Economic analysis of sugarcane cultivation in Kerala

Abstract

Sugarcane (Saccharum officinarum) is one of the primary sources of sugar in the world and has a prominent position as a cash crop in the tropics. Sugarcane is a very important crop in India’s agriculture landscape as being the world’s second largest producer and largest consumer of sugar. The global area, production, and productivity of sugarcane were 26.08 million hectares, 19.22 million tonnes, and 65.5 tonnes, respectively. In India, sugarcane was cultivated in an area of 5.83 million hectares in 2022-23, with production of 494.22 million tonnes and productivity of 84.01 tonnes per hectare. The area, production and productivity of sugarcane in Kerala was 931 hectares, 1,01,240 tonnes and 108 tonnes per ha, respectively. In Kerala, Idukki district is the leading producer of sugarcane, accounting for 93 per cent of the state production (10,076.95 tonnes). The entire production in the Idukki district is used to prepare the Marayoor jaggery. As the demand for jaggery is increasing and likely to increase in the coming years, there is considerable scope for expansion of sugarcane cultivation. In this context, the current study entitled “Economic analysis of sugarcane cultivation in Kerala” aimed to suggest appropriate and specific recommendations on production and marketing-related aspects to the sugarcane growers and processing unit owners in Kerala to help them to improve their income from their produce. The research was conducted in Idukki district of Kerala using primary and secondary data. A multi-stage random sampling technique was adopted and the data was gathered from 120 farmers using a well-structured pre-tested interview schedule. Besides, information relating to the marketing was collected from 20 market intermediaries in the Devikulam block. The economics of Marayoor Jaggery production units was analysed by interviewing the unit owners of 15 Marayoor Jaggery Production units. The socioeconomic profile of the respondent farmers was analysed and found that the majority of the respondent farmers were in the age group of 45 to 60 years. Regarding educational status, most of the farmers in the study area had an education up to the primary level. About 60 per cent of the farmers had a family size of less than four members. Exactly 84.17 per cent of farmers were dependent on agriculture as their main source of income. Regarding the type of land holding, 48.33 per cent of the farmers in the i study area had a marginal land holding of less than one hectare. The majority of the farmers (61.70%) had an annual income between rupees one to five lakh. The total cost of sugarcane cultivation was estimated at Rs. 3, 74, 831 ha-1. In total cost, operational cost and fixed cost were Rs. 2,71,583 and Rs. 1,03,244 per hectare. The estimated value of cost A2 in the study area was Rs.3,18,115 ha-1. It is observed that 54.80 per cent of cost A2 is accounted for the cost of hired human labour and 9.89 per cent is accounted for the cost of fertilizers. The computed value of cost A2+FL was Rs. 3,31,875 ha-1. The return analysis further revealed that the average yield of sugarcane in the study area was 101 tonnes ha-1. The net returns based on cost C2 was Rs. 1,02,221 ha-1, with a computed BC ratio of 1.27. A BC ratio exceeding one indicates the profitability of sugarcane cultivation in Kerala. The study examined the input-output relationship and resource use efficiency of sugarcane production using the Cobb- Douglas production function. It was observed from the fitted regression that inputs viz., setts, fertilizers and human labour were positively and significantly contributing to sugarcane production. The marginal productivity analysis further revealed the over-utilisation of organic manures and human labourers and the under-utilisation of resources like setts, chemical fertilizers and hired machine labour. The economic analysis of Marayoor jaggery processing units revealed that an average investment of Rs. 10,98,073 is needed to establish the Marayoor jaggery processing unit. The operational cost needed for the jaggery processing unit was Rs. 37,21,439. In operational cost, the cost of raw material (sugarcane) was the prime cost and accounted for about 65.87 per cent of the total cost. The financial feasibility analysis of Marayoor jaggery production units further revealed that Net Present Worth (NPW), BC ratio and IRR were Rs. 21,71,775, 1.07 and 59 per cent, at a 12 per cent discount rate. The values indicated the viability of the production unit. Among the two identified marketing channels of sugarcane, the producer’s share in the consumer rupee was high in channel II (Producer (jaggery) – Village trader – Wholesaler – Retailer – Consumer). Those farmers who marketed the produce as jaggery realised good profits compared to other farmers and marketing efficiency was also found to be higher in this channel. Despite this fact, the majority of the farmers marketed their ii produce through channel I (Producer – Processor – Wholesaler – Retailer – Consumer) due to the lack of adequate processing facilities. The Marayoor jaggery production units mainly used three channels for disposing of the jaggery. As there was no marketing intermediary, the producer share in consumers’ rupee and marketing efficiency was higher in channel III (Processor– consumer). The major production constraints reported by the sugarcane farmers were the attack of wild animals and rodents, shortage of labour and high labour costs and high cost of inputs. In the case of marketing, price fluctuation in sugarcane and the absence of regulated markets were the main constraints faced by the farmers. Shortage of raw materials and high cost of production were the major production constraints confronted by the processing unit owners. Additionally, they encountered marketing constraints like low price of Marayoor jaggery and the cheap import of jaggery from neighbouring states. Based on the findings the study recommended the following policy suggestions • As the support price is fixed based on cost A2+FL, the government may take into account the large variation in the cost before fixing the state advisory prices to promote the cultivation of sugarcane. • The cultivation of sugarcane is found profitable, hence the government may take suitable measures to bring more land under sugarcane cultivation through area expansion programmes. • The government may take suitable initiatives to promote mechanisation in sugarcane cultivation by providing necessary machinery on hire basis through Krishi Bhavan. • Promoting awareness about the optimal utilisation of inputs and implementing suitable policy measures, such as alertness and training programs on adopting recommended agricultural practices to maximize profits, could be encouraged. • The government can take initiatives to establish farmer producer organisations and strengthen the capacity of farmer collectives by providing suitable infrastructural facilities for the processing of Marayoor jaggery. • The government may provide subsidy for the installation of electric fences around the sugarcane fields. iii • To safeguard the interests of farmers and processing unit owners and uphold the quality standards of Marayoor jaggery, it is imperative for the government to implement measures aimed at regulating the influx of inferior quality jaggery from neighbouring states through rigorous inspection protocols at border checkpoints.