Economics and Efficiency of Organic Farming vis-à-vis Conventional Farming in India

Charyulu Kumara D. and Subho Biswas

No WP2010-04-03, IIMA Working Papers from Indian Institute of Management Ahmedabad, Research and Publication Department

Abstract: Organic farming systems have attracted increasing attention over the last one decade because they are perceived to offer some solutions to the problems currently besetting the agricultural sector. Organic farming has the potential to provide benefits in terms of environmental protection, conservation of non-renewable resources and improved food quality. India is bestowed with lot of potential to produce all varieties of organic products due to its diverse agro-climatic regions. In several parts of the country, the inherited tradition of organic farming is an added advantage. This holds promise for the organic producers to tap the market which is growing steadily in the domestic market related to the export market. In India, the land under certification is around 2.8 million ha. But, there is considerable latent interest among farmers in conversion to organic farming. However, some farmers are reluctant to convert because of the perceived high costs and risks involved in organic farming. Despite the attention which has been paid to organic farming over the last few years, very little accessible information actually exists on the costs and returns of organic farming in India. The empirical evidences of efficiency analysis of organic and conventional farming systems are scarce or even absent. So, the present paper focuses mainly on the issues like economics and efficiency of organic farming vis-à-vis conventional farming in India. Four states namely Gujarat, Maharashtra, Punjab and U.P were purposively selected for the present study. Similarly, four major crops i.e., cotton, sugarcane, paddy and wheat were chosen for comparison. A model based non-parametric Data Envelopment Analysis (DEA) was used for analyzing the efficiency of the farming systems. The crop economics results showed a mixed response. Overall, it is concluded that the unit cost of production is lower in organic farming in case of cotton and sugarcane crops where as the same is lower in conventional farming for paddy and wheat crops. The DEA efficiency analysis conducted on different crops indicated that the efficiency levels are lower in organic farming when compared to conventional farming, relative to their production frontiers. The results conclude that there is ample scope for increasing the efficiency under organic farms.

Date: 2010-04-20
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