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A study of the cost of production of apples in shimla district of Himachal

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Progressive Research 9 (Conf. Spl. ) : 866-870 (2014) Society for Scientific Development in Agric. and Tech.

A STUDY OF THE COST OF PRODUCTION OF APPLES IN SHIMLA DISTRICT OF

HIMACHAL PRADESH
K. Kireeti1, Chandresh Guleria2, Deep Narayan Mukherjee2 and L.R. Sharma1
1
Dept. of Ag. Economics, College of Agriculture, Prof. Jayashankar Telangana
State Agricultural University, Hyderabad – 500030,
2
Ph.D. Scholar, Department of Social sciences, COF, Dr.YSPUHF, Nauni, Solan, HP-173230 E-mail id: thekireeti@gmail.com

ABSTRACT
The present study entitled “A study of the cost of production of apples in Shimla District of Himachal Pradesh”
was undertaken with a vision to study the economic part of apple production. Narkanda was selected randomly
as the ultimate block of study from the Shimla district of Himachal Pradesh state. The objective was aimed at
analyzing the condition of cost of apple cultivation. The study sample was drawn using random sampling
method in four stages making a total of 70 orchardist households from five altitudinal zones namely = 1500 m,
1500-2000, 2000-2500, 2500 -3000 and 3000 m amsl respectively in the study area. General mathematical and
statistical methods were utilized to perform the present study. The apple had the pride of having more than 89
per cent of the orchard area in the study region. Majority of sampled orchardists in the study region, fall in the
income scale of T 2-5 lakhs. On an average per tree establishment cost worked out to R 3318.19 in the study
area. Maintenance cost of bearing apple per hundred in the study area ranged between R 60,169.88 to
61,769.01in different elevations and net return varied between R 162,817.14 and R 269,362.63.17 in the assorted
elevations.

Key words : Cost of production, sampling frame, apple cultivation.

Horticulture occupies very important position in the Apples constitute a major part of the economy of
predominantly agricultural economy of western Himalaya, Himachal Pradesh, with a turnover of over Rs. 3000 crore
among all the fruits grown in the Himachal, Apples are and accounting for almost 10 percent of the gross
most widely planted and is commercially the most domestic product. In the post-independence period
important fruit crop. In this background a close look at the especially after the statehood in 1971, there has been a
economics of apple cultivation become highly relevant for strong backing from the state for apple plantations.
study to determine the costs, the cultivation of apple crop Consequently the area under apple cultivation has
in Himachal Pradesh shows particular interest for a increased substantially from a mere 400 hectares in
number of reasons. In terms of both area and production, 1950s to 114939 hectares in 2011-12. Of the total area
apple is very beneficial fruit crop. Apple is an extremely under fruit production, apples make up for more than 48
important source of nutritive diet, this provides a major percent and of the total fruit production, apple alone
source of income and employment also, It’s production in accounts for more than 74 percent. Considering the vital
Himachal Pradesh and its marketing all over the country role that Apple has in the economy of Himachal Pradesh,
as well export promotion to other countries by several there is a need to study the economics of apple
government initiated programs and policies. production and problems encountered by the orchardists
The cost of cultivation is a subject of attention to a in the state.
wide range of users of cost data and it assumes particular An orchard is a long term investment and careful
importance in the area of planning. The efficacy of data on planning is essential to ensure economic success. Apple
the cost of cultivation of horticultural commodities for orchard is no exception in this regard (Marini, 1997).The
planning is appreciated as these data inform the planners gains in production have come essentially from increase
about the area where it is economical to produce various in the acreage rather than through intensive cultivation
commodities and the regions that would accordingly be practices. The situation calls for the intensive use of
most appropriate for the development of industries based knowledge and skills based farming to realise potential
on the agricultural raw material. At the micro level, it productivity.
enables the farm management experts to examine the
efficiency of the various cultivation practices and revise MATERIAL AND METHODOLOGY
the crop planning by furnishing information regarding their Sampling frame
profitability. This facilitates the experts to make practical To obtain data for the research survey, a sample is usually
recommendations for farm planning aimed at better required. The reason being, the population may be so
allocation of existing resources and introduction of large as to make it difficult to get to every individual.
improved agronomic practices that would increase the Therefore population should be sampled keeping the
competence in apple production. confinements due to time and money. A sample is a
 A study of the cost of production of apples in Shimla district of Himachal Pradesh 867

subset of a population from which to obtain information. Cost structure, output and returns from apple crop grown
The multistage random sampling technique was applied in study area have been discussed under, cost of
for the selection of households in the selected block. The plantation, cost in maintaining the orchard in non-bearing
entire sampling plan consisted of several steps. At the first stage and expenditure incurred during bearing stage. The
stage one apple producing district from state of Himachal summation of cost incurred during initial investment and
Pradesh was chosen purposively. At the second stage non bearing stage is termed as establishment cost, from
one block from the selected district was chosen randomly. which annual amortized established amount cost has
In the third stage the block was divided into five altitudinal been worked out.
zones and were designated as E1, E2, E3, E4 and E5 for
For estimating the cost and returns estimates for
=1500m, 1500-2000m, 2000-2500m, 2500- 3000m,
apple crop, it has been assumed that:
=3000m above msl respectively. Selection of villages
constitutes the fourth stage in the sampling frame. In the (i) First bearing starts from 9th year in the study area.
fourth stage, a list of villages falling under each altitudinal (ii) The major operations and input requirement vary in
zone was prepared along with the area under apple and different ages of the orchards, therefore, average values
other crops. There after 2 villages were selected randomly have been taken as a whole
from each altitudinal zone. Thus, in all 10 villages viz.,
(iii) Total economic life of the plantations is 40 years in the
Kirti, Namjha, Mangsu, Shamathla, Thanadar, Pamlai,
study area.
Jarol, Tikkar, Saroga and Shilajan were ultimately
selected for the present investigation. The analysis in this section has been divided into three
parts.
A complete enumeration of all the 10 villages was
done and the list of the households was prepared with the (a) Initial investment
help of patwari of the village. From the list of commercial (b) Cost during non-bearing stage (other than plantation
apple growers so prepared, 7 households from each cost), and
village were selected based on equal allocation sampling
(c) Bearing stage cost
method. Thus a sample of 70 apple growers from the
block was drawn at random. In apple, initial investment is quite heavy for reasons of the
cost involved in land development, digging of pits,
General mathematical calculations have been used
application of manure and fertilizers and material cost.
in the present study and the procedure of cost of
Growers have to incur cost on maintenance for about 8
cultivation for the orchards has been adopted in order to
years without any returns. Farmers can take inter-crop
take all the relevant data for calculating the economics of
from the orchard up to 3rd year after which this practice
apple production.
becomes uneconomic due to competition for nutrition and
RESULTS AND DISCUSSION shade effects.
Cost and Returns Structure in Apple Cultivation The study is based on primary data, after analyzing

Table 1 : Initial costs of Apple Orchards (Per 100 Plants) in the study area

Particulars Unit Quantity Value (T ) Percentage

1. Labour Cost Man Days 46.58 9314.44 21.46
(a) Family Man Days 9.46 1890.66 4.36
(b) Hired Man Days 37.12 7423.78 17.11
2. Material Cost
(a) Plant material Number 100 7114.25 16.39
(b) FYM Kg 3250 11375.46 26.21
(c) Fertilizer Kg 100 1699.00 3.91
3. Interest on WC T @ 11.70 % of WC 1615.33 3.72
4. Risk Margin T @10.00 % of WC 2761.25 6.36
5. Managerial Cost T @10.00 % of WC 2761.25 6.36
6. Land Revenue T - 39.71 0.09
7. Depreciation T - 1485.70 3.42
8. Rental value of Land T - 4525.00 10.43
9. Interest on Fixed Capital T @ 11.70 % of WC 707.90 1.63
Total Variable Cost T - 34750.32 80.07
Total Fixed Cost T - 8648.96 19.93
Total Plantation Cost (T) T - 43399.28 100.00
868 Kireeti al.,

Table 2 : Maintenance cost of non - bearing apple per hundred apple plants in the orchards of study area, 2012-13 (Percentage)

Particulars Age of plantation in years

2 3 4 5 6 7 8
1. Labour cost 18.39 17.54 18.43 17.15 16.56 14.98 12.90
(a) Family 10.69 9.01 10.22 9.03 8.30 7.51 6.44
(b) Hired 7.70 8.53 8.21 8.12 8.25 7.48 6.42
2. Manure 11.51 13.63 13.95 13.21 12.79 12.89 13.00
3. Fertilizer 3.29 3.73 4.21 4.73 4.72 4.51 4.95
4. Plant protection 3.51 3.71 3.81 4.08 4.45 4.50 4.00
5. Replacement cost 1.77 0.88 0.45 NA NA NA NA
6. Interest on working capital 1.63 1.78 1.79 1.76 1.77 1.72 1.66
7. Managerial cost 2.78 3.05 3.06 3.01 3.02 2.94 2.84
8. Risk margin 2.78 3.05 3.06 3.01 3.02 2.94 2.84
9. Land revenue 0.06 0.05 0.04 0.03 0.03 0.02 0.01
10. Depreciation 5.63 4.25 3.40 2.87 2.39 2.03 2.25
11. Rental value of owned land 20.32 17.73 14.13 11.81 9.63 8.13 7.48
12. Interest on fixed capital. 3.04 2.58 2.05 1.72 1.41 1.19 1.14
13. Interest on past establishment cost 25.30 28.03 31.61 36.60 40.21 44.15 46.98
Total variable cost 34.97 38.36 38.55 37.93 38.02 36.97 35.70
Total fixed cost 65.03 61.64 61.45 62.07 61.98 63.03 64.30
Total cost (T) 20073.94 26496.19 33298.53 39407.52 47328.41 55652.55 66161.74

the data and estimating the inputs and outputs of orchards year to 18.43 per cent in 4th year. Cost of hired labour
of different age groups - (Singh V B -2006) and (Kanwar S ranged from 6.42 per cent in the eighth year to 8.53 per
M -1988) cent in third year. In absolute terms, the cost of necessary
Cost structure during non- bearing years in Himachal critical inputs like fertilizer and plant protection increased
Pradesh with increase in the age of plants. In percentage terms,
the share of critical inputs together was highest in sixth
(a) Initial investment year and lowest in second year.
It is imperative to examine the resource position of the As expected interest on working capital exhibited
growers before deciding to establish an orchard. It is clear positive relationship, age of plants until 6th year then was
from the table that, apple orchardists in the study area decreased in last two years, while interest on fixed capital
incurred a total cost of 43,399.28 per hundred plants on decreased with the age of plants. Managerial cost and risk
an average in the first year of plantation. Labour margins exhibited positive trends until fourth year;
investment was around 21.46 per cent and cost incurred thereafter-declining trend was noticed with age in this
on material inputs averaged nearly 46.51 per cent of the category of costs. The depreciation cost, rental value of
total cost. Managerial cost and risk margin each land and interest on fixed capital declined with the age
accounted for 6.36 per cent of the total cost. Rental value of plants. The proportion of interest on past
of land shared 10.43 per cent of the total cost at overall establishment cost in the total cost exhibited positive
level. relationship with the age of plants during non-bearing
(b) Maintenance cost during non-bearing stage years as the their values were ascending from 25.30 per
Maintenance cost during non-bearing stage was cent in 2nd year to 44.15 per cent in 8th year. The total
estimated based on information collected from orchardists variable cost during the non-bearing years was found
from entire sample irrespective of elevation zones. This highest (38.55 %) in the fourth year and lowest in second
was possible because the orchards in the study block are year (34.97%). The total fixed cost during the non-bearing
quite old and farmers are replacing old plants with new years was in the range of 61.45 per cent (fourth year) and
plantations. Maintenance cost per hundred plants during 65.03 per cent (second year).
non-bearing stage for various age groups of apple Among the fixed costs, interest on establishment
plantation in Narkanda block is given in Table 2. cost accounted for the maximum proportion of the fixed
It is obvious from the table that the maintenance cost costs in the study area. Next in importance was rental
of non-bearing plants has a positive relationship with age value of land whose share in total cost ranged between
of plants. However, in case of labour, material and other 7.48 per cent (8th year) to 20.32 per cent in second year.
costs no perceptible pattern could be observed between The total maintenance cost during non-bearing stage was
plantation age and different costs during gestation period. mounting from T 20,073.94 per 100 plants in 2nd year to
T 66,161.74 per 100 plants in 8th year. It depicts that the
Total labour cost varied from 12.90 per cent in the 8th total annual costs during non-bearing years, increased
 A study of the cost of production of apples in Shimla district of Himachal Pradesh 869

Table 3 : Cumulative establishment cost per apple tree using interest rate of 11.70 per cent. In other words, it is
(T per tree) akin to the situation where total establishment cost has
been assumed to be borrowed at the rate of 11.70 per cent
Age in years Annual cost (R) Cumulative cost
interest rate and prorated figure presents the value of
1 433.99 433.99
installment to fully repay the amount in 32 years.
2 200.74 634.73
3 264.96 899.69 A cursory glance on the table indicated that the total
4 332.99 1232.68 labour cost varied from 26.36 per cent in E3 elevation to
5 394.08 1626.76 27.82 per cent in E2 elevation. At overall level, the labour
6 473.28 2100.04 cost constituted 27.43 per cent of the total maintenance
7 556.53 2656.57 cost. Labour is used in the application of critical inputs,
8 661.62 3318.19 manure, in training and pruning, harvesting operations in
the study area indicating thereby that apple cultivation is
with increase in the age of plantation. During 8th year, the labour intensive activity.
total cost was found more than three times as compared It is significant to note that, orchardists of lowest
to cost incurred in second year. elevation (E1) use less hired labour as compared to the
Cumulative Cost of Plantation orchards in other elevations. The fertilizer costs works out
to 19.17 per cent of the total cost under pooled conditions.
The cumulative cost of plantation in Narkanda block
per tree was worked out and placed in Table 3. The However, the nutrient costs ranged from 20.47 per
cumulative per tree establishment cost worked out to ` cent in highest elevation to 20.99 in lowest elevation,
3,318.19. The annual cost per plant worked out to ` which were almost similar. Farmers are using heavy
433.91, 200.74, 264.96, 332.99, 394.08, 473.28, 556.53 doses of supplementary inputs to replenish the soil fertility
and ` 661.62 during 1st, 2nd, 3rd, 4th, 5th, 6th, 7th and 8th status. The share of plant protection costs ranged
years respectively. between 13.40 per cent (E2 elevation) to 15.76 per cent
(E1 elevation). The higher plant protection costs in lowest
Maintenance cost during bearing stage
elevation may be attributed to higher incidence of pest
Since the life cycle data based on cross sectional and diseases in the area.
information on apple plantation was not available during
The management cost and risk margins were
bearing years, therefore, cash flow analysis was not
worked out at the rate of 10 per cent of the working capital
attempted. Thus, the cost and returns analysis was carried
in order to arrive at the true cost of cultivation. The
out on an average age basis in the bearing stage of
managerial cost and risk cost together ranged between
sampled apple orchards in each elevation zones. The
9.18 per cent in lowest elevation to 10.58 per cent in E4
detailed analysis of maintenance cost of apple during
elevation and under pooled condition, it works out to be
bearing stage in the study region for the apple orchards is
10.18 per cent. The proportionate share of variable cost in
given in the Table 4. The establishment cost has been
different elevation zones worked out to 57.74, 64.57,
spread over 32 years of bearing life on prorated basis

Table-4 : Maintenance cost of bearing apple per hundred plants on the orchards of study area, 2012-13. (Percentage)

Sr. Particulars Elevations

No E 1 E 2 E 3 E 4 E 5 Pooled
1 Labour Cost 26.38 27.82 26.36 26.45 27.08 27.43
a Family 17.24 10.23 8.68 8.27 9.59 10.35
b Hired 9.14 17.58 17.68 18.18 17.50 17.08
3 FYM 15.13 12.52 12.79 12.59 12.86 13.46
4 Fertilizer 5.86 7.80 8.01 8.08 7.61 5.71
5 Plant Protection 15.76 13.40 13.63 14.02 14.66 14.61
6 Interest on WC 2.68 3.00 3.05 3.09 3.08 2.98
7 Managerial Cost 4.59 5.13 5.21 5.29 5.26 5.09
8 Risk Margin 4.59 5.13 5.21 5.29 5.26 5.09
9 Land Revenue 0.04 0.07 0.08 0.08 0.05 0.06
10 Depreciation 2.29 2.41 2.40 2.53 2.12 2.41
11 Rental value of Owned Land 6.81 7.56 7.84 7.56 7.22 7.58
12 Prorated Establishment Cost 13.25 12.51 12.71 12.38 12.26 12.91
13 Interest on Fixed Capital 2.62 2.64 2.69 2.64 2.53 2.69
Total variable Cost 57.74 64.57 65.59 66.55 66.23 64.01
Total Fixed Cost 42.26 35.43 34.41 33.45 33.77 35.99
 870 Kireeti al.,

Table 5 : Maintenance cost, yield and returns from apple orchards during bearing Stage in Himachal (per 100 plants), 2012-13

Items Elevations
E1 E2 E3 E4 E5 Pooled
Total cost (T) 60169.88 63722.02 62706.50 64421.61 65010.12 61769.01
Average production (Q) 38.92 70.53 74.16 71.78 70.47 65.17
Gross returns (T) 222987.02 314372.00 332069.12 318721.52 313236.46 300277.22
Gross margins (T) 188242.25 273226.84 290939.21 275250.64 270183.30 260736.81
Net returns (T) 162817.14 250649.98 269362.63 254299.91 248226.34 238508.21
Average cost per kg. (T) 15.40 9.08 8.44 9.08 9.28 10.01
Output / Input ratio 3.76 4.93 5.34 4.92 4.80 4.89

65.59, 66.55 and 66.23 per cent of the total maintenance altitude and highest in E3 altitude. The cost of production
cost in E1, E2, E3, E4 and E5 respectively. was found highest (` 15.40 per kg) in E1 elevation and
Among the fixed costs prorated establishment cost, lowest (` 8.44 per kg) in the E3 elevation zone. At overall
rental value of land accounted for the maximum level, the average cost of production per kilogram comes
proportion of the fixed costs in all the elevation zones out to ` 10 per kg.
under study. The share of depreciation and interest on The output-input ratio, which is considered the index
fixed cost hovered around 2.5 per cent in each elevation of profitability, was lowest of 3.76 in lowest altitudinal zone
zone. The total fixed cost during the bearing years was and highest of 5.34 in E3 elevations. At overall level, the
found highest (42.26 %) in the lowest elevation zone and output-input ratio worked out to 4.89. This implies that, the
lowest in E4 (34.41 %) zone. apple industry in the study area is a high pay off enterprise
The total maintenance cost during bearing stage as each unit of rupee expenditure is resulting on an
varied from ` 60,169.88 per 100 plants in lowest zone to ` average an income of ` 4.89
65,010.12 per 100 plants in E5 zone. At overall level, the CONCLUSION
total maintenance cost worked out to rupees ` 61,769.01
Apple cultivation is profitable economic activity in the state
per 100 plants of which the proportion of variable cost was
of Himachal Pradesh compared to other agriculture food
64.01 per cent and that of fixed cost was 35.99 per cent.
crops. It is labour intensive, farm based and commercially
Maintenance Cost, yield and returns from apple attractive economic activity. The income earned from this
orchards of Himachal Pradesh crop is much higher than any horticulture crop, if it is done
The maintenance cost, average yield, net returns, cost of is a systematic way. Another conclusion emerged in our
production and output-input ratio of apple cultivation for study, that the avg. cost to produce one kilogram of apple
the year 2012 for different elevations has been is nearly 10.01/ kg and income generation from apple
summarized in Table 5. It can be seen from the table that cultivation could vary accordingly based on the variety,
on average situation, the total output of apple per 100 quality parameters and the market situation. Hence for
plants works out to 65.17 quintals. The production was reaching the real conclusion a net income of 4.89 is
found lowest in lowest elevation (E 1) and highest in E3 earned with investment of 1.00 from apple cultivation in
elevation. The relatively lower production in E1 elevation the study region of Himachal Pradesh state (India) but it is
may be attributed to lesser comparative advantages very little if we compare it with other apple producing
prevalent in this elevation due to change in climatic countries in the world.
conditions.
REFERENCES
However, there is no existence of much difference in
1. Kanwar,S.M (1988), Apple- Production Technology and
the outputs of E4 and E5 elevation orchardists. The low Economics, Tata Me Grew-Hill publication New Delhi-
average output of apple in E5 elevation is due to smaller 701: 739 - 40.
holding size in this elevation zone. The gross returns 2. Marini R.P. (1997). Growing peaches and nectarines in
varied from ` 2.23 lakhs in E 1 elevation to ` 3.32 lakhs in Virginia, Virginia cooperative extension. Horticulture
E3 altitudinal range. On an average, the orchardists are Publication, pp 422–519
earning about ` 3lakhs as gross income per 100 plants in 3. Singh,V.B, (2006). Horticulture for Sustainable Income and
Environmental Protection., Concept publishing company,
the study area. Under pooled conditions, the net profits
New Delhi.
and gross margins work out to ` 2.38 lakh and ` 2.61
lakhs respectively. These figures were lowest in E1

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