An-Economic Analysis of Gherkins Contract Farming in Dindigul district of Tamil Nadu
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Date
2008
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ACHARYA N.G. RANGA AGRICULTURAL UNIVERSITY, RAJENDRANAGAR, HYDERABAD
Abstract
Contract farming is a system where a central processing or exporting
unit purchases the harvests of independent farmers and the terms of the
purchase are arranged in advance through contracts. India is the largest
producer of vegetables but is only the 19th largest exporter in the world.
Gherkin is one of the potential items of export. In Tamil Nadu, gherkins are
cultivated only under contract farming. In this context the present study is
taken up with the following objectives: (1) To compute the cost and returns of
cultivation of gherkins under contract farming (2)To estimate the resource use
efficiency and input demand in gherkin cultivation (3)To assess the
environmental impact and environmental awareness (4)To study the constraints
at various stages of this contract farming.
Dindigul district was purposively selected because it has the largest area
under gherkin cultivation among various districts in the state of Tamil Nadu.
Among the taluks in Dindigul district, palani taluk was purposively selected in
order to comparatively study the contract cultivation of gherkin by farmers
supplying to four major units namely ITAP, IAP, Bnazram and Ravibala. The
data were collected from the sample farmers through personal interview
method using a structured pre-tested questionnaire.
The one way Analysis of Variance test showed no significant difference
between the sample farms supplying gherkins to the four firms in terms of
gross income per hectare. Therefore, the functional analyses were done for the
pooled sample though the descriptive analyses were done individually for
farmers supplying to the four firms for better comparison. The cost and returns
of cultivating gherkins was estimated and compared between companies. Cobb-
Douglas form of production function was fitted, to analyze the contribution of
different inputs to gherkin production and the efficiency of inputs used in
cultivating gherkins. The "Environmental Impact Quotients" (EIQ) (Kovach
et al., 1992) was computed to study the levels of environmental impacts of
plant protection chemicals used. The Multivariate Tobit Model was used to
determine the factors which influenced the level of environmental awareness
among the gherkin farmers. A Cobb-Douglas form of profit function was
modeled incorporating the level of environmental awareness and its impacts on
profit and to derive the input demands.
The average size of the sample farms supplying gherkins to ITAP, IAP,
Bnazram and Ravibala was 2.05 hectares. The average area irrigated was 0.99
hectares accounting to 48.29 per cent of the net area of the farm. The average
area under gherkins for the pooled sample was only 0.26 hectares. The Paddy –
Gherkin-Paddy crop rotation seemed to be popular (23.33 per cent) and paddy
was grown as the successive crop to gherkin in 56.67 per cent of the farms.
The average variable cost worked out to little over Rs.125000 per
hectares in the case of sample farmers supplying gherkin to all the four firms
operating in Dindigul district. The human labour accounted for the lion’s share
of over 47 per cent, out of which the family labour constituted close to 18 per
cent. The next major expenditure was on plant protection which stood at closer
to 22 per cent. This was followed by expenditure on fertilizers which
constituted close to 18 per cent. Expenditure on seeds constituted little over
two per cent.
The net income over Cost A for the pooled sample was Rs. 94519 per
hectares and the net income over Cost C3 was Rs. 69815 per hectares. The
average cost of production (A) was Rs. 4.06 per kg for the pooled sample. The
net returns worked out to Rs. 3.06 per kg over Cost A. The average cost of
production (C3) was Rs. 4.86 per kg for the pooled sample. The net returns
worked out to Rs. 2.26 per kg over Cost C3.
The production function analysis revealed that one percent increase in
the expenditure on labour would increase the gross returns by 0.62 per cent;
one per cent increase in the expenditure on seeds would increase the gross
return by 0.03 per cent, the coefficients for seeds, fertilizers and plant
protection chemicals stood at 0.03, 0.48 and – 0.379 respectively.
The MVP/MFC ratio for labour (1.73) and fertilizers (2.51) were greater
than unity indicating the scope to increase the use of these inputs. However, in
case of the expenditure on seeds, the ratio of 0.82 (less than unity), indicated
that every additional rupee spent on seeds would add only Rs.0.82 to gross
returns and for plant protection chemicals at -0.02 happened to be negative
indicating that every rupee increase on plant protection expenditures would
reduce the gross returns by Rs.0.02, hence there is a need to reduce the use of
plant protection chemicals.
The average yield of gherkins (of all grades) was 30.87 tonnes for the
pooled sample and it ranged between 30.81 and 31.90 tonnes per hectare. The
average gross income for the pooled sample was Rs. 219751 per hectare and it
ranged between Rs. 219454 and Rs. 220023 per hectares for farmers supplying
to various firms. The average number of payments made by Ravibala (2.68)
was the highest, followed by ITAP (2.37), Bnazram (2.06) and the IAP (1.98)
in that order.
The EIQ field scores indicated high levels of EIQ values ranging
between 80.475 and 149.446, the average being 113.308. The analysis would
only show the need to reduce the use of chemicals by using these on need basis.
The environmental awareness increased with the level of education,
extension contact and the increase in the off farm income.
The elasticities of demand for inputs showed that the input prices had
negative elasticity of demand for all inputs. The price elasticity for fertilizer
was -0.56, for pesticides was -0.79, for labour was -1.125. For every one per
cent increase in area, fertilizer demand increased by 0.11 per cent and pesticide
demand increased by 0.33 per cent. If the index of infrastructure increased by
one per cent, fertilizer demand increased by 0.006 percent and labour demand
decreased by 0.31 per cent. For every one per cent increase in environmental
awareness, fertilizer demand decreased by 0.45 per cent and pesticide demand
decreased by 0.68 per cent.
Invariably, the contract farmers of all the companies in the study area
revealed that the type of agreement between them and the company had been
oral and informal in nature as it happened to be more convenient. All the
sample farmers expressed satisfaction about companies and were ready to
cultivate gherkins once again.
In the system of contract farming, the major problem encountered by the
farmers was higher price of the inputs when compared with the market price.
The problems in cultivating gherkin were labour scarcity and severe yield loss
due to pests and diseases. The major expectations in the order of Garrett ranks
were higher price for the produce, supply of inputs at subsidized prices and
identification of specific seasons for gherkin cultivation.
Description
Keywords
Economic, Analysis, Gherkins, Contract, Farming, Dindigul district, Tamil Nadu