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

Abstract

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