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Economics of Bamboo Cultivation: A case study from Punjab, Pakistan

Technical Report · December 2013

DOI: 10.13140/RG.2.2.21765.45286

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Economics of Bamboo Cultivation: A
case study from Punjab, Pakistan

Hassnain Shah
Muhammad Sharif
Muhammad Fiaz Joya

Social Sciences Institute

National Agricultural Research Centre

Islamabad, Pakistan

December 2013
 Introduction:

In Asia, bamboo is ecologically, socially and commercially an important plant (IDRC 1980,
Austin et al 1983). It is equally obvious that there exists a potential to significantly increase the
production of bamboo and improve its productivity in present and alternative uses. In other
words, bamboo has 'value'. It is seen as a relatively scarce resource (due to low productivity of
natural stands) with many uses in manufacturing, as a food and in making paper (MacCormac
1985).

Efforts were made in eighties to introduce different species of bamboos from Bangladesh, China,
Sri Lanka and Thailand in to Pakistan. Some of them are well adapted to climatic conditions of
Punjab. 21 species were introduced from Bangladesh and 4 from Thailand and China. Some of
the outstanding species in this regard are Dandrocalamus giganteus, Dandrocalamus stictus,
Bambusa arundinacia, Bambusa tulda, Dandrocalamus hamiltonii, Bambusa vulgaris,
Dandrocalamus longispthus and the ornamental species Phyllostachys aureau. Bamboo
plantations have been raised on good agricultural lands in Sargodha, Jhang, Khoshab and
Mandibhaudin districts of Punjab province in Pakistan. Most of these plantations are on 0.5 acres
of lands. In Chunian sub division of Kasur district, small farmers have also successfully
established small bamboo groves of 4-10 acres area. Bamboo plantation area increases or
decreases with the market demand in the domestic as well as in the Middle East markets.
Dandrocalamus stictus, Bambusa tulda and Dandrocalamus hamiltonii are the major species
grown on private farmlands (Global Forest Resources Assessment 2005).

Bamboo has a rich history, and a promising future as a part of the solution to 21st century
challenges. A giant, fast-growing, wood like grass and one of earth’s oldest and most precious
plant materials, it has benefited human societies since times before recorded history. Today, it
helps more than two billion people meet their basic needs, and – as a widespread, renewable,
productive, versatile, low- or no-cost, easily accessed, environment-enhancing resource – it has
great potential to improve life even more in the years ahead, especially in the villages and
countryside of the developing world (Sastry, 2003a; Sastry, 2003b).
As global population climbs and resources are stretched, bamboo can continue to serve the poor,
in particular, across a huge spectrum of uses, ranging from shelter and piping to tools and
musical instruments. And with demand exceeding the sustainable yield of the world’s forests, it
offers many ways – through traditional as well as modern industrial applications – of bridging a
growing gap (Sastry, 1999, 2000).

Bamboo is a versatile multipurpose forest produce which plays a vital role in the world’s
industrial and domestics economics. It has been used, especially by the natural people, for their
shelter and for every day utilities. It is described as the “word of the poor”, green gold of the
forest and friend of the people. In many parts of the world it is used as a food, fodder, the
primary construction material and for making great variety of useful objects from kitchen tools,
to appear to dinnerware (Nagpure et al 2008).

Now, it is being realized that development based on bamboo is an effective way to improve the
livelihoods of rural poor people in bamboo growing areas because they generally have adequate
access to these crops and bamboo can be grown or harvested in forest margins or agro – forestry
situation requiring a modest capital investment to generate farm income. With these ideas, the
present work has been undertaken to study the economics of bamboo production with the
following specific objectives.
1. To workout costs and return from bamboo production in Punjab.
2. To evaluate economic financial viability of bamboo production.
Methodology
The estimates are based on the information provided by the key informant/bamboo growers
collected through a survey in bamboo cultivation areas of Qasoor and Mandi Bahaudin.
Economic Evaluation of Investment of Bamboo
The per acre cost of production of bamboo plantation at constant prices starting from first year
up to reaching the first harvesting maturity after 5 years and subsequent production cost for
ratoon crop for every three years interval was calculated. To test economic financial viability of
bamboo production, project evolution techniques were used, which comprised Net present value
(NPV), Benefit cost ratio (BCR), and Internal rate of return (IRR). The definitions of these
parameters / indicators are given below.
Net Present value
The discount rate/compound rate which reflects the price of the investment funds is used to
arrive at costs and returns to a common point of time. These costs are subtracted from returns to
get the net present value of the project. The decision criteria are to check the profitability, If
NPV>0, investment is worthwhile, NPV<0, investment is not worthwhile NPV=0, indifference
case.
Benefit cost ratio
It is the ratio of the discounted value of all cash inflows to the discounted value of cash outflows
during the life of the project. The decision criteria are uses for profitability If, B/C> 1,
investment is worthwhile, B/C< 1, investment is not worthwhile, B/C = 1, indifference case.

Internal rate of return

The internal rate of return (r) is that discounted rate at which the NPV is zero. Accordingly the
derived discount rate (IRR-r) is compared with the price of the investment funds i.e. market
interest rate (i) to know the worthiness of the project.
If, r>i, investment is worthwhile, r<i, investment is not worthwhile, r = i, indifference case

To bring parity between investment cost and benefits, the input outputs were evaluated at 2011
prices as accordingly cash out flows (cost) and cash inflows (returns) series were generated for
discounting cash inflow and outflow streams discounting rate of 18% was considered.
Cost of production

The per acre cost of production of bamboo plantation at constant prices starting from first year
up to reaching the first harvesting maturity after 5 years and subsequent production cost for
ratoon crop for every three years interval is presented in Table 1. The individual budgets for
different years are presented in the Annexure-I.

Table 1. Cost of Production of bamboo

Value in each Year
Items 1 2 3 4 5 3 years
(Ratooning)
Cultivation for bamboo 1600 1600 1600 0 0 0
Leveling 1500 0 0 0 0 0
layout and planting (man days) 1200 0 0 0 0 0
Nursery Cost 4200 0 0 0 0 0
Transportation 1200 0 0 0 0 0
Replacement @ 10% 540 540 0 0 0
Irrigations Canal 0 0 0 0 0 0
Irrigations T.well 1000 5000 5000 5000 5000 15000
Labor charges for irrigation @
4Hrs/Acre 300 2100 2100 2100 2100 6300
Urea (bags) 0 3200 3200 3200 3200 9600
DAP (bags) 0 4200 4200 4200 4200 12600
Labor charges for fertilizer 0 120 120 120 120 360
Pruning etc 0 300 300 0 0 0
Weeding/hoeing 900 900 900 900 900 2700
interest @ 18% on working
capital 1980 2974 2974 2794 2794 8597
Land rent 0* 30000 30000 30000 30000 90000
water Charges 0 300 300 300 300 900
interest @ 18% on fixed capital 0 5454 5454 5454 5454 16362
Total Cost 13880 55248 55248 54068 54068 163619
Total Cost for reaching 163619
harvesting/maturity 232510
Sale value 275000 300000
Net Income with rent 42490 136381
Net Income Per year 10622 45460
Net Income without rent 162490 226381
Net income per year (without
rent) 40622 75460
* Assumption: Farmers grow crop initially for one to two years. For the present study it is
assumed that farmer will get benefits equal to one year normal crop form initial intercropping for
first one to two years. Since, income from intercropping has not been considered while
calculating economics and further analysis was performed considering 4 years except for initial
plantation cost.

Financial analysis

Bamboo cultivation is financially viable at the above expenditure and income levels. The
financial indicators for one acre bamboo plantation are given below:

NPV Rs.54605
IRR 27%
PWC @18% 322711
PWB @ 18% 269300
BCR 1.24

Conclusion

The success of bamboo cultivation in particular and other forestry in general will depend upon
their relative costs and benefits. Bamboo, either as a plantation or integrated into a farming
system as a crop, has potential, for many of the reasons. It is economically viable and has future
market potential. It needs less labor and is drought tolerant.
Region or site specific factors of environment, market demands, relative resource costs and
product prices, etc will be the key determinants of bamboo cultivation. A second characteristic is
that the decisions become more micro-economic rather than socio-political (unless the
government is willing to incur costs in the form of subsidies or transfer payments for a perceived
social benefit).
This means that local communities or individual farm households will decide if bamboo should
be cultivated. This also means bamboo must be economic (per unit land area) not just compared
to other tree species but compared to agricultural crops too. Or at least, it must complement crop
production without reducing farm household income. Keeping in view the livelihood structure of
the farming communities, bamboo cultivation will be most suitable to large and absentee farmers
for most of the reasons.
References:

Austin R, K Ueda and D Levy.1983. 'Bamboo' 2nd edition by Weatherhill Inc. New York NY.
Global Forest Resources Assessment 2005. Pakistan Country Report on Bamboo Resources
Peshawar May,2005. Forestry Department Food and Agriculture Organization of the
United Nations FRA Working Paper 128. Rome, 2006.
IDRC 1980. 'Bamboo Research in Asia' Proceedings of a Workshop, IDRC 159e, 1980.
MacCormac C W 1985. Economics for Bamboo Forestry Research: A Rationale and Some
Suggested Approaches. Paper presented at the International Bamboo Workshop, 6-12
October 1985, Hangzhou, People's Republic of China.
Nagpure S. C., D. P. Wahile and Anita G. Rangire 2008. Economic of Bamboo Production in
Maharashtra State. Proceeding of International Conference on Improvement of Bamboo
Productivity and Marketing for Sustainable Livelihood. 15th - 17th April, 2008, New
Delhi (214-228).
Sastry, Cherla. 1999. Bamboo as the alternative resource for the coming century. Asian Timber.
Vol. 18 (11) pp. 20-23.
Sastry, Cherla. 2000. Insights into the exciting commercial uses of Bamboo. Asian Timber Vol.
19 (2) pp. 20-25.
Sastry, Cherla. 2003a. Bamboo and Global Development. Paper presented at BAMTECH
Seminar, Guwahati, India.
Sastry, Cherla. 2003b. Bamboo and Human Development. Development Express Vol. 2.
Canadian International Development Agency – Policy Branch.
Annexure-I
Table1. Cost of Production for first year
1st year
Items Unit Number Rate Value
Additional Cultivation for bamboo No. 2 800 1600
Leveling No. 1 1500 1500
layout and planting (man days) 4 300 1200
Nursery Cost No. 120 35 4200
Transportation No. 120 10 1200
Additional irrigations Tube well No. 1 1000 1000
Additional irrigations Canal No. 1 0 0
Labor charges for irrigation @ 4Hrs/Acre No. 2 150 300
Weeding/hoeing No. 3 300 900
interest @ 18% on working capital 11000 0.18 1980
Total Cost 13880
* Assumption: Farmers grow crop initially for one to two years. For the present study it is assumed that farmer will get benefits equal to one year
normal crop form first one to two years.
nd rd
Table 2. Cost of Production for 2 and 3 year
Items Unit Number Rate Value
Replacement @ 10% No. 12 45 540
Cultivation No. 2 800 1600
Irrigations Canal No. 9 0 0
Irrigations Twell No. 5 1000 5000
Urea (bags) No. 2 1600 3200
DAP (bags) No. 1 4200 4200
Labor charges for irrigation No. 14 150 2100
Labor charges for fertilizer No. 3 40 120
Pruning etc No. 1 300 300
Weeding/hoeing No. 3 300 900
interest @ 18% on working capital 16520 0.18 2973.6
Land rent No. 1 30000 30000
water Charges No. 1 300 300
interest @ 18% on fixed capital 30300 0.18 5454
Cost for one year 56147.6
Total cost for 2 years 112295.2
 Table 3. Cost of production for 4th and 5th year
Items Units Number Rate Value
Cultivation No. 0 800 0
Irrigations Canal No. 9 0 0
Irrigations T.well No. 5 1000 5000
Urea (bags) No. 2 1600 3200
DAP (bags) No. 1 4200 4200
Labor charges for irrigation No. 14 150 2100
Labor charges for fertilizer No. 3 40 120
Weeding/hoeing No. 3 300 900
interest @ 18% on working capital 15520 0.18 2793.6
Land rent No. 1 30000 30000
water charges No. 1 300 300
interest @ 18% on fixed capital 30300 0.18 5454
Cost for one year 54067.6
Total Cost of 2 years 108135.2
Total cost of production for 5 years 232510.4

Table 4. Cost of production for ratoon crop for three years

Items Units Number Rate Value
Cultivation No. 0.5 800 400
Irrigations Canal No. 9 0 0
Irrigations T.well No. 5 1000 5000
Urea (bags) No. 2 1600 3200
DAP (bags) No. 1 4200 4200
Labor charges for irrigation No. 14 150 2100
Labor charges for fertilizer No. 3 40 120
Weeding/hoeing No. 3 300 900
interest @ 18% on working capital 15920 0.18 2865.6
Land rent No. 1 30000 30000
water charges No. 1 300 300
interest @ 18% on fixed capital 30300 0.18 5454
Cost for one year 54539.6
Total cost for three years 163618.8

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