The document analyzes the costs and benefits of three agricultural interventions in Andhra Pradesh: 1) Improving the availability of certified seeds, 2) Establishing custom hiring centers to increase mechanization, and 3) Improving extension services through ICT tools like SMS and IVRS. For all three interventions, the analysis found benefit-cost ratios above 1.9, indicating the interventions would provide economic benefits that exceed their costs.
1. Cost-benefit analysis of agricultural interventions
in Andhra Pradesh
Surabhi Mittal
Agricultural Economist
India, Vijayawada, 18-20 June 2018
2. Background
•The 12th five-year plan aims to promote agriculture at the
rate of 6% in Andhra Pradesh.
• 62 % of the population is dependent on this sector for their
livelihoods.
•This sector contributes around 27.8 percent to the GSDP
•The cost of production is increasing faster than the
productivity gains
3. Government of Andhra Pradesh Strategy
• Transform the agricultural and allied sectors with specific emphasis on
increasing the productivity of the crops
• This is combined with a goal of doubling farmer incomes by 2022 as
set out by the central government.
• In this new outlook, it is important to assess how the cost of
production can be reduced, yields can be enhanced and, with
appropriate pricing policies, how farmers can attain improved
incomes.
6. The Problem
• The seed replacement rates and varietal replacement are low for most
of the crops
• This hinders introducing high yielding varieties
The Solution
• Encourage farmers to adopt certified seed production
• Improved SRR which would result in producing higher yields
• Government of Andhra Pradesh encouraging Seed Village Programme
•quality seed is available at the doorstep of the farmers, at affordable prices
7. CostsTotal cost- Rs. 400 crores
(higher SRR over a period of 3 years)
Cost of production of the
additional seed required to
achieve the higher SRR
Cost of promotion to increase
the adoption of the improved
seed (rs 186/ha)
Expanding extension,
demonstration and field
days
8. Benefits
Increased yields
because of the
use of certified
seed.
Higher yields
lead to increased
production (10%
is assumed)
Better incomes
Total benefits -
Rs. 6,176 crores
11. The Problem
• Challenge for availability of machines for small and fragmented land
holdings
• Poor affordability of over 80% of the small/marginal holdings
The Solution
• The focus is to increase agricultural productivity by mechanization
• reduce the problem of the high cost of labor and the increasing unavailability of
labor.
• aim is to increase the level of mechanization, even for small farms.
• Andhra Pradesh government plans to increase available of machinery
through Custom Hiring Centers (CHC)
•To achieve the benefits of CHC’s machinery needs to be used properly, technical
experts and extension agents have a key role in ensuring that the CHCs are
working efficiently
12. Costs
• Well stocked CHC can serve approximately 500 acres of land
every year and thus in Andhra Pradesh 28,679 CHCs will be
required
Capital cost for establishing
the CHCs
• assuming 75% of the total capacity utilized
operational costs every year
for a period of 5 years
• 5 percent of the total annual cost of the CHC
Cost of promotion and the
administrative costs of
setting up the CHCs
• estimated at Rs. 11,892 crores.Total cost of the intervention
13. Benefits
• Reduced cost- seed and fertilizer by 15%; animal labor by 60%;
and human labor by 20%.
Reduced the cost of
production
• yield enhancement because of the efficient utilization of inputs
from mechanization
• assumption- 2% yield gains per year over a period of 5 years.
Income gain
• 10% of the capital cost
Benefit at end of 5th year-
residual value of the
machineries
• Estimated at Rs. 22,574 crores.The total benefit
16. The Problem
• Public sector extension services are usually criticized for their
ineffective targeting, poor reach and the huge administrative cost of
delivering information
The Solution
• This intervention seeks to rely on ICT for improving the existing
extension services.
• The overall goal of using the mobile phone-enabled information
delivery mechanism is to have inclusive growth by reducing the
knowledge gap between large and small farmers and by creating
awareness.
17. Costs
• The costs is a sum of three components (for mobile users)
• Cost of delivering agricultural advisories through SMS
• Cost of IVRS (Integrated Voice Recording Service)
• Other costs of operations.
• The total costs of the intervention are Rs. 1,003 crore over five years
Benefits
• Increased farmer incomes- HH that have access to ICT based advisories have 16 percent
higher profits
• Utilization assumed to be 60% in 5 years
• average of small and marginal farmers is taken as the base income figure to remove the
bias because of large farming households
• Total benefits of this intervention are estimated at Rs. 6,250 crores.
