Cost of Cultivation of Kharif Paddy

Cost of Cultivation of Kharif Paddy

Cost of Cultivation of Kharif Paddy

Importance of cost calculation of Kharif Paddy

  • In any business, it is considered very important to keep an account of income and expenditure as it provides information on profit and loss and this information becomes very useful in bringing about necessary changes in the business.
  • Since agriculture is also a business, it is equally important to keep an account of income and expenditure.
  • Calculation of farm expenditure is not only important for the farmer but also for the government departments involved in agriculture, lending banks and all those directly or indirectly connected with agriculture.

(1) Usefulness to the farmer:

  • By keeping an account of the income of the farmer in his agriculture, he gets the knowledge of how much profit has been made from which crop and which crop has suffered a loss.
  • By comparing the profit-loss of different crops one can plan, which crops to take for maximum profit in the future.
  • By planning the cultivation in advance, it is possible to know how much money will be required at which stage. Based on that, it becomes easy to get a loan from the bank.
  • Also, proper management of money can save you from interest expenses.
  • By keeping an account of the expenses, if the farm expenses are incurred, it is realized and by eliminating such wrong expenses, the profit can be increased for the whole year.
  • In short, the profit can be increased by proper planning based on the calculation of farming costs.

Cost of Cultivation of Kharif Paddy

(2) Utility to Government of cost of Cultivation of Kharif Paddy

  • The government is frequently making necessary reforms in agricultural policy to promote agribusiness.
  • Accurate information on farm costs and profitability is very useful for formulating appropriate and effective agricultural policy.
  • Information on the cost of farming is used to make the right decision even in resolving court cases filed by farmers against compensation.
  • The Government of India currently announces minimum support prices for about 22 agricultural crops, thereby protecting the farmer against market price fluctuations.
  • Farming cost information is taken as the main basis for determining the minimum support price.
  • Similarly, calculating the cost of crop production is also very useful in calculating compensation for paying relief during natural calamities.
  • Information on farm expenditure is also useful for compensation to farmers during land acquisition for public interest works like canals, roads, railways, etc.

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Cost of Cultivation of Kharif Paddy

(3) Utility for banks and credit institutions: Cost of Cultivation of Kharif Paddy

  • Banks as well as various credit institutions provide various types of credit for agriculture, among which crop credit is considered the most important.
  • Current farm cost information is used to decide the maximum amount (scale of finance) of such crop credit by various banks and institutions.
  • The amount of credit should be sufficient to meet the cost of crop production and should not be more than necessary so that the credit is used for non-productive activities and consequently increases unnecessary interest burden.
  • Thus, the scale of finance that is in the interest of both the farmer and the bank is determined based on the calculation of the cost of crop production at the local level per year.

A scientific method of calculating farm expenditure

  • In today’s times, when agriculture is seen as an industry or profession, understanding the meaning of agriculture becomes very important for the farmer as well as for anyone associated with agriculture.
  • It is very important to know whether there is a profit or a loss from the amount of production and the amount of income when the cost of the equipment required for agriculture such as seeds, fertilizers, and pesticides, besides labor, irrigation, tractor and thresher, etc. is constantly increasing.
  • For this, only if we calculate according to the accurate and scientific method of calculating the cost of agriculture, we can get an idea of the true situation and understand how profitable the business of agriculture is.
  • Generally, farmers and people associated with agriculture calculate the cost of agriculture according to their own understanding. In which main expenses like seed, fertilizer, pesticides bought from the market and hired labor or rent of tractor or thresher, etc. are calculated by taking into account the cash expenses only and calculating the profit and loss.
  • From the point of view of economics or science, this is a wrong and flawed method.
  • Apart from cash costs, depreciation costs, interest on capital investment, land rent, labor costs of farm work done by family members and management costs must also be taken into account. After calculating all this, the actual profit can be determined by subtracting the income from the expenses.

In order to bring a formula in the calculation of agricultural cost and economically accepted methodology has been developed by the Commission on Agricultural Cost and Price (CACP) and implemented across the country.


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Cost of Cultivation of Kharif Paddy

Cost of Cultivation of Kharif Paddy

What is CACP?

  • CACP is an organization of the Government of India. The Government of India constituted the Agricultural Price Commission in the year 1965.
  • The purpose of this was to advise the government in making policy decisions regarding the prices of the main agricultural products.
  • For this, a balanced and integrated structure of agricultural expenditure was decided in such a way that the interest of both the farmer who is the producer, and the user i.e. the customer is maintained in addition to the requirement of the entire economy of the country.
  • Since the year 1985, this organization has now known as CACP under a new name i.e. Commission on Agricultural Cost and Price.
  • This organization collects data on the cost of cultivation of major crops 5 from across the country every year, calculating which it recommends to the government to fix the minimum support price for that crop.
  • A scientific method of calculation of farm expenditure laid down and implemented by CACP in which the total expenditure is classified into four categories namely Cost-A, Cost-B, Cost-C1, and Cost-C2. So that when the cost information is to be used for different purposes, the farm cost can be taken into account according to the requirements according to the strata.

1. Calculation of Farming Costs

Method of calculating farm cost per unit area (per acre or per hectare)

ExpenditureDetails of costs involved

 

Method of calculating cost

 

Expenditure– A

 

Wage Labor (Human Labour)

 

Expenditure is calculated by taking into account the market value of payments made in the form of tea snacks or food in addition to cash
+Bullock expenses (own/hired)

 

Actual cost (taking into account the cost of own bulls at prevailing market prices)
+Seed cost (own/purchased)

 

Actual cost (taking into account cost of own seed as per prevailing market price)
+Manure / Cake (own/purchased)

 

Actual cost (taking into account the cost of own manure/cake as per prevailing market price)
+ Chemical fertilizersActual cost
+ Water (own/hired)

 

Actual cost (calculated as per prevailing market price for own water)
+ Pesticide/InsecticidesActual cost
+ Miscellaneous expenses

(Rent of machinery like tractor/trailer, cost of miscellaneous items like rope and land revenue/taxes etc.)

Amount actually paid

 

+ Depreciation expenses

(House used for farming, bullock cart

Also small implements like shovels and spades have depreciation expenses)

 

Kachha House:5% per annum

Pacca House:2% per annum

Bullock Cart: 10% per annum

Small implements:20% per annum

(In proportion to area under crop out of total area)

+Working Capital Interest (Sum all above-mentioned Expenses)12% per annum (For Crop period only)

 

 

+ Land Rent (if on Rent)Amount actually paid

 

Expenditure– B

 

Expenditure– A

 

As per earlier calculations mentioned above in the Expenditure-A method

 

+ Own land rentActual Rent Paid
+ Interest on fixed capital

-Houses used for agricultural work, Bullock carts,

-Cost of land, tractor, well or irrigation pump etc. is calculated at market price but not included in calculation of depreciation in fixed capital)-

 

 

10% per annum

(Area under crops and as per duration of crops from total cultivated area)

Expenditure– C1

 

Expenditure– B

 

As per earlier calculations mentioned above in the Expenditure-B method

 

+ Labour used for Agricultural works of own home (Man Days spent by own Family Members)Cost of labor calculated according to the prevailing rate of human labor in the domestic human market used for agricultural work

 

Expenditure– C2

 

Expenditure– C1

 

As per earlier calculations mentioned above in the Expenditure-C1 method

 

+Management Cost

(For the entire production of Agricultural Produce)

10% of total farm management cost of C1

 

2. Calculation of income:

Total revenue = Revenue of Main product x Revenue of Secondary product

= [(Primary Product Quantity × Market Price)] X [(Secondary Product Quantity × Market Price)]


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Cost of Cultivation of Kharif Paddy

Cost of Cultivation of Kharif Paddy

3. Calculation of cost of production (Rs. /quintal):

In agriculture, there are generally two types of production namely main production and secondary production. Out of which the production cost per quintal is calculated only for the main product. By comparing the cost of the main product (Rs./quintal) and the prevailing market price (Rs./quintal) the estimate of profit and loss is quickly arrived at.

The cost of production (Rs./quintal) is calculated as follows.

(a) When income from secondary production is 10% or less of total income

Prime cost of production (Rs./Quintal)=Expenditure C2-Income from Secondary Products/Main Product Quantity (Quintal)

(b) When income from secondary production is 10% or more of total income

Prime cost of production (Rs./Quintal): Expenditure C2 x Main Product Quantity/Main Product Quantity (Quintal) x Total Income

Cost of Cultivation of Kharif Paddy

Cost of Cultivation of Kharif Paddy

4. Net profit

Profit = Total Revenue – Expenses incurred

The profit at different stages of cost is calculated as follows.

Profit Over Expense A=Total Income- Expense A

Profit Over Expense B=Total Income- Expense B

Profit Over Expense C1=Total Income- Expense C1

Profit Over Expense C2=Total Income- Expense C2

5. Income Expenditure Ratio:

  • The income-expenditure ratio shows how much income was generated against the expenditure per Rs.
  • If this ratio is greater than 1, it indicates profit, and if it is less than 1, it indicates loss.
  • The income-expenditure ratio is also calculated at different levels of expenditure.

On Expenditure A=Total Income/Expense-A

On Expenditure B=Total Income/Expense-B

On Expenditure C1=Total Income/Expense-C1

On Expenditure C2=Total Income/Expense-C2

6. Calculating the fertilizer from the amount of elements Chemicals required to take one kg of elements

Nitrogen

 

Kg.

 

1. Urea

 

2.175

 

2. Ammonium Sulphate

 

4.855

 

3. Ammonium nitrate

 

3.030

 

4. Can

 

4.000

 

5. Ammonium sulfate nitrate

 

3.845

 

Phosphorus

 

Kg.

 

1. Super phosphate

 

6.250

 

2. D.A.P.

 

2.175 + 400 grams of Nitrogen

 

Potash

 

Kg.

 

1. Murate of Potash

 

1.725

 

2. Sulphate of potash

 

2.083

 


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Cost of Cultivation of Kharif Paddy

Detail Cost of Cultivation of Kharif Paddy

Table-1 : Kharif paddy cultivation cost (per hectare)
Sr.No.ParticularsUnitQuantityExpense% of total Expense
1Labour (Hired)Human Day84.741704427.94
2BullockPair/Day0.2660.11
3SeedKilogram31.313182.16
4Farm yard Manure26614.36
5Chemical Fertilizer37926.22
6Irrigation48788.00
7Pesticides/Insecticides5440.89
8Miscellaneous expenses782312.82
9Depriciation3740.61
10Interest on Working Capital15402.52
11Expenditure– A4004065.64
12Rent of own land854614.01
13Interest on fixed capital7041.15
14Expenditure– B4929080.80
15Labor (Own Family)Human Day31.02616710.11
16Expenditure– C15545790.91
17Administrative Expenses55469.09
18Expenditure– C261003100.00
19Total Labor (1 + 15)Human Day115.762321138.05

 

Table-2: Production and income (per hectare) in Kharif paddy cultivation
1Main ProductionQuantity (Quantl/Ha)47.62
Price (Rs./Quantal)1641
Income (Rs.)78144
2secondary productionQuantity (Quantl/Ha)57.03
Price (Rs./Quantal)332
Income (Rs.)18951
3Total IncomeRs.97095

 

Table-3: Cost of Production (Rs./Quantal) and Income-Output Ratio in Kharif Paddy Cultivation
SNParticularsProfit in Rs.Cost of Production (Rs./Quintal)Income-expenditure ratio
1Expenditure– A570556772.42
2Expenditure– B478058331.97
3Expenditure– C1416389371.75
4Expenditure– C23609210311.59

 

Cost of Cultivation of Kharif Paddy

Economic Analysis:

From the above Table No-1 it is revealed that  Expenditure A incurred 65.64% cost out of the total cost followed by Expenditure B and Expenditure C1

From the above Table No-2 it is revealed that  Income from Main production and Secondary production arrived at Rs.97095.

From the above Table No-3 it is revealed that Expenditure-A has the highest Income Output ratio followed by Expenditure-B, Expenditure-C1 and Expenditure-C2.

Final Conclusion:

A profit from one hectare of Paddy cultivation is approximately Rs.36092.00 as per cost of cultivation calculated in Table No-1,2 and 3.

Cost of Cultivation of Kharif Paddy

 

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