Research Paper Research Journal of Agricultural Sciences 4(2): 202-206, March-April (2013)

ISSN: 0976-1675 DI: 1199-12-0111-2012-48

Analysis of Pomegranate Orchards for Financial Feasibility and Economic Viability Sustainable Cultivation in Karnataka
C B Koujalgi, S M Mundinamani* and B S Kulkarni*
Department of Agricultural Economics, University of Horticultural Sciences, Sector No. 60, Navanagar 587 102 Bagalkot, Karnataka, India *Department of Agricultural Economics, University of Agricultural Sciences, Dharwad- 580 005, Karnataka, India
e-mail: cbkoujalagi@gmail.com
Received: 01 November 2012; Revised accepted: 07 August 2012

ABSTRACT
An economic analysis of pomegranate cultivation in Karnataka for its viability and sustainability has been taken up in Northern Districts of Karnataka during 2009-10. The results indicated that, the per hectare total establishment cost including maintenance cost up to bearing period was Rs. 2,85,998.76 and Rs. 2,78,440.31 for Bagalkot and Koppal districts, respectively. The cost per hectare in pomegranate orchard from the fourth year onwards in Bagalkot district was Rs. 55,009.38 and it was Rs. 56,217.46 for Koppal district. The project evaluation criteria indicated that NPV was Rs. 3, 02,602.65 and Rs. 3, 87,900.02 for Bagalkot and Koppal districts, respectively discounted at the rate of 9.00% opportunity cost of capital. The B: C ratio was 1.53 and 1.68, IRR was 19.76 and 22.45% for Bagalkot and Koppal districts, respectively. The payback period was 6.11 years for the orchards in Bagalkot district and 6.04 years in Koppal district. Key words: Establishment cost, Maintenance cost, Opportunity cost of capital, Returns, Financial feasibility India is the worlds second largest producer of fruits (57.73 million tonnes) and vegetables (129.15 million tonnes) and contributes 13.30 and 10 per cent of vegetables and fruits, respectively in the world. The area and production of pomegranate in India during 2009-10 was 1, 27,160 hectares and 8, 20,970 metric tonnes, respectively (Anonymous 2008). Maharashtra accounts for maximum area (about 98,900 ha) particularly in Ahmednagar, Solapur, Satara, Sangali, Pune and Wardha districts. Karnataka state occupied the second position in area (15400 ha) under pomegranate cultivation during 2009-10. The major pomegranate growing districts of the state are, Bagalkot, Bellary, Chitradurga, Koppal, Raichur and Tumkur. The important varieties grown in Karnataka are Kesar (Bhagwa), Araktha (Mrudula), Ganesh, Jyoti, G-137 and Rubi. Karnataka state is emerging as one of the leading states in the field of horticulture. The state has shown a good potential for growing fruits. Mango, Banana, Sapota, Citrus, Grapes and Pomegranate are the main fruit crops of the state. The total horticultural crop area in the state was 18 lakh hectares during the year 2008-09. Out of 17.67 per cent of the total horticultural crop area occupied by fruit crops in the state, pomegranate is cultivated in an area of 14,996 ha. Bagalkot and Koppal districts cover 53.52% of the state total area (Subba et al. 2010). Suitable soil and climatic Research Journal of Agricultural Sciences 4(2) conditions are responsible for concentration of pomegranate crop area in these two districts. In view of this, the present study has been undertaken in two selected districts of Karnataka during 2009-10 for economic analysis and financial feasibility.

MATERIALS AND METHODS

Pomegranate crop is spread over 25 districts of Karnataka state. However, commercially it is grown in Koppal, Bagalkot, Bellary, Bijapur, Tumkur, Chitradurga and Raichur districts. Among the major pomegranate growing districts of the state, Koppal and Bagalkot districts stood first and second place with respect to area and production. Hence, these two districts were selected for the present study. Multistage sampling method was employed for selection of districts, taluks and villages. The pomegranate fruit growers were selected randomly from the selected villages. Bagalkot and Koppal districts were purposively selected based on highest area and production in the state. These two districts together accounted for more than 50% of area and production under pomegranate in the state during the year 2008-09. Two taluks with highest area under the crop from each district was selected for the study. Similarly, five villages from each taluk accounting for 20 villages were selected based on the highest area criterion. For the selection 202 https:// www.rjas.info

Koujalgi et al. of pomegranate growers, the purposive sampling method was adopted. Five pomegranate growers from the list of farmers growing pomegranate were randomly selected from each chosen village. Thus, a total of 100 pomegranate growers were selected for the purpose of the study. For analyzing the data collected during the study, tabular analysis and financial analysis were employed. The technique of tabular analysis was employed for estimating the investment pattern, maintenance cost of pomegranate, pattern of labour use, yield and return structure of pomegranate and cost of marketing, etc. In order to know the relative profitability of investment in pomegranate cultivation, the project evaluation measures namely, net present value (NPV), benefit cost ratio (BCR), internal rate of return (IRR) and pay back period (PBP) were computed. 1,52,482.52) and 53.15 percent (Rs. 1,47,996.28) for Bagalkot and Koppal districts, respectively. Similarly, the maintenance cost up to the bearing period (3 years) accounted for 46.68 percent (Rs. 1, 33,516.24) and 46.85 percent (Rs. 1, 30,444.03) for Bagalkot and Koppal districts, respectively. Among the initial costs of investment, the cost on bore well and accessories accounted for a major share of 25.59 percent (Rs. 73,177.26) followed by installation of drip irrigation set (13.11%), cost on fencing (6.85%), rental value of land (3.72%), planting material (2.07%) and investment in digging of pits and planting (1.47%) for Bagalkot district (Raikar 1990). The cost on sprayer and staking material accounted for a meager share in the initial cost with 0.30 per cent and 0.22 per cent, respectively for Bagalkot and Koppal districts. In the case of Koppal district, more or less similar pattern was observed in respect of establishment cost of pomegranate orchards. The cost on bore well and accessories contributed a major share in the initial cost with 25.70 percent (Rs. 71,566.28) followed by installation of drip irrigation set (13.65%), fencing (6.79%), rental value of land (3.05%), planting material (2.08%) and investment in digging of pits and planting (1.36%). The total maintenance cost up to bearing period (3 years) accounted for Rs. 1,33,516.24 (46.68%) for Bagalkot district. Similarly, for Koppal district it was Rs. 1,30,444.03 (46.85%). (Rupees/hectare) Koppal Value % 8480.00 71566.28 900.00 5800.00 3800.00 550.00 18900.00 38000.00 147996.28 40680.48 44421.19 45342.36 130444.03 278440.31 3.05 25.70 0.32 2.08 1.36 0.20 6.79 13.65 53.15 14.61 15.95 16.28 46.85 100.00

RESULTS AND DISCUSSION

Investment pattern in pomegranate orchards The investment pattern in pomegranate was similar to the one found in any plantation or orchards. The per hectare cost of establishment of pomegranate orchard in the two selected districts revealed that the per hectare cost of establishment of pomegranate orchard was Rs. 2,85,998.76 and Rs. 2,78,440.31 for Bagalkot and Koppal districts, respectively (Table 1). Out of the total establishment cost (A+B) the initial investment constituted 53.32% (Rs. Table 1 Investment pattern in pomegranate orchards Particulars Initial Investment Rental value of land Bore well and accessories Sprayer Plant material (Seedlings) Investment in digging of pits and planting Staking Fencing Installation of drip set Total Maintenance cost up to bearing period I year II year III year Subtotal (I+II+III) Total establishment cost (A+B)

Bagalkot Value 10625.00 73177.26 850.00 5920.00 4200.00 628.00 19582.26 37500.00 152482.52 42553.28 45930.84 45032.12 133516.24 285998.76 % 3.72 25.59 0.30 2.07 1.47 0.22 6.85 13.11 53.32 14.88 16.06 15.75 46.68 100.00

Maintenance cost of pomegranate orchard during bearing period Maintenance cost is the recurring cost which will be incurred after the establishment of the orchard normally from fourth year onwards for upkeep of the plants so that good yield can be obtained over the economic lifespan of the plants. The maintenance cost comprised of the expenditure towards the use of labour and other material inputs along with fixed costs (Table 2). Bagalkot district Research Journal of Agricultural Sciences 4(2)

Of the total maintenance cost, the variable costs constituted a major share of 77.81 per cent (Rs. 42,801.71) followed by the fixed cost with 22.19 per cent (Rs. 12,207.67) during the bearing period in Bagalkot district. Among the total variable cost, the material cost accounted for a major share of 39.01 per cent (Rs. 21,460.60) followed by labour cost with 33.71 per cent (Rs. 18,541.00) of the total cost. Among the labour cost, the cost on weeding accounted for a major chunk with 6.59 per cent (Rs. 3626) followed by intercultivation (4.54%), harvesting (4.36%), loosening of soil around the trunk (3.33%), application of 203 https:// www.rjas.info

Pomegranate Orchards for Financial Feasibility and Economic Viability plant protection chemicals (2.96%), application of farm yard manure (2.66%), application of fertilizers (2.05%) and miscellaneous costs (1.45%) in the total cost. In the material cost, the expenditure incurred on plant protection chemicals was found to be maximum with 23.53 per cent (Rs. 12,945) followed by farm yard manure (14.36%) and fertilizers (1.12%). The interest on working capital accounted for a share of 5.09 per cent of the total cost. Among the fixed costs, the rental value of land accounted a major share with 19.31% (Rs. 10625) followed by depreciation (1.06%) and land revenue (0.07. The interest on fixed cost worked out to be 1.74% (Rs. 959.67) of the total cost in Bagalkot district.

Table 2 Maintenance cost of pomegranate orchard during bearing period (4th year onwards) in the selected districts Bagalkot Koppal Particulars Unit Qty Value % Qty Value Variable cost Labour cost Pruning MD 15.65 1565.00 2.84 16.25 1625.00 Inter-cultivation BP 6.25 2500.00 4.54 6.38 2552.00 Loosening of soil around the trunk MD 18.32 1832.00 3.33 19.23 1923.00 Application of FYM MD 14.65 1465.00 2.66 15.35 1535.00 Application of fertilizers MD 11.25 1125.00 2.05 12.15 1215.00 Application of plant protection chemicals MD 16.28 1628.00 2.96 18.25 1825.00 Weeding MD 36.26 3626.00 6.59 38.25 3825.00 Irrigation, watch and ward MD 16.00 1600.00 2.91 18.00 1800.00 Harvesting MD 24.00 2400.00 4.36 26.00 2600.00 Miscellaneous 800.00 1.45 950.00 Total labour cost 18541.00 33.71 19850.00 Material cost FYM Tonnes 8.78 7902.00 14.36 9.65 8685.00 Fertilizers Kgs 30.68 613.60 1.12 32.21 644.20 Plant protection chemicals Liters 45.89 12945.00 23.53 48.26 14130.00 Total material cost (B) Rs. -21460.60 39.01 -23459.20 Interest on working capital at 7 % Rs. -2800.11 5.09 -3031.64 Total variable cost (A+B+C) Rs. -42801.71 77.81 -46340.84 Fixed cost Rental value of land Rs. -10625.00 19.31 -8480.00 Land revenue Rs. -38.00 0.07 -38.00 Sub-total Rs. -10663.00 19.38 -8518.00 Interest on fixed cost @ 9 % Rs. -959.67 1.74 -766.62 Depreciation Rs. -585.00 1.06 -592.00 Total fixed cost Rs. -12207.67 22.19 -9876.62 Total cost (I+II) Rs. -55009.38 100.00 -56217.46 Table 3 Yield and return structure of pomegranate Bagalkot district Koppal district Age of the pomegranate Total Total Yield Yield orchard value value (years) (tonnes/ha) (Rs.) (tonnes/ha) (Rs.) 4th 3.51 119340 3.88 135800 5th 3.66 124440 3.92 137200 6th 3.89 132260 4.15 145250 7th 4.25 144500 4.48 156800 8th 4.76 161840 4.88 170800 9th 5.22 177480 5.66 198100 10th 5.65 192100 5.97 208950 11th 6.01 204340 6.33 221550 12th 6.34 215560 6.87 240450 13th 5.12 174080 5.66 198100 14th 4.71 160140 4.89 171150 15th 4.55 154700 4.66 163100 Average 4.81 201845 5.11 214725 Research Journal of Agricultural Sciences 4(2)

2.89 4.54 3.42 2.73 2.16 3.25 6.80 3.20 4.62 1.69 35.31 15.45 1.15 25.13 41.73 5.39 82.43 15.08 0.07 15.15 1.36 1.05 17.57 100.00

Koppal district It could be observed from the table 4 that the average labour cost accounted for 35.31% (Rs. 19,850) of the total cost during the bearing period. Among the labour cost, the cost on weeding constituted a major portion with 6.80 per cent (Rs. 3825) followed by harvesting operations with 4.62 per cent (Rs. 2600), intercultivation (4.54%), loosening of soil around the trunk of tree (3.42%), application of plant protection chemicals (3.25%), irrigation and watch and ward (3.20%), pruning (2.89%), application of farm yard manure (2.73%), application of fertilizers (2.16%) and miscellaneous costs (1.69%) of the total cost. The total material cost accounted for 41.73% (Rs. 23,459.20) of the total cost of maintenance of pomegranate orchard during the bearing period. Among the material costs, the cost on plant protection chemicals contributed a major share with 25.13 per cent (Rs. 14,130) followed by cost on farm yard manure with 15.45% (Rs. 8,685.00) and cost on fertilizers with 1.155%. The interest on working capital accounted for 204 https:// www.rjas.info

Koujalgi et al. 5.39% of the total cost. Among the fixed costs, the rental value of land accounted a major share with 15.08% (Rs. 8480) followed by depreciation (1.05%) and land revenue (0.07%). The interest on fixed cost worked out to be 1.36% (Rs. 766.62) of the total cost in Koppal district. Among the total cost, the total variable cost accounted for a major share with Rs. 46,340.84 (82.43%) followed by fixed cost with Rs. 9,876.62 (17.57) in the total cost of maintenance of pomegranate orchard. The maintenance cost (total cost) of pomegranate orchard during the bearing period accounted for Rs. 56,217.46 for Koppal district (Table 4). The results clearly indicated that among the material cost, the major input contributing to the cost was again plant protection chemicals followed by manures and fertilizers in maintenance of pomegranate during bearing period. This may be attributed to epiphytotic of bacterial blight pomegranate apart from anthracnose resulted in continuous use of the pesticides to manage the diseases. As a result, the expenses on these items were on higher side. So far as fixed costs were concerned, the rental value of land formed the major cost component. The farmers who were cultivating this crop on their own land included imputed rental value, taking into consideration the ongoing rental value. Hence, the cost worked out to be higher. Not much difference was observed between Bagalkot and Koppal districts. The results obtained in the present study were similar with the results obtained by Ramachandra (2006), Ravikumar (2009). It was noticed from the results that, during the bearing period material cost was higher as compared to the labour cost. This may be attributed to fact that the crop required higher quantities of nutrients for production of fruits along with its growth and development during the bearing period. Further, during the fruit bearing period, intensive care against pests and diseases were required.

Table 4 Cash flow analysis of pomegranate orchards in Bagalkot and Koppal districts Bagalkot district Discount Discounted factor at 9% Cash net cash (opportunity out flow flow cost of capital) 1.00 0.92 0.84 0.77 0.71 0.65 0.60 0.55 0.50 0.46 0.42 0.39 0.36 0.33 0.30 0.27 -152482.52 -39149.02 -38581.90 -34674.73 45674.74 45129.90 46350.37 49219.84 53415.31 56336.48 57578.06 58238.94 57798.22 39293.30 31539.19 26916.47 147996.28 40680.48 44421.19 45342.36 56217.46 56217.46 56217.46 56217.46 56217.46 56217.46 56217.46 56217.46 56217.46 56217.46 56217.46 56217.46
Year

Cash out flow

Cash inflow

Net cash flow

0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15

152482.52 42553.28 45930.84 45032.12 55009.38 55009.38 55009.38 55009.38 55009.38 55009.38 55009.38 55009.38 55009.38 55009.38 55009.38 55009.38

----119340 124440 132260 144500 161840 177480 192100 204340 215560 174080 160140 154700

-152482.52 -42553.28 -45930.84 -45032.12 64330.62 69430.62 77250.62 89490.62 106830.62 122470.62 137090.62 149330.62 160550.62 119070.62 105130.62 99690.62

Koppal district Discount factor at Discounted Cash 9% Net cash flow net cash inflow (opportunity flow cost of capital) --147996.28 1.00 -147996.28 --40680.48 0.92 -37426.04 --44421.19 0.84 -37313.80 --45342.36 0.77 -34913.62 135800 79582.54 0.71 56503.60 137200 80982.54 0.65 52638.65 145250 89032.54 0.60 53419.52 156800 100582.54 0.55 55320.40 170800 114582.54 0.50 57291.27 198100 141882.54 0.46 65265.97 208950 152732.54 0.42 64147.67 221550 165332.54 0.39 64479.69 240450 184232.54 0.36 66323.71 198100 141882.54 0.33 46821.24 171150 114932.54 0.30 34479.76 163100 106882.54 0.27 28858.28

Yield and return structure of pomegranate orchards The yield and return structure of pomegranate in Bagalkot and Koppal districts revealed that that the pomegranate orchard, the economic yield started from fourth year after planting and continued up to the fifteenth year age of the orchards of both the districts (Table 3). The per hectare average yield increased at a increasing rate from fourth year onwards until the eight year and then onwards the yield started increasing at decreasing rate and finally highest yield was attained during the twelfth year of orchard establishment in both the districts. The yield from thirteenth year onwards started decreasing at a decreasing rate as the orchard reached fifteenth year of establishment. It could also be observed from the table that the average yield (5.11 t/ha) and the average returns (Rs. 2,14,725/ha) from pomegranate Research Journal of Agricultural Sciences 4(2)

obtained by the sample farmers of Koppal district was comparatively more than that of Bagalkot district farmers (4.81 t/ha and Rs. 2,01,845/ha). The average yield obtained by the Koppal district farmers during the 4th year was 3.88 t/ha as against 3.51 tonnes per hectare in Bagalkot district. The yield was highest during the twelfth year age of orchards for both Koppal and Bagalkot districts with 6.87 and 6.34 t/ha, respectively. Thereafter, the yield started decreasing and it reached around 4.66 and 4.55 t/ha during 15th year for Koppal and Bagalkot districts, respectively. The cost per ha in pomegranate orchard from the fourth year was Rs. 55,009.38 and it remained same until the fifteenth year age of orchards in Bagalkot district. The cash inflow at the fourth year was Rs. 1,19,340 and it kept on increasing up to Rs. 2,15,560.00 during the twelfth year. Later it decreased 205 https:// www.rjas.info

Pomegranate Orchards for Financial Feasibility and Economic Viability to Rs. 1,54,700 during the fifteenth year age of orchards. The present value of the future return was calculated at 9.0 per cent discount rate (opportunity cost of capital). The cost per ha in pomegranate orchard from the fourth year was Rs. 56,217.46 and it remained same until the fifteenth year age of orchards in Koppal district. The cash inflow at the fourth year was Rs. 1,35,800.00 and it kept on increasing up to the twelfth year with Rs. 2,40,450.00. Later it decreased to Rs. 1,98,100.00 in the thirteenth year and upto Rs. 1,63,100.00 during the fifteenth year age of orchards. The future returns were discounted at 9.0 per cent discount rate (opportunity cost of capital) to get the present value. Table 5 Financial feasibility of investment in pomegranate orchards Particulars Units Bagalkot Koppal Net present value Rs./ha 3,02,602.65 3,87,900.02 (At 9.0 % discount rate) Benefit cost ratio Ratio 1.53 1.68 (At 9.0 % discount rate) Internal rate of return Per cent 19.76 % 22.45 % Payback period Years 6.11 6.04 Financial feasibility of investment in pomegranate orchards In order to examine the financial feasibility of investment in pomegranate enterprise, the measures of project appraisal were computed. The measures considered were net present value, benefit cost ratio, internal rate of return and payback period (Table 5). The per ha net present values of pomegranate were Rs. 3,02,602.65 and Rs. 3,87,900.02 for Bagalkot and Koppal districts, respectively discounted at the rate of 9.0 per cent opportunity cost of capital. The net present value of costs and returns were obtained by discounting the cost and return streams by the opportunity cost of capital. The benefit cost ratio obtained in pomegranate was 1.53 and 1.68 for Bagalkot and Koppal districts, respectively at 9.0 per cent discount rate. This represents the rate of return over the life period of the project (Hugar et al. 1991). Hence, the IRR indicated an important trait in investment than other criterias of evaluation. The value of IRR generally depends on the magnitude of returns realized in each year over the economic life period and more particularly in the initial years of pomegranate enterprise. The internal rate of return was computed by inter-polating two discount rates (lower and higher discount rates). The internal rate of return in pomegranate was 19.76 and 22.45 per cent in Bagalkot and Koppal districts, respectively. The internal rate of return was higher than the opportunity cost of capital of 9.0 per cent. This indicates a higher average earning power of money invested in the project. In the present study the payback period was about 6.11 years for the orchards in Bagalkot district and in Koppal district it was 6.04 years. This clearly indicated that it would take 6.11 years in Bagalkot district and 6.04 years in Koppal district to recover the entire establishment cost of orchard. The foregoing analysis revealed that NPV was positive, BCR was greater than one and IRR was higher than the opportunity cost of the capital (9.00%). The investments in pomegranate crop could be recovered in about six years after planting. The study identified IRR as the best criteria to judge the viability of pomegranate enterprise and to arrive at feasible pay back period. Thus, the results of this study clearly revealed that investments in pomegranate orchard were highly profitable, economically viable and financially feasible.

LITERATURE CITED
Anonymous. 2008. Economic survey, directorate of economics and statistics. Ministry of Agriculture, Government of India. Hugar L B, Murthy P S S, Umesh K B and Reddy B S. 1991. Economic feasibility of guava cultivation under scientific management - An empirical evidence. Agricultural Situations in India 46(4): 211-214. Raikar N A. 1990. Investment in production and marketing of cashew in Karnataka. M. Sc. (Agriculture) Thesis, University of Agricultural Sciences, Dharwad, Karnataka (India). Ramachandra V A. 2006, Production and marketing of sapota in Northern Karnataka: An economic analysis. M. Sc. (Agriculture) Thesis, University of Agricultural Sciences, Dharwad, Karnataka (India). Ravikumar K T. 2009. Investment pattern and maintenance cost in pomegranate orchards in Chitradurga district of Karnataka: An economic analysis. M. Sc. (Agriculture) Thesis, University of Agricultural Sciences, Dharwad, Karnataka (India). Subba R S, Raghuram P, Neelakantasastry T V and Bhavani D I. 2010. Agricultural Economics. Oxford and IBH publishing company Pvt. Ltd. New Delhi. pp 472-480.

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