The study has examined economics of crop cultivation at the aggregate level over the past 25 years, identified sources of cost escalation and evaluated the effects of factor prices, substitution and technological effects on the production cost. The results reveal that a disproportionate change in gross return vis-à-vis cost resulted in varying rate of return from crop enterprise during the past 25 years. During 2007-08 to 2014-15, the average cost inflation reached the highest level of 13 per cent, more than half of which was contributed by the rising labour cost alone. Further, at the aggregate level, use of physical inputs increased only marginally and a large share of the increase in the cost of cultivation was attributed to the rising prices of inputs. The estimated negative and inelastic demand of inputs revealed a great scope to reduce the cost by keeping a check on input prices, particularly labour wages. The estimated elasticity of substitution indicated imperfect substitution between labour and machine and the present level of farm mechanization is inadequate to offset the wage-push cost inflation in Indian agriculture. It is therefore necessary to accelerate appropriate farm mechanization through the development of farm machinery suitable and economical at small farms and improvement in its access through the custom hiring. The study has also revealed a slow rate of yield improvement to offset the rising cost.
The study identifies factors behind the groundwater depletion in Punjab (India) and examines the economics of groundwater irrigation across farm-size categories, varied groundwater levels and energy policy scenario. The farm-level evidences point out that farmers with smaller land holdings incur 2-3 times groundwater cost than those with larger land holdings. Also, small farmers are affected more adversely due to falling groundwater level. Further, financial expenses in extracting groundwater are borne equally by the society and the farmers. The withdrawal of energy subsidy is expected to reduce net returns, but at a varying rate across different crops. However, crop cultivation would still be profitable and desubsidization will result in 29-82% savings in existing groundwater use in different crops.
The study has assessed the performance of different crops and cropping pattern in the state of Punjab using alternative scenarios like market prices; economic prices (net out effect of subsidy) and natural resource valuation (NRV) considering environmental benefits like biological nitrogen fixation and greenhouse gas costs. The study has used unit-level cost of cultivation data for the triennium ending 2010-11. It has analyzed crop-wise use of fertilizers, groundwater, surface water and subsidies. The paper provides insights into relative profitability of various crops with and without state support in the form of subsidies and by reckoning positive and negative environmental externalities. The study has shown that even after netting out the effect of input subsidies and effect on environment and natural resource, the relative profitability of various crops doesn't change. Under the present set of marketing infrastructure, minimum support price, and agricultural technological know-how, the rice-wheat cropping pattern produces the highest and more stable incomes. The study has pointed out that farmers may not move towards diversification until incentivized by economically attractive alternatives.
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