Ground Water Based Irrigation – A business module

Saturday, August 20, 2016

Ground Water Based Irrigation – A business module

Ground Water Based Irrigation – A business module

            A major problem inflicting Bihar agriculture is lack of reliable and affordable irrigation. The difference between achievable yield and present productivity can be bridged if irrigation could be provided. Bihar has about 60% cultivated area under irrigation out of which about 66% is irrigated by ground water and 27% by surface water. However ground water exploitation is just 40% which indicate huge potential of enhancing irrigated area by using ground water. Presently most of the ground water is exploited through shallow tubewells with diesel operated small pumps (mostly hired) extracting water. This is most appropriate system given the fact of that 38% farmers have holding less than 0.5 ha. However, this system is high inefficient and entails huge application losses making irrigation a costly affair. An interaction with farmers of Motihari indicated that although they have irrigation facility but they apply only minimal irrigation as they can’t afford cost of irrigation by hired pumps.

            Thus for further extending irrigation facility to small fragmented holdings, one has to think out of box and develop a business module which will not only provide reliable and affordable irrigation but will also generate jobs and entrepreneurship. This article conceptualize such business module.

            It is proposed to install a 15 hp tubewell which will command about 12 ha land with a crop rotation of paddy – wheat/ maize – moong. The system will have an underground pipeline network to distribute water to each holding. It has been assumed that average size of plot will be 0.09 ha (30 m x 30 m). Fig-1 provides a layout of such system. Thus for a  12 ha area, these will be one tubewell in centre with 300 m pipeline of 4” dia to serve as main pipeline and 1800 m pipeline + 3” dia to function as submains. The outlets will be fixed in submains at distance shown which will be fixed in submains at distance shown which will serve almost every plot.

            It is expected that such system will cost around Rs.10 lacs with cost of tubewell being Rs.3 lac, cost of pipeline as Rs.6 lacs and Rs.1 lac being cost of pump house plus other contingent expenditure. If the enterprenur puts up 20% of his money and rest by Bank loan, his annual EMI @ 10% interest for a 7 years period will be about Rs.2 lac. This includes return on his own investment.

            This can be taken as fixed cost. The variable cost of the system will be as below:

            Operational cost/ variable cost :

(i)	Maintenance cost @ 2% of investment	=	20,000/-
(ii)	Operator’s cost @ 5000/- p.m. (It is assumed that one operator will be able to run 2 such systems and therefore will earn Rs.10,000/- p.m.)	=	60,000/-
(iii)	Electricity charges @ 3.00 per kwH Assuming 200 days of operation 60 days in Kharif, 90 days in rabi and 50 days in summers and operating hours 8 hours per day.	=	54,000/-
	Total :	=	1,34,000/-

	Thus total annual cost	=	Rs.3,34,000/-
	Now three situations can be visualized.

Scenario-I

            The system will be self financing with no support from Government. Under this the annual cost will be Rs.3,34,000/- and per hour cost Rs.210/- per hour.

This will be best scenario with only market forces operating but initially farmers may find it bit expensive to opt for.

Scenario-II

            Government will pay EMI directly to bank which will cover fixed cost. There will be no subsidy at any stage. The payment of EMI will be only on performance of the system. If system stops functioning, the EMI payment will also stop and he entrepreneur will have to make rest of payment. This will have two advantages: First the fly by night operators will not come who take subsidy and later on whole system disappears; secondly the burden on government will be spread over 7 years and therefore with limited budget, it can cover more area.

            Under this scenario, the per hour cost will be Rs.1,34,000/1600 = Rs.85/- per hour which farmer can easily afford.

Scenario-III

            Under this, the labour wages in erecting the irrigation system can be paid from MANREGA funds. It should be reimbursed to bank which will provide finance. The labour employed in digging trenches, laying of pipeline etc. will be recorded as MANREGA employees and their wages will be reimbursed to bank as pre-payment. This will reduce EMI payment load of government. Further, the operator’s wages can be paid from MANGREGA funds which will further reduce operating cost of the system. Under this scenario, the cost per hour will be Rs.74,000.00/1600 i.e. about Rs.62.00 per hour.

            Benefit to enterprenure and employment generation.

            The enterprenure will be getting a return of about Rs.3200.00 p.m. on his 20% investment i.e. Rs.2 lac i.e. @18-20% return in terms of EMI payment. After 7 years, the whole system will be his which will have value of about 50% of investment. He can be allowed to charge 20% of his investment i.e. Rs.40,000.00 as fixed cost after 7 years by which time farmers will be able to pay more for irrigation. Suitable legal frame work will have to be created for this.

            The system will generate employment for installing the system at the time of installation. Further regular employment will be generated for ½ man year for each such system. For a normal village having cultivated area of about1000 ha, employment of about 40 man year in operation and about 10 man year in maintenance will be created. In addition, a shift from single crop to a three crop rotation will generate huge employment in crop cultivation and post harvest operations.

Doubling Farmer’s Income – A Roadmap for Bihar farmers

Saturday, August 20, 2016

Doubling Farmer’s Income – A Roadmap for Bihar farmers

Doubling Farmer’s Income – A Roadmap for Bihar farmers

            Prime Minister Sri. Narendra Modi has given a target of doubling farmers’ income in next five years. While some supported it, few called it a dream or goal which cannot be achieved. This debate is very relevant for Bihar which has predominant agrarian economy with 68% population dependent upon agriculture contributing about 22% of state GDP. Further Bihar agriculture is a low investment, low productive, low profit enterprise. So it is worth examining whether farmers’ income can be doubled in given environment or not.

            The profitability of any enterprise can be increased through three routes: (i) reducing cost of inputs; (ii) increasing the system efficiency of enterprise; and (iii) increasing price of end product through government intervention which in this case is to be higher minimum support price. Out of these three, third alternative is easiest to adopt and implement but is fraught with consequences for overall economy. Further it has not much for regions where penetration of public procurement agencies is not sufficient. Thus first two options need to be examined about their feasibility.

            Cost of cultivation of any crop is made up of two components: Fixed cost and Operational cost. Fixed cost is rental value of owned land, rent paid for leased in land, land revenue etc., depreciation and interest on fixed capital. Operational cost includes cost of labour (human, animal & machine) seed, fertilizer & manure, insecticide, irrigation, miscellaneous and interest on working capital. Although fixed cost has a role in estimating cost of cultivation but for an ordinary farmer, it is operational cost which matters. Thus here we will examine whether target of doubling farmers’ income is feasible or not and if yes what should be road map.

            Table 1 gives data on components of operational cost of different crops for North Bihar conditions. It is evident from table that human labour cost is the highest among all components with maximum in paddy. Let us analyze cost of which component can be reduced. In case of paddy the share of human labour is the highest due to labour used in transplanting. If use of paddy transplanter could be popularized as well as better paddy transplanter could be designed to be suitable for small and marginal farmers, the cost of labour can be reduced significantly. Similarly with better mechanization in wheat and maize, the cost of labour can be easily reduced by 25% if not by 50%. Second cost component of seed will increase if we replace existing seed with certified good quality seed. Thus the cost of seed will increase by 50% but the productivity will increase by minimum 10%. Third cost component is fertilizer whose cost can be reduced by using soil health card information properly. It has been found in few studies that fertilizer use has reduced by 25% if targetter fertilizer is used. Further if at village level vermi-compost is prepared using organic household waste (linking with Swachhchh Bharat) and payment of labour wages from MANREGA, the cost of fertilizer can be reduced significantly by atleast 25%. The cost of labour is about 40% percent of total cost of vermin-compost and therefore, MANREGA funds can be used both for job creation as well as reducing cost of cultivation.  In a study conducted by author, it has been found that in alluvial aquifer zone (to which North Bihar belong), if diesel pump is replaced by electric pumps the cost of water is reduced by 80%. If centrifugal pump presently in use is replaced by efficient submersible pumps, the cost will further reduce.

            Thus if we can reduce labour cost by 25% through mechanization, fertilizer cost by 25% through targeted fertilization and village level production of vermi-compost, irrigation cost by 80% through replacing diesel pump by electric pump and increasing seed cost by 50% through seed replacement the net return will increase by 81.04% for paddy, 12.09% for wheat and 19.13% for maize. If we assume that just by seed replacement, yield will increase by 10% which is at lower end of estimate, the income will increase by 126.09% for paddy, 32.66% for wheat and 36.75% for maize. It will further increase if we could reduce post harvest losses and do some value addition.

            If the whole scenario is seen in terms of crop rotation i.e. paddy-wheat and paddy-maize, the net return for a full year the income will increase by 28% and 30%, respectively if no increase in productivity is assumed. With 10% increase in productivity, which is minimum found to be due to seed change alone, the increase will jump to 54.22 and 52.44 respectively. If 5% increase in gross return due to reduction in post harvest losses accounted, the increase in net return is 68.63 and 64.78% respectively which increase to 83.76 and 88.21% respectively if we account for 5% increase in gross return with local level value addition.

            It is therefore evident that enhancing farmers’ income by 100% is not that difficult especially in low investment low productivity, low income scenario of North Bihar agriculture. Only requirement is proper mechanization compatible to conditions of small and marginal farmers, reduction in cost of fertilizer with targeted fertilizer as well as production of vermin-compost by converging MANREGA funds, seed replacement, and electrification of irrigation pumps on input cost side. On the output side we need to reduce post harvest losses by adequate storage facilities and develop infrastructure for part value addition at local level.