An Economic Analysis of Farm Income Distribution on Potato Specialised Farms in Agra District of Uttar Pradesh

Home , Agra district, Western Uttar Pradesh

Ind. in. ofAgri. Econ. Vol.57, No.4, Oct.-Dec. 2002 An Economic Analysis of Farm Income Distribution on Potato Specialised Farms in Agra District of Uttar Pradesh

Virendra Singh, S.P.R. Chaurasia and J.S. Sharma*

INTRODUCTION

The state of Uttar Pradesh ranks first in area and production of potato among the Indian states. This state alone accounted for 40 per cent of area and 44 per cent of potato production in the country during the year 1996-97. Western Uttar Pradesh is the major potato-producing region of the state accounting for 48 per cent of area and 54 per cent of production of the state during the same year. Potato is relatively higher yielding, labour and capital intensive short-duration high-value crop having widespread popularity. This crop has predominance in the areas where physical and economic resources are suitable for its production. Though potato is produced by all the categories of farmers, the participation of large farmers was relatively more because of the capital intensive nature of the crop and rich resource position and better access to technology, input, and capital markets, etc. The full use of modern technology is more pronounced on large farms and hence, the gains from the same are tilted in favour of them (Saini, 1976). The small farmers do not get adequate incentives to exploit the full potential of the available modern technology and thereby increase in the level of income. Thus it becomes pertinent to examine the effect of modern technology on the pattern ofincome distribution among potato growing farmers, which may be helpful in formulating appropriate policy for attaining the goals of agricultural development. The present study has been undertaken in an agriculturally progressive region of Uttar Pradesh with a view to accomplishing the following objectives:(i) to study the sources and pattern of income generation on potato specialised farms,(ii) to examine the income distribution among farmers of different size-groups, and (iii) to quantify the disparities in income distribution among potato specialised farmers.

METHODOLOGY Sampling Scheme The study was conducted in Agra district of Western Uttar Pradesh. Out of 15 development blocks in the district, one development block, namely, Khandoli having the highest area under potato was selected purposively. This block has 10 Village District Office (VDO) circles. A sample of about 33 per cent of VDO circles (three

* Post-Doctoral Fellow, Professor and Retired Professor, respectively, Department of Agricultural Economics, Pantnagar-263 145 (Uttar G. B. Pant University of Agriculture and Technology, Pradesh). 742 INDIAN JOURNAL OF AGRICULTURAL ECONOMICS

VDO circles) was taken randomly. To select the villages from these VDO circles, a list of leading potato-growing villages was prepared by consulting the respective VDOs and two villages from each circle were selected randomly. Before selecting the sample farmers, a tentative survey was made to identify the sampling units in all the six villages. Those farmers were identified as potato specialised farmers whose 50 per cent or more farm income was derived from the potato crop alone. In all 97 farmers were identified as the potato specialised farmers. These farmers were classified into three groups on the basis of their size of operational holding, viz., small (<2 ha), medium (2-4 ha) and large (> 4 ha). The required data were collected for the year 1995-96.

Analytical Tools

The descriptive analysis was done using percentage, means, etc., to fulfill the first and second objectives. For computing the cost of production of potato, the value of all the inputs incurred in the production process was taken into account, while the gross returns was estimated by using the average price received by the farmers of different size-groups. The net returns were worked out by subtracting paid out total cost from gross returns. The term farm income as used in the present study refers to net returns and the whole analysis has been made on the basis of net returns rather than gross returns. In order to fulfill the third objective, i.e., to estimate the disparities in income distribution among potato specialised-farmers, the Gini concentration ratio of Lorenz curve was estimated by Kakwani and Podder's new co-ordinate system approach. The Lorenz curve is the relationship between F(x) and Fi(x). The equation of the line F1 = F is called the line of equality, which is the diagonal through the origin of Unit Square. Let P be any point on the curve with co-ordinates (F, F1) and 1 f.,„ , 1 f.„.r rt = r, ana x t —,_ — r1) ....(1. ) 2 2 where, rt is distance of ordinate along the line of equality and Yt is the length of the ordinate from (P) on the line of equality. Hence, the equation of Lorenz curve in terms of r, and Yt can be written as: f(r Y t = )1 ....(2) where, rt ranges from 0 to 42. On the basis of the above discussion, the proposed equation of Lorenz curve in its applicable form, can be written as Yt = a rta _ rt y —(3) However, for computational purposes, it is presented in log form as Log Y,= log a + a log rt +13 log — where, a> 0, a > 0 and 3 > 0 (constants). ECONOMIC ANALYSIS OF FARM INCOME DISTRIBUTION ON POTATO SPECIALISED FARMS 743

The additional properties of Lorenz curve hypothesised in equation (3) are as follows: (a) It will be symmetrical if a = 13; (b) it will be skewed toward (1,1) if p > a and,(c) it will be skewed toward (0,0) if a 13. The Gini concentration ratio can be estimated from equation 3 as: GCR = 2 [a rta rt yi dr, ....(4) 0 -

or GCR =- 2 a Ort+P + OC, 1 -113) where B(l+a, 1+ p) is the beta-function which has been widely tabulated. The equation of Lorenz curve,' developed in equation (4) was estimated in this study separately for income from potato crop, on-farm income and total farm income (including off-farm income). RESULTS AND DISCUSSION Resource Position Reflecting Investment on Various Size ofPotato Specialised Fanns The resource position of different size-groups offarmers reflecting investment per farm is given in Table 1. From Table 1 it is evident that investment on improved machinery and implements like tractor, cultivator, harrows, trailer, potato planter,

TABLE I. RESOURCE POSITION REFLECTING LEVEL OF INVESTMENT ON VARIOUS CATEGORIES OF FARMS

Small Medium Large

Sr. Percentage of Per farm Percentage Per farm Percentage Peil farm No. Particulars farmers investment of farmers investment of farmers investment owning (Rs.) owning (Rs.) owning (Rs.) (4) (6) (8) (1) (2) (3) (5) (7) A. Farm size(ha) 1.654 3.013 5.114 B. Machinery I. Tractor, cultivator and harrow 26.09 31,833 50.00 47,833 76.92 90,231 2. Trailer 17.39 2,826 41.67 7,583 69.23 12,385 3. Potato planter 4.35 522 25.00 3,396 46.15 4,538 4. Potato digger 4.70 1,522 16.67 2,271 38.46 5,577 5. Seed drill 8.69 674 29.17 1,729 76.92 5,500 6. Thresher 8.69 1,565 41.66 6,833 76.92 13,115 7. Sprayer and duster 56.52 311 54.16 285 84.61 573 8. Winnowing fan 8.69 122 29.16 371 38.46 515 9. Others* 4,334 3,878 5,904 Total(B) 43,708 74,180 1,38,339 C. Irrigation structure, etc. 1. Pumpsets and 91.30 5,972 100.00 15,930 100.00 24,076 tubewells 5,693 2. Irrigation channels 17.39 1,756 29.17 2,966 46.15 Total(C) 7,728 18,896 29,769 96,538 D. Farm buildings 66,317 82,221 2,64,646 Total B+C+D 1,17,754 1,75,297 * Indicates conventional implements. 744 INDIAN JOURNAL OF AGRICULTURAL ECONOMICS .

potato digger, thresher, sprayer, etc., was more pronounced on large farms as compared to the small and medium farms. The position of investment with regard to irrigation structure indicated that all the categories of farmers had their own secured source of irrigation.

Expenditure Pattern on Modern Production Technology

The expenditure on various production technologies like high-yielding variety (HYV)seeds, fertiliser consumption and plant protection chemicals has been given in Table 2. The Table reveals that the expenditure on seed incurred is higher on small and medium farms as compared to large farms because of the fact that small and medium farmers were using largely traditional seeds purchased from markets whose higher quantity had to be used and prices were high while the large farmers were using their own seeds kept in cold storage. It also reveals that the proportionate expenditure on HYV seeds in the total expenditure made on seeds was substantially higher on large farms as compared to the small and medium farms, indicating that small and medium farmers were not in a position to make higher expenditure on HYV seeds due to their financial constraints. There was no conspicuous difference in the expenditure made on fertiliser. The expenditure on plant protection chemicals was found to be increasing with the size of farm.

TABLE 2. EXPENDITURE PATTERN ON MODERN PRODUCTION TECHNOLOGY (Rs./ha) Items Size-group

Small Medium Large (1) (2) (3) (4) Expenditure on seed 20,972 21,115 19,832 HYV seed 2,705 4,289 6,774 (12.90) (20.31) (31.16) Fertiliser consumption 9,357 9,757 9,774 Plant protection chemicals 397 549 663 Notes: (i) Figures in parentheses indicate percentages to total expenditure on seed.(ii) Figures have been rounded off to the nearest rupee.

Area, Productivity, Costs and Returnsfrom Potato Crop

The percentage area allocated under potato of total cultivated area, level of productivity realised per hectare, price received per quintal and gross income, net income generated per hectare, cost of cultivation and cost of production are given in Table 3. From Table 3, it is evident that the percentage area allocated under potato ranged between 60 and 75 per cent of the net cultivated area. Thus a substantial proportion of the cultivated area was devoted to potato production on all size-groups of farms. As far as the per hectare yield was concerned, the large farmers were capable to realise nearly 24 quintals per hectare higher yield as compared to the small farmers. Similarly, the productivity of potato on medium farms was lower by nearly ECONOMIC ANALYSIS OF FARM INCOME DISTRIBUTION ON POTATO SPECIALISED FARMS 745

20 quintals per hectare as compared to large farms. The large farmers were realising a higher yield at a relatively lower cost of cultivation as compared to the small and medium farm categories. As regards the price received per quintal, the large farmers were capable to receive about Rs. 30 per quintal higher price as compared to the small farmers. This difference in the prices was observed due to retaining power of the produce in cold storage for a longer period and disposing off the same at the time and place when and where the prices were relatively better. The medium farmers were also at an advantage in receiving Rs.15 per quintal higher price as compared to the small farmers. Because of the big difference in per hectare yield and the average price per quintal received, the large farmers received Rs.16,693 per hectare higher gross income than the small farmers and Rs.10,604 per hectare higher than the medium farmers. As far as net income was concerned, the large fanners received around Rs. 19,000 per hectare higher net income as compared to the small farmers and Rs. 13,000 to the medium farmers. The medium farmers received around Rs. 6,000 per hectare higher net income as compared to small ones. In a nutshell, the difference in per hectare yield, cost of cultivation and the average price per quintal received were the basic factors causing a big difference in per hectare income of the fanners (Kahlon and Bal, 1975).

TABLE 3. AREA,PRODUCTIVITY, COSTS AND RETURNS FROM POTATO CROP

Particulars Small Medium Large (1 2) (3) (4) Operational holding (ha) 1.65 3.01 5.11 Area under potato(ha) 1.00 1.93 3.85 (60.61) (64.12) (75.34) Productivity (qtl/ha) 299.56 305.09 323.59 Cost of cultivation (Rs./ha) 36,465 36,769 34221 Cost of production (Rs./qt1) 121.73 120.52 105.75 Average price (Rs./qt1) 292.72 307.37 322.57 Gross income (Rs./ha) 87,687 93,776 1,04,380 Net income Rs./ha 51,222 57,007 70,159 Note: Figures in parentheses indicate percentages to total cultivated area in operational holdings. Disparities in Income Distribution among Potato Specialised Farmers For the quantification of disparities in income distribution among potato specialised farmers, the new co-ordinated system developed by Kakwani and Podder for the efficient estimation of Lorenz curve and thereby the Gini concentration ratio -(GCR) was used in the present study as a measure of inequality in the distribution of income of potato producers on income from potato crop, on-farm income and total income. Income Pattern on Sample Farms The level and pattern of farm income derived through various sources on different size-groups of holding is presented in Table 4. A perusal of the table 746 INDIAN JOURNAL OF AGRICULTURAL ECONOMICS

indicates that potato crop was the most important source of income on all farm size-groups. This crop alone contributed about 74 per cent of the total farm income at the aggregate level and ranged from 53.29 per cent on small farm size-group to 83.23 per cent on large farm size-group. The contribution of non-potato crops in total farm income was the highest on small farm size- group with a magnitude of 18.79 per cent while it was the lowest on large farm size-group with a magnitude of 8.27 per cent. Livestock enterprise contributed 2.67 per cent of farm income at the aggregate level, which was the highest on small farm size-group (5.03 per cent) and the lowest on large farm size-group (1.85 per cent). Total farm income at aggregate level was Rs. 1,88,617, which varied across the farm size-group from Rs. 96,497 on small farm size-group to Rs. 3,24,666 on large farm size-group. The income from off-farm sources on small and medium categories of farms constituted a substantial proportion of the total income, i.e., 22.89 and 13.73 per cent of the total income respectively. However on the large farms, the off-farm sources constituted only 6.65 per cent of the total income. The income from hiring out machinery and equipments in absolute terms on small, medium and large farms was in increasing order, primarily due to concentration of these assets on large farms (Julka and Soni, 1988) as compared to the small farms and thereby hiring out more of the farm machinery and equipments resulted into higher income. Contrary to this, income from other sources in percentage terms was observed to be quite higher on the small and medium farms as compared to the large farms. This was attributed to the hiring out labour and seasonal trading practices, etc., by the small and medium farmers.

TABLE 4. INCOME PATTERN OF POTATO SPECIALISED FARMERS OF DIFFERENT FARM SIZE-GROUPS (Rs./farm) Farm size-groups/ Particulars Small Medium Large Aggregate (1) (2) (3) (4) (5) A. On-farm sources I. Potato crop 51,427 1,09,853 2,70,249 1,38,992 (53.29) (69.06) (83.23) (73.69) 2. Non potato crops 18,127 22,750 26,846 22,752 (18.79) (14.30) (8.27) (12.06) 3. Livestock 4,852 4,619 5,994 5,043 (5.03) (2.91) (1.85) (2.67) B. Off-farm sources 1. Farm machinery and 3,478 4,167 5,154 4,268 equipment hiring out (3.60) (2.62) (1.59) (2.26) 2. Other sources 18,613 17,677 16,423 17,563 (19.29) (11.11) (5.06) (9.32) Total 96,497 1,59,066 3,24,666 1,88,617 (100) (100) (100) (100) Note: Figures in parentheses indicate percentages to aggregate incomes. ECONOMIC ANALYSIS OF FARM INCOME DISTRIBUTION ON POTATO SPECIALISED FARMS 747

Income Distribution on Potato Specialised Farms

The percentage of farmers and their income from different sources are presented in Table 5. An examination of Table 5 indicate that the small size farmers constituting about 24 per cent of total sample farmers shared only 12.05 per cent of the total land while the medium size-group farmers in the sample were nearly 49 per cent but shared only 45.82 per cent of land and the large farmers who constituted about 27 per cent in number possessed about 42 per cent of land. The table further reveals .that the magnitude of net aggregate income through potato crop on all the categories of farms was Rs. 134,82,239 of which the small, medium and large farms shared about 8.77, 39.11 and 52.12 per cent respectively. On small farms, non-potato crop, livestock, hiring out farm machinery and equipments and other sources contributed about 19, 23, 19 and 25 per cent respectively in the total income. The total income generated through all sources on small farms was about 12.13 per cent of the aggregate income of all the three groups generated through all sources, i.e., on- farm and off-farm sources.

TABLE 5. DISTRIBUTION OF LAND AND INCOME ON POTATO SPECIALISED FARMS

Farm size-groups/ Small Medium Aggregate Particulars Large (2) (3) (4) (5) (1) Number of farmers 23 48 26 97 (23.71) (49.49) (26.80) (100) Land 38.042 144.624 132.964 315.638 (12.05) (45.82) (42.13) (100) Area under potato 23.092 92.496 100.152 215.728 (10.70) (42.88) (46.42) (100) A. On-farm income 17,11,315 65,86,608 78,80,314 1,61,78,237 (10.58) (40.71) (48.71) (100) 1. Potato crop 11,82,821 52,72,944 70,26,474 1,34,82,239 (8.77) (39.11) (52.12) (100) 2. Non-potato crop 4,16,921 10,92,000 6,97,996 22,06,917 (18.89) (49.48) (31.63) (100) 3. Livestock 1,11,596 2,21,712 1,55,844 4,89,152 (22.81) (45.33) (31.86) (100) B. Off-farm income 5,08,093 10,48,512 5,61,002 21,17,607 (23.99) (49.520) (26.49) (100) 1. Hiring out machinery, etc. 79,994 2,00,016 1,34,004 4,14,014 (19.32) (48.31) (32.37) (100) 2. Other sources 4,28,099 8,48,496 4,26,998 17,03,593 (25.13) (49.81) (25.06) (100) Total income(A+B) 22,19,408 76,35,120 84,41,316 1,82,95,844 12.13 41.73 46.14 100 Note: Figures in parentheses indicate the percentages to total cropped area and aggregate incomes. Similarly, the share of sources other than potato crops such as non-potato crops, livestock, hiring out farm machineries and equipments and other sources on medium farms were 49.48, 45.33, 48.31 and 49.81 per cent respectively of the aggregate total income generated by all sources on all the three categories of sample farms. 748 INDIAN JOURNAL OF AGRICULTURAL ECONOMICS

However, the medium size-group of farms earned around.41.73 per cent of gross aggregate total income earned by all the three categories of farms. Though the large size farmers were only 26.80 per cent but shared more than 52 per cent of the total income generated through potato crop by all the farms. The share of sources other than potato crop such as non-potato crops, livestock, hiring out farm machineries and equipments and other sources in the total aggregate income of all the categories of farms were 31.63, 31.86, 32.37 and 25.06 per cent respectively. The share of total income of the large farmers earned through all sources constituted about 46 per cent of the total aggregate income generated through all sources by all the categories of farmers. The above analysis pertaining to the sourcewise contribution to income on various size-groups of farms reflected that there existed wide inequalities in income distribution particularly with respect to on-farm income distribution. The inequalities in the distribution in the farm income are evident through the fact that the small farmers (24 per cent) shared only 10.58 per cent, medium farmers (49 per cent) shared 40.71 per cent while the large farmers (27 per cent) shared a lion's share, i.e., 48.71 per cent of the on-farm income. The potato crop appeared to be the sole factor for widening the inequalities of income distribution among the farmers. Thus the small farmers shared a small proportion of income while the large farmers shared a major proportion of the income generated through potato crop. The income generated through other sources on various categories of farms was observed in similar proportion, as their proportion existed in the total sample size.

Estimated Lorenz Curve and GCR for Income Disparities

Table 6 reveals a positive value of intercept for Lorenz curve estimated for the distribution of income from potato crop, on-farm income and total farm income. This shows that all the Lorenz curves lie below the line of equality. However, the nature of Lorenz curves as indicated by the values of regression coefficient rt (a) and .Nri. - rt (13) imply that these curves varied from one income measure to the other. A higher value of a than p in the case of on-farm income and total income implies that the Lorenz curves were more skewed towards the left of the line of equality (i.e., towards 0,0). This shows that the higher magnitudes of disparities were prevailing in the lower income bracket (small farmers) (Miglani et al., 1975). While a higher value of f3 than a in the case of income from potato crop implies that the Lorenz curves were more skewed towards the right of the line of equality (i.e., towards 1,1). This shows that the higher magnitudes of disparities were prevailing in the higher income bracket (large farmers). ECONOMIC ANALYSIS OF FARM INCOME DISTRIBUTION ON POTATO SPECIALISED FARMS 749

TABLE 6. ESTIMATED LORENZ CURVE AND GIN! CONCENTRATION RATIO FOR INCOME DISPARITIES AMONG POTATO PRODUCERS

Gini concentr- Income Intercept(a) (a) (P) R2 ation ratio (6) (1) (2) (3) (4) (5) Income from potato 0.39568 0.9397* 0.94272* 0.9991 0.39507 (0.00342) (0.00318) On-farm income 0.29095 0.87739* 0.76551* 0.9935 0.32774 (0.01072) (0.00670) Total income 0.26085 0.90650* 0.80468* 0.9965 0.28389 (0.00790) (0.00516) * Significant at 0.1 per cent level of significance.

The magnitude of disparities in the income distribution as reflected by GCR is obtained 0.2839 in the case of total farm income while it was 0.3277 and 0.3951 in the case of on-farm income and income from potato crop respectively. Thus the highest disparities were observed in income generated through potato crop. The on-farm income distribution led to more disparities as compared to total farm income. However, from the present analysis it can be inferred that the income from potato crop was found to be widening the disparities in the distribution of income while the income earned from non-farm sources was helping in reducing the income disparities.

CONCLUSION

The study revealed that the resource position of the farmers reflected through investment was conspicuously different across the size-groups by virtue of the size of business and usefulness of their investment in farm inventories. The study also indicates that the large farmers were more progressive in adopting modern production technology. The gains from potato production showed positive association with the size of farm in the form of productivity, price, gross income and net income and negative with respect to cost of production. The study further revealed that the income pattern of the potato specialised farmers was quite different from one farm size-group to the other. The small farmers earned a considerable share of their income from other sources, non-potato crops and livestock enterprises. However, these sources of deriving income were not much significant on the large farms. Though small farmers were also taking potato as one of the prominent crop but were observed not to reap as much benefit per unit area as large farm potato growers primarily due to poor resource endowment base. In other words, the potato cultivation in the study area appeared as more favourable to large farmers due their access to modern production technology including marketing which widens the gap in the income distribution among different categories of farms. The off-farm sources of income helped in minimising the gap in income distribution on the small farms and proved favourable for them. The value of Gini concentration ratio indicated that the disparities were more pronounced in the case of income generated through potato 750 INDIAN JOURNAL OF AGRICULTURAL ECONOMICS

crop. The study further suggested that the small farmers should be encouraged to raise their income from potato crop by way of providing incentives to them in the form of availability of quality seed, fertiliser, plant protection chemicals, credit at reasonable price and other requisite technical know-how at the right time.

Received November 1998. Revision accepted July 2002.

NOTE

1. Interested readers may see the detailed estimation procedure of Lorenz curve in the research paper by Kakwani and Podder (1976), Kakwani (1977).

REFERENCES

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