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Production Efficiency of Vermi-Compost E-mail
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Monday, 02 July 2007
Production Efficiency of Vermi-Compost

Economic Impact and Production Efficiency of Vermi-Compost Use in Agriculture: Methodological Approaches

B. V. Chinnappa Reddy1, P.N. Subba Reddy2 and  R. D. Kale3  

               1 Professor and Head, Department of Agricultural Economics,

                      Agriculture College, University of Agricultural Sciences,

                      VC Farm, Mandya- 571 405 Email: This email address is being protected from spam bots, you need Javascript enabled to view it

                  2  Associate Professor of Sociology, Department of Agricultural Economics

                    Agriculture College, University of Agricultural Sciences, VC Farm, Mandya

                  3 Professor and Head (Retd), Department of Zoology University of Agricultural Sciences,

                    GKVK, Bangalore-560065


Composting of agricultural waste is a traditional practice in India. Enrichment of soils with use of abundant organic matter especially with vermicompost (VC) improves ecology and environment besides contributing to productivity of crops. In recent years use of vermicompost in crop production especially in perennials is gaining popularity due to its beneficial roles and functions. Production of vermicompost could be an important income generating activity to farmers as it fetches a good price ranging between Rs 3000 and Rs 7000 per ton. The information on economics of VC production at farm level besides its impact on farm production in terms of efficiency and profitability will be highly useful as an extension tool to popularize its production and use. The production of vermicompost calls for a considerable amount as initial investment which lasts for several years. Hence, we need to establish economic viability of investment on VC production facility in terms of project evaluation indicators such as internal rate of return (IRR), benefit cost ratio (BCR) and net present value (NPV). For this net cash flow from vermicompost production units have to be estimated.

Using the approach ‘with and without’, impact of vermicompost is assessed based on sample farmers who use vermicompost and control farmers (without VC use). For assessing the economics and profitability of vermcompost use, typical economic measures need to be estimated. Production costs including that of vermicompost are categorized as variable costs and fixed costs. Variable costs are those which vary with the level of output. They include expenditure on seed, fertilizer, labour, farmyard manure, pesticides, interest on working capital etc.  Fixed costs do not vary with the level of output. They include depreciation on machinery, equipment, livestock and other capital components, rental value of land, land revenue, insurance, interest on long term capital etc. Total income from crop production is derived by multiplying output with market prices.  Gross profit is computed as total income minus variable costs and net income (profit) is derived by deducting total costs from total income. Using the approach of partial budgeting method, profitability of VC use in crop production can be estimated.

A production function frame work can be used to analyze the productivity and efficiency of resources including vermicompost. A production function reveals the functional relationship between inputs and outputs describing the response of output to varying levels of inputs. In agriculture Cobb-Douglas type of production function is commonly used as it has appealing properties. To know the contribution of VC technology to crop output and to identify sources of increased output, a methodology developed by Kalirajan and Shand (1997) can be used. Using this methodology, the total factor productivity (TFP) can be estimated to know contribution of technologies like vermicompost to the increased output of the crop. TFP can be defined as growth in output not explained by input growth, that is, contribution of technology and non-input factors such as infrastructure (roads, markets etc). In this paper detailed methodologies are given with appropriate illustrations to evaluate investment on production of VC and impact, profitability and TFP of VC use in crop production.

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