Economic Analysis of Drip Irrigation for Coconut (<em>Cocos nucifera</em>) – A Case Study in North Western Province, Sri Lanka

Abstract

This research was conducted to help coconut farmers in making decisions regarding investments in Drip Irrigation Systems (DIS). It provides an economic rationale for investing in DIS. The paper examined the economic worth of investment in DIS in North Western Province. The data were collected from 13 coconut estates using a pre-tested questionnaire, direct observation, field visits and personal interviews. Three different project evaluation criteria; Net Present Value (NPV), Benefit-Cost Ratio (BCR), Internal Rate of Return (IRR) were used to determine the worth to invest in the DIS. Cost of production and benefits were calculated in the present value using discounting factor at an interest of 12%. Differential rates of interest rates (6%, 8%, 10%, 15%, and 20%) were assumed to represent the opportunity cost of capital. There are some leading drip irrigation design companies in Sri Lanka, accordingly, the fixed cost for one acre of coconut land varies from Rs.70, 000.00 to Rs.146, 666.00. Almost all selected estates have recorded a positive NPV (Rs.21,322.48 to Rs.968,457.17), BCR over one (1.03 to 3.61) and IRR greater than the selected interest rate (17% to 47.2%) reflecting the economic viability of the investment. The sensitivity analysis has also confirmed that almost all selected estates have a positive NPV and BCR over one under three different scenarios. It can be concluded that the economic viability of drip irrigation technology is very high and is capable of generating a sufficient return to pay back the capital investment within one to three years.