Shifting Cultivation and its Alternatives in Bangladesh: Productivity, Risk and Discount Rates M. A. Monayem Miah and S M Fakhrul Islam Presented ByPresented

Shifting Cultivation and its Alternativesin Bangladesh: Productivity, Risk and

Discount RatesM. A. Monayem Miah and S M Fakhrul Islam

Presented By Presented To

Tanjuma Khanam Mohammed Ziaul Haider

Student No.: MSS 141501 Head

Beauty Khanam Economics Discipline

Student No.: MSS 141530 Khulna University

Economics Discipline Khulna

Khulna University

Khulna

1.IntroductionShifting cultivation(Jhum) is a very well known form of cultivation in

the hilly areas. Nothing is of unmixed blessings. This cultivation has

some advantages and drawbacks. It causes loss of top soil, degrade the

soil quality and decrease the crop yield. So in this regard the specialists

are trying to evaluate the economic feasibility of replacing shifting

cultivation with settled agriculture and new soil conservation

technology and corresponding discount rates. The discount rate is

considered a crucial factor in determining the necessity of switching

traditional shifting cultivation to a new modern cultivation. But the

farmers are reluctant to accept the changes as there is high

establishment cost, long gestation period and unclear customary rights.

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Key words: Shifting cultivation, soil erosion, soil conservation, rate of

return, discount rate, property rights, MSFO technology.

The objective of the study is

• to replace Jhum cultivation by establishing Multi Strata Fruit

Orchards (MSFO) on farmers’ hills

This attempt to the study is suitable for preventing soil erosion and

degradation, and increasing the cropping. MSFO is one of the

technologies which conserve the soil. For MSFO farmers are given

inputs like fruit sucker, pineapple sucker, fertilizers and transplanting

of fruit saplings. Usually dwarf fruit trees are planted on the top

while tall trees are planted on the lower base. Within few years the

hill becomes the fruit orchard if proper management can be ensured.

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Why Jhum cultivation not desirable?Jhum cultivation in Hilly areas is not desirable as the fallow period

period between cultivation cycles declines. As such there is a little

scope for regeneration and long-term sustainability of soil fertility

can not be ensured. Moreover, this cultivation causes loss of top

soil, degrade soil quality and reduce crop yield. As a result, there is

a threat for unsustainability and there is a crying need for alternative

soil conservation technology. In this regard, The Bangladesh

Agriculture Research institute(BARI) launched the Hill farming

Research and Rehabilitation Programme (HFRRP) in hilly areas.

The aim of this programme is to replace Jhum cultivation by

establishing Multi Strata Fruit Orchards (MSFO) on farmers’ hills.

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2.Methodology • Study area:

Chittagong Hill Tract (CHT) which is around 13,237 sq.km. The inhabitants

are poor and illiterate and live on Jhum cultivation.

• Sampling technique:

Matiranga, Ramgar and Sadar upazila of Khagrachari has been selected

purposively for MSFO as major households practice soil conservation

technology and the age of the orchard in this area is longer. Sixty

households were selected and categorized according to the number of years

of MSFO technology and choosing 15 farmers from each category

randomly. For studying Jhum farmers the Dighinala upazila was selected.

A pilot survey was conducted and a complete list of framers was

developed. On the basis of fallow periods of 3-,4-,5-, and -6 year the farms

are stratified. Forty farmers 10 from each strata were selected randomly.

Both primary and secondary data has been collected for the study.

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3. Result and Discussion

In this study, the benefit cost analysis and discount rate in

motivating farmer to adopt to new technologies are examined.

3.1 Jhum Farming:

The per hectare cost of Jhum farming is calculated by summing up

all the costs incurred for various inputs such as human labor,

seed, and fertilizer. The gross return per hectare is calculated by

summing up the value of different crops grown. The net return is

estimated by deducting gross cost from gross return. It is assumed

that the return from the four fallow period (-3,-4,-5,-6) to remain

constant over the next 25 years (Table 1). This is done in order to

estimate the future from Jhum farming.

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Table :1 Estimated Net Benefit (BDT per ha)

The net return was estimated by deducting gross cost from gross return. The

gross cost consists of full cost and variable cost.

3.1.1 Profitability of Jhum farming:

Jhum cultivation relies largely on own inputs and the natural fertility of the soil and

requires little cash. The survey result shows that 75 percent of the labor and 100

percent of the seed are supplied by the by households and this consists of 80

percent of the total cost. By lengthening the fallow period the return per hectre

increases worth tk.17,786. The average rate of return (BCR) of full cost and

cash cost were 1.21 and 2.79 respectively implying that Jhum farming is

profitable.

YearLength of Fallow Period of Hill

3 year 4 year 5 year 6 year

1-25 686 2582 6763 9811

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Table :2 Effect of Increased Fallow on Productivity

Type of Jhum Average Revenue( BDT/ha)

A. Turmeric

3 years fallow 12448.80




B. Rice





C. All Crops





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Table 2 shows that with the gradual increased in the fallow period the

average revenue of the two crops turmeric and rice have also

increased. That means the length of fallow period has a significant

impact on the productivity of the crops.

3.1.2 Marginal Effect:

Increasing the fallow period has a marginal effect on the on the farms’

revenue. The gain in marginal revenue gradually declines as the

fallow period increases. The maximum marginal gain is reached

when farmers increase the fallow period to 4 years and the marginal

gains are at their lowest when the fallow period is increased to 6

years. This implies that it is not desirable for Jhum farmers to

increase the fallow period beyond the 5th year as shown in figure 1.

Figure:1 Marginal Revenue with Respect to Fallow Period

3-year fallow 4-year fallow 5-year fallow 6-year fallow0

500

1000

1500

2000

2500

3000

3500

4000

All Crops Turmeric Rice

Mar

gina

l Rev

enue

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3.2 MSFO Farming:

This technique is an alternative to shifting cultivation in hilly areas.

This study estimates the cost and benefit of this technology. The

establishment cost includes the cost of fruit sapling, banana and

pineapple sucker, human labor and fertilizer. The initial cost and the

maintenance costs up to four years of MSFO were calculated from

cross section data. Based on the field experience, the study finds

that as the age of the garden increases so is the maintenance costs.

The gross benefit of MSFO included the benefits received from

fruits, pineapple, intercrops and the salvage value of trees. The

economic life was taken into consideration when estimating income

from a fruit tree.

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The total benefits of a fruit tree= Total quantity of fruit produced

(year)×fruiting period+ local fruit price.

Salvage value=Local price of timber × total no. of trees (hectre)

Thus, total benefit (undiscounted) per year has been calculated by

adding up all the returns produced from the different fruit trees.

The study finds that the net benefit for the Jhum farming is

assumed to be constant over 25 years whereas the net benefit of

the MSFO varies with the years.

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3.3 Net Present values (NPV) of the Two Techniques:

The net present value of MSFO and Jhum farming are used to

calculate the net gain . Net gain from MSFO:

Where, Bt =Benefit from Farming (MSFO or Jhum) in year t; Ct =

Cost of Farming (MSFO or Jhum) in year t; t= 1,2,3 to n and I=

discount rate. The net gain from MSFO has been calculated by

considering the social benefits and costs. The cost to society

keeping land fallow has been included. So this net gain proofs that

the MSFO technique is superior to Jhum farming.

Jhumn

t

tt

MSFOn

t

tt

t

CBt

t

CB

11 )1()1(

)1(

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3.4 Role of Discount Rate:Discount rate is the interest rate at which future receipts or payments

are discounted to find their present value. Discount rate plays an important role in determining the NPV of projects that have a stream of benefits and costs. It included the time value of money as well as a rate of growth of consumption. This analysis uses an arbitrary value of 10%. So, a sensitivity analysis has been conducted to evaluate the impact of discount rates on the NPV value of benefits using different discount rates like 8 percent, 12 percent, 15 percent and up to 50 percent. The discount rate of a farmer depends on a) the rate of interest, b) the rate of time preference, and c) the rate of growth in consumption. Assuming the rate of interest and growth in consumption is the same, it is the rate of time preference of individual farmers that would determine the discount rate. The rate of time preference depends on the individual’s perception of future outcomes.

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Figure: 2 Annual Net Gain from Switching to MSFO Technology at Different Discount Rates

This figure provides a comparative picture of net gains at different discount rates. The discount rates below 57.48% generates an increase in the net gain from MSFO as the discount rates declining. So a very high return from MSFO would tempt the framers to adopt this new technology.

8.00% 10.00% 12.00% 15.00% 25.00% 32.60% 36.40% 46.50% 57.50%0

2

4

6

8

10

12

Rate of Discount (%)

Net

Gai

n(T

k/ha

/yea

r)

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3.5 Reasons for Absence of MSFO Popularity:

Although the NPV calculation is large for MSFO technology for a different discount rates the farmers are reluctant to adopt this technology. The reasons behind the reluctance are:

• The high initial cost of setting• Too risky for farmers who enjoy customary rights on their land• Long gestation period between initial expenditure and floe of

returns• Lack of access to credit• Unfamiliar type of farming increases risk perception.

3.6 The Social Perspective:

The critical discount rates act as a catalysts for a farmers to adopt MSFO technology. Fallow period of 3 years for Jhum farm uses 3 times the amount of land used by a MSFO farmer using the same net cropped area.

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If the gross cropped area is used to compare between the two technologies,

the total gain from switching to MSFO would be much higher .Hence,

the net social gains are much greater than the net private gains calculated

earlier.

3.7 Farmers’ Perception on Shifting Cultivation and MSFO:

Jhum farmers know the harmful effects of shifting cultivation . It

deteriorates the soil in addition causing other environmental degradation.

So its a crying need to stop shifting cultivation as the crop yield is

decreasing overtime. Despite having known the bad consequences of

shifting cultivation the farmers continue farming partly because of

tradition, poverty and lack of technical know- how. If farmers are

provided the facilities then there will no barriers to such an adaptation.

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Table:3 Farmers’ Responses to the Adoption of MSFO Technology

Table 3 explains that 90 percent of the framers are willing to undertake MSFO but they lack the technology. Of those willing to accept MSFO, 36 percent said that they need financial support, 39 percent want free supply of saplings, and 25 percent need training.

Reasons for not Adopting Percentage

A. Willingness to Adopt (N=40) Yes No

9010

B. Reasons for not Adoption1. Technique of establishing MSFO is unknown2. Require higher investment

5842

C. Facilities Demanded1. Provision for supplying fruit saplings free of cost2. Provision for full financial support to set up MSFO3. Provision for providing training on MSFO

393625

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4.Conclusions and Policy Recommendation

This study evaluates the necessity of replacing the practice of shifting

cultivation to a MSFO farming technology by comparing the

benefits between the two. MSFO farming ensures soil conservation

and enhance farm income and highly beneficial for the area. But in

practice farmers are afraid of change and are reluctant to switch to

MSFO farming for high initial establishment cost and adoption

cost, insufficient knowledge, lack of seed money, uncertain

property rights and associated risks and uncertainties. If state

authorities provide financial support and technical assistance then

the farmers would come forward to undertake this farming.

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The farmers need to be known about the benefits of MSFO. The

awareness among the farmers need to be raised by NGOs. Wider

acceptance of this technology can be ensured by providing long

and short terms at reduced interest rates. Thus, scientists and

extension agencies need to help with better pest

management strategies and dissemination of these

strategies through extension services.

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Thanks

Documents

Shifting Cultivation and its Alternatives in Bangladesh: Productivity, Risk and Discount Rates M. A. Monayem Miah and S M Fakhrul Islam Presented ByPresented