1

Economic Evaluation of Alternative Farming Systems in Coastal

Floodplains (gajnis) of Karnataka, India1

Ganesh B. Keremane + and Balachandra K. Naik ++

+ Corresponding Author and Member, Centre for Comparative Water Policies and Laws

School of Commerce, University of South Australia GK 4-17, City West Campus, North Terrace,

Adelaide, South Australia 5000 GPO Box 2471, Adelaide-5001 ganesh.keremane@unisa.edu.au

&

++ Assistant Professor, Department of Agricultural Economics,

University of Agricultural Sciences, Krishinagar, Dharwad – 580 005,

Karnataka, India

2

Economic Evaluation of Alternative Farming Systems in Gajni lands

(floodplains) of Coastal Karnataka, India

Abstract

Indian coastline is vulnerable to sea-level rise and the tidal ingress and pushing up of

saline waters inland result in submergence of croplands, particularly the low-lying

agricultural lands making them unfit for crop production. Such lands are found all

along the Indian coastline including the Karnataka coast, where they are locally

referred to as gajnis. Since ages, local communities have managed these lands in a

traditional way which was disturbed by the emergence of modern aquaculture

industry. Large tracts of gajnis were converted into profit-making aquaculture ponds.

But, the success of the aquaculture industry was short-lived as serious concerns were

raised about its negative socio-economic and ecological impacts on the livelihood of

the local communities and sustainability of the gajnis. Therefore a study was carried

out to examine the alternative farming systems in the region and identify an

economically viable and sustainable system for the gajni farmers. The present paper is

based on the findings from this study.

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INTRODUCTION

Indian coastline is vulnerable to sea-level rise and the tidal ingress and pushing up

of saline waters inland result in submergence of croplands, particularly the low-lying

agricultural lands making them unfit for crop production (Aggarwal & Lal, 2000).

Such lands or flood plains are found extensively along the estuarine borders and river

banks on the Indian coastline, including the Karnataka coast where these lands are

referred to as gajnis. Since ages, the local communities have managed these lands by

following the traditional farming systems i.e., paddy monoculture or the paddy/prawn

rotation system. Although the returns from these traditional systems were low

compared to those from modern aquaculture industry, they were quite sufficient for

local sustenance and thus could be characterized as subsistence economic activity

(Maybin & Blundell, 1996; Bhatta & Bhat, 1998).

But, a policy decision of the state government to replace age-old mud

embankments surrounding the gajnis with the permanent stone dams to protect the

gajni agriculture coupled with the efforts to promote ‘blue revolution’ in the country

created favorable conditions for the entry of fishing contractors and external capital in

the region (Bhatta & Bhat, 1998; Chandran,___). The huge economic (monetary)

returns from the aquaculture industry attracted the farmers who were searching for

ways and means to meet the demand of increased population and cost of living.

Moreover, the fact that it was risk-free2 made a large number of farmers to lease-out

their lands to the contractors for prawn farming instead of cultivating on their own

(Bhatta and Bhat, 1998; Chandran___; EJF, 2003).

Further, the rising foreign and domestic demands for prawns resulted in rapid

expansion of the industry along the Karnataka coast (Naik, 1994). As a result, large

tracts of gajnis were converted into profit-making aquaculture ponds. But, the success

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of the industry was short-lived as serious concerns were raised about its negative

socio-economic and ecological impacts on the livelihood of the local communities and

long-term sustainability of the gajnis. Thus, the lands once managed traditionally and

sustainably either turned low-productive or unproductive, leaving the farmers in

jeopardy (Maybin and Blundell, 1996; Bhatta and Bhat, 1998; EJF, 2003).

The present situation demands an urgent need to address the issues affecting the

long-term sustainability of gajni lands and hence a study was carried out in coastal

Karnataka, India with the objective of identifying a sustainable farming system for

gajni farmers by comparing the alternative land-use options with respect to

profitability, resource use efficiency and problems faced by the farmers in taking up

these practices. The present paper while focusing on a part of this study highlights the

costs and returns structure; factors influencing production activity; returns to scale and

allocation efficiency by determining the production functions underlying the

alternative farming systems, and the actual allocation of resources the farmers made

among the different farming systems.

METHODOLOGY

The study area

The study area- Uttara Kannada district (previously North Kanara) lies between

74°9' to 75°10' East longitude and 13°55' to 15°31' North latitude and stretches itself

along the coastline of the Arabian Sea. The district constitutes a total of 5640 hectares

of gajni lands spread over five coastal talukas namely Karwar, Ankola, Kumta,

Honnavar and Bhatkal (BFDA, 1998). The region comes under the direct influence of

the Southwest monsoon, receiving very heavy rains during June to August. Agriculture

is the main occupation in the district and more than 70 per cent of the work force is

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engaged in agriculture. However, fisheries are an important economic activity and fish

represents the major dietary source of animal protein for the people in the region.

Sampling design and Data collection

Multistage random sampling technique was used to select the study sites and the

respondents. In the first stage three talukas namely Kumta, Karwar and Ankola were

selected as they together accounted for around 88 per cent of the total gajni lands

available in the district (Table-1). In next stage, based on the proportion of the gajni

lands available in each respective talukas the villages and the farmers were selected.

Accordingly, from the three talukas identified a total of 10 villages and 160 farmers

practicing different farming systems were selected for the study. Both primary and

secondary data were used for the study. Primary data were obtained by personal

interview method using a comprehensive questionnaire.

Data Analysis

Simple tabular analysis with aid of percentages and ratios was used to estimate and

compare the costs and returns structure of different farming systems. A Cobb-Douglas

type of production function was fitted to data in order to determine the factors that

influenced the economic returns in each production system (Onyenweaku et.al, 2000;

Kamanga, et.al, 2000; Islam et.al, 2003). Cobb-Douglas functions were used partly

because of the advantages in estimation and interpretation but mainly because of the

good fit to available data (Chennareddy, 1967; Hopper, 1965; Kaldi, 1975; Islam et.al,

2003). Processing of the data collected ascertained that factors like land, labour

(human and bullock), manure, seeds and feed (in case of prawn farming and mixed

farming) were important variables influencing the production activity. Therefore, the

inputs were considered as independent variables and the gross income as the

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dependent variable. Separate production functions as specified (equation 1) were fitted

to data collected for the individual systems:

Y= EibXbXbXbXbXbXbXbXbaX .99.88.77.66.55.44.33.22.11 ---- (1)

where,

Y is the gross returns;

X1 is the amount of land or water spread area;

X2 is the value of human labour;

X3 is the value of bullock labour;

X4 is the value of paddy seeds;

X5 is the value of farm yard manure (FYM);

X6 is the value of artificial feed for prawn/fish;

X7 is the value of prawn seeds/post-larvae (PLs);

X8 is the value of fish fingerlings;

X9 is the value of pre-stocking chemicals;

a is the intercept/constant;

bi represents elasticities of production; and

Ei is the error term

The summation of elasticities of production (Σbi) was used to estimate the returns

to scale. If the sum of elasticities of production is equal to unity, we have constant

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returns to scale; a sum greater than unity, implies increasing returns to scale while a

sum less than unity denotes decreasing returns to scale (Onyenweaku et.al, 2000;

Islam et.al, 2003).

Further, to judge the allocative efficiencies the ratios of the Marginal Value

Product (MVP) to Marginal Factor Cost (MFC) of individual resources were used

(Hopper, 1965; Koopmans, 1951; Kumbhakar & Bhattacharyya, 1992; Onyenweaku

et.al, 2000; Liefert et.al, 2003). The computed MVP was compared with the MFC or

opportunity cost of the resource to draw inferences. A resource is said to be optimally

allocated when it’s MVP=MFC or MFCMVP =1. The marginal value products

(MVP's) were calculated at the geometric mean levels of the variables using the

formula:

MVP of Xith resource = bi . Xi

Y ------ (2)

where,

Y = geometric mean of gross returns in different farming systems

Xi = geometric mean of ith independent variable

bi = regression coefficient (elasticity of production) ith independent variable

In imputing the marginal cost of land in case of paddy monoculture and paddy/prawn

rotation, the average per hectare value of land was taken as its marginal cost while the

same in case of prawn farming and mixed farming was the average per hectare leasing

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value of pond area. The marginal cost of all other inputs was considered as one rupee,

since these inputs have been measured in value terms in the regression analysis.

RESULTS AND DISCUSSIONS

Alternative farming systems in the study region

During the survey it was identified that the farmers in the region practiced four

different farming systems i.e., paddy monoculture, paddy/prawn rotation, prawn

farming (traditional and semi-intensive), and mixed farming (Bhatta & Bhat, 1998). A

brief description of these systems is given below:

Paddy monoculture: is a conventional system of cultivating paddy in the gajnis. A salt

tolerant paddy variety -‘kagga’ is grown during kharif with the onset of the monsoon

and harvested in November once the rains subsided. The rice was mainly used for

self-consumption.

Paddy/prawn rotation: is the other traditional system followed in the region. Here,

paddy is grown in one season followed by prawn culture in the next. The natural tides

bring along the wild fish fry and post-larvae (PLs), thus enabling to produce prawns in

the paddy fields through a rotation system. The final product includes paddy, prawn

and also other marine species.

Prawn farming: in the region was practiced by following both extensive and semi-

intensive methods. Extensive method was usually practiced in low-lying areas and

involved tidal flooding, stocking at a rate of 10,000 – 30,000 PLs /ha, and the final

product included prawn and other marine species. Semi-intensive method on the other

hand was comparatively capital intensive as it involved purpose-built ponds of

between half and five hectares, stocking at rates between 30,000 -100,000 PLs / ha. It

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also included pumping of water in and out from ponds, regular feeding and post

stocking preparations. The final product included only a single output-prawn.

Mixed farming: was an integrated system developed by the agricultural research

station at Ankola. It is an improvement over the semi-intensive prawn farming which

involves prawn and fish farming in same pond with stocking of PLs and fish fry’s at

recommended density, pumping of water, regular feeding. The final product includes

prawn and fish.

Distribution of sample farmers based on the systems they practiced is presented in

Table-2. The figures clearly indicate that paddy monoculture and paddy/prawn rotation

system were the most commonly practiced systems in the region as 41 and about 33

percent of farmers respectively took up these systems. Prawn farming as explained

above was being practiced by following both the traditional and semi-intensive

methods. Irrespective of the methods, around 21 percent of sample farmers practiced

prawn farming. However, only nine percent of farmers took up semi-intensive prawn

farming as this method was capital intensive and only a few resource rich farmers or

the fishing contractors who leased-in the lands from farmers practiced this system

(Bhatta and Bhat, 1998; EJF, 2003). After the initial euphoria of the aquaculture

industry, there was a huge reduction in the number of farmers practicing commercial

prawn farming in the region because of a serious outbreak of viral that caused many

farmers to abandon the aquaculture ponds (Chandran, ---; Maybin&Blundell, 1996;

Shivanandmurthy, 1997). The other system identified was mixed farming which was a

new system of integrating prawn farming with fish culture and an improvement over

semi-intensive prawn farming. However, given the problems associated with

commercial prawn farming farmers hesitated to take up this the system and so did not

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receive the expected response (Keshavanath, 1999). Only 5 percent of sample farmers

were identified who took up this system this system.

Having identified these systems practiced by the farmers an attempt was made to

estimate the profitability and resource use-efficiency in each of these systems so as to

enable us to suggest an economically viable and sustainable system for the gajni

farmers. What follows is the discussion of results of the cost and returns analysis and

production function analysis.

Costs and returns analysis

The comparative economics or profitability of different farming systems identified

in gajni lands is presented in Table-3. It is clear from the figures that net returns were

the highest in case of the two modern systems i.e., semi-intensive prawn farming

(Rs.2,49, 943 /ha) and the mixed farming system (Rs.2,39688/ha) compared to the

traditional systems. However, the benefit-cost ratio (BCR) in case of paddy/prawn

rotation system was 2.64 as against 1.91 and 1.77 in case of semi-intensive prawn

farming and mixed farming respectively. This implies, in case of the traditional rotation

system for every rupee invested the returns was almost three times the investment and

hence was the most profitable system. In addition, unlike the prawn farming which

included a single enterprise i.e., only prawn, the rotation system included two

enterprises viz., paddy and prawn and therefore had an advantage of the risks being

distributed among enterprises (Purandarashetty, 1986). It was clear that the two modern

systems were capital intensive and the production costs in both the systems accounted

to more than 80 percent of the total cost. A close look into the cultivation practices

under each farming system revealed that farmers practicing paddy monoculture could

easily shift to the rotation system by incurring some costs towards strengthening the

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embankments and installation of sluice gates as against the huge investments demanded

by semi-intensive prawn farming or the mixed farming which would substantially

increase their farm income (Naik et.al, 1998; Keshavanath, 1999). By doing so, the

women who were the worst hit by the advent of aquaculture industry (EJF, 2003) could

be relieved from working at the aquaculture sites. As in earlier days they could earn

some income from sale of local catches of marine species.

Factors influencing production activity in gajni lands

A Cobb-Douglas production function was fitted to the data related to each farming

system in order to determine the factors influencing production activity. Estimated

values of the regression coefficients and related statistics for the selected sample

farmers practicing different farming systems are presented in Table-4.

The coefficient of multiple determination (R2) for different farming systems varied

from 0.776 to 0.976 which indicates that 78 to 98 percent of the total variation of

output of respective farming system is explained by independent variables included in

the model. With respect to prawn farming the production function analysis was carried

on only for the semi-intensive system of prawn farming since the independent

variables included in case of traditional prawn farming (land, labour and feed)

explained only 38 per cent of total variation of output.

The relative contribution of specified factors affecting productivity of the farming

systems in gajni agriculture was evident from the estimates of regression equation for

different farming systems identified in the region. There were 22 input coefficients for

the production of selected farming systems and of these only five coefficients had

negative sign indicating that increased use of these resources would result in

decreased gross returns while the remaining coefficients showed positive effect on

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gross returns. The coefficients for paddy seeds and FYM in paddy monoculture;

bullock labour and paddy seeds in paddy/prawn rotation; land area, post-larvae (PLs)

and disinfectants in semi-intensive prawn farming; and land area, human labour,

artificial feed, fish fry’s and disinfectants in mixed farming were statistically

significant at different level (0.01 to 0.10). However the coefficients for seeds

(P<0.10) in case of paddy/prawn rotation system, disinfectants (P<0.05) in case of

prawn farming, and land area (P<0.01) and artificial feed (P<0.05) in case of mixed

farming were negative and statistically significant indicating that increased use of

these resources would result in decreased gross returns.

The sum of production coefficients (Σbi) of paddy monoculture and mixed farming

was equal to 2.041 and 1.169 respectively, which was greater than one. This means

that the function exhibits increasing returns to scale i.e., if all the input specified in the

respective function were increased by one percent, the gross returns would be

increased by 2.041 and 1.169 percent respectively for paddy monoculture and mixed

farming system. The same in case of sampled paddy/prawn rotation system and semi-

intensive prawn farming was equal to 0.306 and 0.906 indicating diminishing returns

to scale. It was clear from the returns to scale that in case of paddy/prawn rotation

system there was enough scope to increase the income if more improved technologies

are introduced. The gajni farmers are traditionally crop farmers and lacked the special

physical skills and fishing knowledge (Bhatta and Bhat, 1998). So, improved

technology could include imparting fishing knowledge and training to the gajni

farmers in areas such as stocking of PLs, managing water flow in and out of the creeks

and decision making regarding the harvest dates and time.

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Allocative efficiency in gajni agriculture

In peasant agriculture, efficient use of farm resources is of utmost importance and

is of considerable interest to agricultural economists (Chennareddy, 1967). In order to

test the allocative efficiency the ratio of marginal value product to the marginal factor

cost for each input was computed and tested for its equality to one. The allocative

efficiency indices for the individual resources are presented in Table-6.

In case of paddy monoculture the value for human labour was less than unity

(0.3310), but greater than unity for other resources. The results show that human

labour was excessively utilized and, therefore, should be reduced to increase profit,

while the other resources should be increased to increase the returns. The values for

human labour, paddy seeds and feed in case of paddy/prawn rotation were less than

unity indicating excessive usage of the resources. The negative ratios indicated

uneconomic use of seed and human labour in the production process. For prawn

farming, except disinfectants (-14.3412) and artificial feed (0.221), all the other

resources were underutilized and there was scope to increase the use of each of these

resources. Similarly, in case of mixed farming except for land (-0.8513) and feed (-

7.6816) the values for all other resources was greater than unity indicating

underutilization of the resources. These results imply that the four farming systems

identified in gajnis are not allocatively efficient in input utilization and farmers are not

aware of efficient use of inputs.

SUMMARY AND CONCLUSIONS

A comparison of the costs and returns structure of the different farming systems

revealed that the two modern faming systems i.e., semi-intensive prawn farming and

mixed farming had the highest net returns. However, the benefit-cost ratio which

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explains the returns per rupee invested indicated that paddy/prawn rotation system

was the most profitable enterprise. Further, production function analysis carried out to

study the influence of various factors on gross returns across different farming

systems revealed that all the resources included in the production process had a

positive impact on gross returns in case of paddy monoculture. Human labour and

seeds were the factors having a negative impact on gross returns in paddy/prawn

rotation while in case of prawn farming (semi-intensive method) PLs and disinfectants

had a negative influence on the gross returns. With respect to mixed farming land and

feed had negative influence on gross returns. The returns to scale of paddy

monoculture and mixed farming exhibited increasing returns to scale while the same

for paddy/prawn rotation system and semi-intensive prawn farming indicated

diminishing returns to scale. The results further indicate that the farming systems are

not allocatively efficient in input utilization and farmers are not aware of efficient use

of inputs.

It is clear that for long term sustainability of gajnis, farmers need to adopt the

traditional ways of cultivation which were once considered as subsistence economic

activities. Moreover, the huge financial benefits from the modern systems cannot

negate the social and ecological damages caused by commercial prawn farming

(NEERI, 1995; Bhatta & Bhat, 1998; EJF, 2003; Islam et.al, 2003; Maybin &

Blundell, 1996). Having said this, long-term sustainability of gajnis cannot be

attained by increasing the use of resources or substitution of resources. This can be

achieved by introducing modern technology into the traditional system in a package

(Chennareddy, 1967; Hopper, 1965) and the package should include introduction of

new resources, agricultural education, special skills and techniques, and appropriate

guidance in farm planning.

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Notes

1 This paper draws heavily from Ganesh B. Keremane’s masters dissertation research carried out at the University of Agricultural Sciences, Dharwad, Karnataka, India. The authors wish to express their gratitude to all the members of the advisory committee for their constructive comments and suggestions during the course of the study. Last but not the least the authors thank the gajni farmers for their cooperation during the field survey. 2 Irrespective of whether or not fishing contractors got their crops, the farmers were assured of the advance lease rent in the beginning of every production season and hence it was considered as free from risk.

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Table 1- Distribution of gajni lands across the study talukas

Name of taluka Gajni lands (ha)

Alternative land-use options for farmers

Ankola 924

Karwar 1116

Kumta 2933

Sub-total 4973 (88.2) a

Total 5640

Paddy monoculture, Paddy/prawn farming, prawn

farming (traditional and semi-intensive), mixed

farming

Note: Figure in parentheses indicates percentage of total gajni lands available in the district a Remaining 11.8 percent is accounted by the remaining two talukas Bhatkal and Honnavar

Table 2- Distribution of sample farmers based on the faming system practiced

Farming systems Name of taluka Rice monoculture

Rice/shrimp rotation farming

Prawn farming

Mixed farming

Total

Ankola 12 11 5 (1) 2 30

Karwar 14 13 7 (4) 2 36

Kumta 40 28 21 (9) 5 94

Total 66 52 33(14) 9 160

% of sample farmers

41.25 32.50 20.63(8.75) 5.62 100.00

Note: Figures in parentheses indicate number and percent of sample farmers practicing semi-intensive prawn farming

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Table 3: Comparative profitability of different production systems in the study area

Prawn farming Costs and returns (Rs/ha)

Paddy monoculture

Paddy/prawn rotation

Traditional Semi-intensive

Mixed farming

Gross returns 24259.35 83765.00

(21.33; 78.67)a

85450.00

(95.83; 4.17)b

523200.00

551857.50

(95.08; 4.66)c

Total cost 18412.48 31787.43 44790.91 273256.61 312169.38

Variable /production costs (% of total costs)

79.96 59.45 33.70 82.04 84.66

Fixed/establishment costs (% of total costs)

20.04 40.55 66.30 17.96 15.34

Net returns 5846.87 51977.57 40659.09 249943.39 239688.12

B:C ratio 1.32 2.64 1.91 1.91 1.77

Note: a Figures are percentage share of paddy and prawn from gross returns respectively

b Figures are percentage share of prawn and other marine species from gross returns respectively

c Figures are percentage share of prawn and fish from gross returns respectively

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Table 4: Regression coefficients of different farming systems in gajni agriculture

Explanatory variables

Paddy monoculture

Paddy/prawn rotation

Prawn farming

Mixed (prawn+fish) farming

Intercept 4.432 11.208 9.061 13.935

(1.023) (1.252) 3.408 (0.701)

Land area (ha) 0.214 0.233 0.612* -0.065*

(0.158) (0.109) (0.212) (0.020)

Human labour(Rs) 0.114 -0.161 0.162 0.540***

(0.163) (0.144) (0.174) (0.050)

Bullock labour(Rs) 0.106 0.443* - -

(0.162) (0.121)

Paddy seeds (Rs) 0.406*** -0.4967*** - -

(0.183) (0.255)

FYM (Rs) 0.424** 0.278 - -

(0.190) (0.244)

Artificial feed (Rs) - 0.009 0.023 -0.721**

(0.010) (0.153) (0.310)

Post-larvae (Rs) - - 0.479* 0.040

(0.153) (0.025)

Fish fry’s (Rs) - - - 0.865*

(0.312)

Disinfectants (Rs) - - -0.371** 0.510**

(0.159) (0.020)

R2 0.776 0.903 0.852 0.976

Return to scale 2.041 0.306 0.906 1.169

Note: *P < 0.01, **P < 0.05 and ***P < 0.10;

Figures in parentheses indicate standard error

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Table 5: Ratios of MVP and MFC for individual resources in different production systems*

Resources Paddy monoculture

Paddy/prawn rotation

Prawn farming

Mixed (prawn+fish) farming

Land 115.911 361.109 6.242 -0.8513

Human labour 0.331 -2.111 2.812 63.221

Bullock labour 1.090 18.461 - -

Paddy seeds 9.283 -71.632 - -

FYM 2.910 9.282 - -

Artificial feed - 0.981 0.221 -7.681

Post-larvae - - 11.521 1.191

Fish fingerlings - - - 27.181

Disinfectants - - -14.341 28.121

Note: * MVP is Marginal Value Product and MFC is Marginal Factor Cost

1