Analysis of Profitability and Risk in New Agriculture Using Dynamic Non-Linear Programming Model

Rakesh Kumar Sharma, Prem Lall Sankhayan, Ranveer Singh

Abstract


Cropping pattern in the Himalayan region of India has undergone a significant change in the recent past. Introduction of
horticultural crops such as vegetables, fruits and flowers has led to more intensive agriculture. Such a change, resulting
in higher incomes and improvements of the overall living conditions has, however, been accompanied with increased
income risk. This emphasizes the need for proper analysis of the cropping pattern, at an appropriate scale, such as a
micro watershed. This was achieved by constructing a dynamic non-linear programming model incorporating
appropriate objective function, constraints and crop and livestock activity budgets along with risk component present in
the gross returns. The model was then solved under alternate policy scenarios by using General Algebraic Modeling
Systems (GAMS) for the next 20 years. The optimum cropping plans were then compared with each other and with the
existing plan. Tomato and carnation are the preferred crops, if the sole objective is profit maximization. Optimum plan
with risk consideration was also assessed by fixing the variance in gross returns at the current level. It reduced the area
under tomato in rainy season by growing capsicum and beans. Similarly, peas replaced tomato in winter season and
chrysanthemum replaced carnation. By comparing it with the existing plan, it can be inferred that the people are more
concerned to risk than the profits. The profits and risks from floriculture are relatively very high as compared to other
crops. By removing constraints in credit availability, irrigation facilities, transportation and market yards, large scale
production of vegetables and flowers can help in raising the income level.


Full Text: PDF DOI: 10.5539/jas.v2n1p59

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This work is licensed under a Creative Commons Attribution 3.0 License.

Journal of Agricultural Science ISSN 1916-9752 (Print) ISSN 1916-9760 (Online)

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