Does adoption of improved agricultural practices reduce production costs? Empirical evidence from Bundelkhand region, Uttar Pradesh, India

Abstract

The present study assessed the effect of improved agricultural technologies disseminated under the ambitious Farmer FIRST Programme on production costs of major crops in Bundelkhand region, Uttar Pradesh, India. The findings show that the average real cost during 2017–18 to 2020–21 declined, leading to an increase in the net return to cost ratio from farming. Technological interventions at the farmer’s field resulted in a gradual decline in the share of seed, fertilizer and plant protection chemicals in the cost of cultivation. The price elasticity of factors, estimated by fitting the translog function, suggests that policies for controlling input price inflation, particularly wage rate, will be imperative in reducing the cost of farming. The results on the elasticity of technical substitution between labour and machinery highlight the need for devising suitable farm mechanization strategies which may be affordable in the small farm situation as well. The panel data estimate of negative cost elasticity of yield indicates that productivity growth plays a vital role in absorbing the increase in production cost.