreased as the farm size increased. The Operational Cost ratio for small farmers in Season I was 37.38%, for medium farmers it was 33.29% and for large farmers it was 28.91%. In Season I, this ratio was lower by 4.09% for medium farmers than that of the small farmers. But the large farmers showed a decrease of 8.47% 10 Nurunnaher, K.M. Rahman and M.H. Ali, Productivity and Efficiency Measurement of Rice Production by Member and Non-member in Selected Cooperative Societies of Bangladesh, Economic Affairs, 2003, Vol.48, No.4, p.220.

33 161 over small farmers and 4.38 % over medium farmers. The Operational Cost ratio for all farmers increased more in Season II than in Season I. Even then the ratio declined as the farm size increased. The Fixed Cost ratio for small, medium, large and overall farmers was 44.45, 42.35, and per cent respectively in Season I but this ratio increased by 2.87 % for small, 2.26 % for medium, 1% for overall farmers. But the large farmers Fixed Cost ratio declined to % in Season II. The percentage of the Gross Cost to the Total income for the large farmers was lower than that of the small and medium farmers in both seasons. Further, the large farmers total income was per cent more than the cost incurred. The Benefit Cost ratio is the net profit ratio. The net profits for small, medium, large and overall farmers were 17.25, 27.20, and per cent respectively in Season I, whereas the same declines by 5.8 % for small, 6.64 % for medium, 2.92 % for large and 4.85 % for overall farmers in Season II. However, the net profit for large farmers was the highest among the farmers size groups in both seasons. 4.9 CONSTRAINTS IN PADDY CULTIVATION Like the cultivators of other crops the paddy cultivators are also not free from problems in producing this cereal. The problems encountered by them are given below. i) Increasing Cost of Production The cost of production of paddy is increasing year after year. The increased cost of inputs and labourers ultimately results in higher production cost.

34 162 ii) Vagaries of Climate Frequent changes in climatic conditions pose another problem in production. The presence of unexpected adverse climate damages the standing crops and thereby reduces the yield of paddy. iii) Pests and diseases menace Pests and diseases in paddy crop may crop up due to vagaries in climate. Pests and diseases when uncontrolled will affect the yield, but to control them cultivators incur expenditure which raises the production cost. iv) Decrease in Soil Fertility The fertility of the soil deteriorates due to the over use of fertilisers and pesticides. This is evident from the fact that most of the sample farmers apply more fertilisers to increase the yield. v) Non-use of quality seeds Sample farmers do not use certified seeds. A majority of farmers use seeds which are either farm-produced or purchased from fellow farmers. vi) Traditional Methods of Cultivation The cultivation methods followed by farmers are traditional in nature. The new and improved cultivation techniques as recommended by the concerned government departments or research institutes do not find their application among the vast majority of the sample respondents.

35 163 vii) Non-availability of Labourers The shortage of farm labourers also hampers the timely farming operations. As farming operations commence concurrently in all places of the study area the shortage of labourers is acute especially during harvesting time. viii) Inadequate credit facilities The credit facilities available for farmers are inadequate. A majority of small and medium farmers are not able to fully avail of the institutional credits. With mean holdings they cultivate in tenancy lands largely depending on the local money lenders for their credit needs. ix) Irrigation The water required for the cultivation of paddy in the study area is supplied through government canals and tanks. Inspite of this the scanty rains cause water shortage. Frequent monsoon failures result in poor water storage level in the Periyar Dam, which supplies water to the irrigated paddy lands in the study area. Further, delayed water release in lesser quantum is also a matter of concern. This delays the commencement of farming operations besides affecting standing crops. The water flowing in the main canals and the river is unauthorisedly tapped and sent through pipelines to irrigate farms and plantations not covered under the existing irrigation schemes. Such unauthorized tapping reduces the cultivators share of water targeted for assured irrigation. The water plants grown in and garbage dumped into the main canals affect the free flow of water. As a result, water level increases and the released water is

36 164 discharged in midway through excess-water drainage sluices. In some areas water released in the channels does not reach the tail-end areas due to non-desilting of channels in the upper reaches by farmers. The encroachment and silt deposited in the tanks also reduces the storage capacity of tanks. Another problem the farmers in the study area face is the water logging. The lands located in low-lying areas face the problems of crop damage due to the submerging of crops for a long time. The lack or absence of adequate drainage facilities and land-levelling activities are the causes for water logging. Due to water logging seedlings or crops are submerged in water for a long period and easily get spoiled. They are prone to diseases and damages caused by birds. Further, weeds are grow in large measure causing delay in agricultural activities. So the yield from the water logged farm is reduced from the normal yield. have to pay more wages for cutting the crops in the water stagnated farms. At the end of the second-crop duration the water available for irrigation becomes scarce. To save the standing crops from water scarcity, many cultivators with owned farming lands have created their own source of water by digging bore wells and installing pump sets, and got electric power supply. Due to interruption in power supply they are not able to utilise the available sources to their fullest capacity to water the farm lands. Ranks of the Problems in Production Prominent problems in the production of paddy were ranked by the sample respondents and the ranks assigned by them on the basis of priority have been

37 165 converted into mean scores by Garrett s Ranking Technique and the result is shown in the following table. Table 4.10 Problems in Paddy Production (Ranks) Sl. No. Problems in production All Small Medium Mean Scores Ranks Mean Scores Ranks Mean Scores Ranks Large Mean Scores 1. Vagaries of climate III V II III 2. Decrease in soil fertility II IV III I 3. Labourers V III V VI 4. Shortage of farmyards IV II IV IV 5. Increase in cost of production I I I II 6. Diseases and pests menace VI VI VI V 7. Irrigation VII VII VII VII Source: Primary Data Ranks Increasing Cost of Production was considered as the foremost problem faced by All and by each size group except by large farmers, for whom Decrease in Soil Fertility is the prime cause of concern followed by increasing cost of cultivation. The problem caused by vagaries of climate was ranked 2 nd by Medium, third by All and also by Large and fifth by Small. The problems of Labourers, Diseases and Pest Menace and Irrigation were not ranked first or second by any size group of farmers. The problem Shortage of Farmyard was ranked 2 nd by Small, but fourth by the rest of the farmers. Problems of Labourers In paddy cultivation farmers face a number of problems including labourers. But the problems of labourers may arise because of their non-

38 166 availability, higher wage rate and the like. The following six problems have been selected as the key problems and the sample respondents ranked them on the basis of priority. The Mean Scores and the ranks based on the Mean Score values are furnished in the following table. Table Problems of Labourers (Ranks) Sl. No. Problems of labour All Small Medium Mean Scores Ranks Mean Scores Ranks Mean Scores Ranks Large Mean Scores 1. Non-availability of labourers VI V V V 2. High labour cost I I I I 3. Lack of cooperation II II II II 4. Wages to be paid in kind V IV IV III 5. Demand for more wages IV III III IV 6. Not following time schedule III VI VI VI Source: Primary Data Ranks Table 4.11 discloses that High Labour Cost and Lack of Co operation were ranked respectively first and second by all farmers and by all size groups. All categorised Not Following Time Schedule as the third problem whereas the third rank was given to Demand for More Wages by Small and Medium and to Wages to be Paid in Kind by Large. Nonavailability of labourers was placed 5 th by each size group, but 6 th by all farmers combined, but Not Following the Time Schedule was decided as the sixth prominent problem by each size group, but third by All combined SUMMARY The Cost-benefit Analysis in paddy cultivation highlights that the per acre yield, the Gross Income and the Net Profit in both seasons increased as the farm