One and a Half Bigha, Two Plans
A household in Nagaon district has 1.5 bigha of cultivable land, ₹20,000 in savings and two adult workers. The family is choosing next year's cropping plan.
Plan A - one crop of winter paddy (salí): 12 maunds per bigha at ₹1,150 per maund; cash cost ₹4,200 per bigha; straw sold for ₹1,500 in total; family labour 18 days per bigha.
Plan B - mustard followed by autumn paddy (ahu): mustard 1.6 maunds per bigha at ₹4,800 per maund, cash cost ₹2,600 per bigha; ahu paddy 9 maunds per bigha at ₹1,150, cash cost ₹3,500 per bigha; family labour 30 days per bigha in all.
Daily wage work in the nearby town pays ₹380 a day, is available for about 25 days a year to each adult, and costs ₹60 a day in travel. A moneylender offers ₹20,000 at 5 per cent a month; a bank Kisan Credit Card offers ₹30,000 at 7 per cent a year but takes about six weeks to sanction. Two years ago mustard prices fell by a third.
1. Calculate the net return from one bigha under Plan A and under Plan B. Show your working.
Read the worked answer
Plan A (per bigha)
- Paddy: 12 maunds × ₹1,150 = ₹13,800
- Straw: ₹1,500 ÷ 1.5 bigha = ₹1,000
- Gross = ₹14,800
- Minus cash cost ₹4,200 = ₹10,600 per bigha, i.e. ₹15,900 for 1.5 bigha.
Plan B (per bigha)
- Mustard: 1.6 × ₹4,800 = ₹7,680; minus ₹2,600 = ₹5,080
- Ahu paddy: 9 × ₹1,150 = ₹10,350; minus ₹3,500 = ₹6,850
- Total = ₹11,930 per bigha, i.e. ₹17,895 for 1.5 bigha.
Comparison: Plan B is ahead by ₹1,330 per bigha, ₹1,995 for the holding - about 12.5 per cent more than Plan A.
Caution about method: this is a cash-cost comparison. It treats family labour as free and uses one price for each crop. Both assumptions need testing before the family acts, which is what the next step does.
2. A neighbour says Plan B earns more but is still the worse choice. Using the labour figures, decide who is right and state the assumption that settles it.
Read the worked answer
Test the free-labour assumption. Plan B needs 12 more family days per bigha than Plan A - 18 days for 1.5 bigha. Wage work pays ₹380 a day and the family has two adults, so if those days could be sold, they are worth 18 × ₹380 = ₹6,840. That is more than three times Plan B's extra ₹1,995. On that basis the neighbour is right: Plan B destroys value.
But the wage work is not unlimited. Only about 25 days a year are available to each adult - 50 person-days in all - and it is uncertain. Plan B already needs 45 family days across the holding. If the family cannot actually sell the extra 18 days, their opportunity cost is near zero and Plan B is better.
Add the risk. Two years ago mustard fell by a third. At ₹3,200 a maund, mustard net falls from ₹5,080 to ₹2,520 per bigha - a loss of ₹2,560 per bigha, ₹3,840 on the holding. One bad mustard year wipes out the plan's ₹1,995 advantage twice over, while Plan A has one crop and one price.
Judgement: the deciding assumption is whether family labour has a paid alternative. Where it does, Plan A wins; where it does not and the household can carry price risk, Plan B wins. A prudent answer is Plan A on most of the land with a small mustard plot, so that risk is tested without staking the whole holding.
3. The family needs ₹18,000 for inputs six weeks before sowing. Advise them on credit, using numbers.
Read the worked answer
Cost the two offers over the period actually needed.
- Moneylender: 5 per cent a month = 60 per cent a year. On ₹18,000 for four months: 18,000 × 5% × 4 = ₹3,600.
- Kisan Credit Card: 7 per cent a year. On ₹18,000 for four months: about ₹420. Even over a full year it is ₹1,260.
The difference is roughly ₹3,180 - a large sum against a net farm income of ₹16,000.
But timing is a real constraint. The KCC takes six weeks, which in this case is exactly the sowing window. Borrowing cheaply after sowing is worth nothing.
Advice:
- Apply for the KCC now, so it is in place for next season; use it as the standing source, not the moneylender.
- For this season, look first at the cheapest short-term source that does not depend on a six-week sanction - a women's self-help group loan, a cooperative society, or an advance from a trader against a confirmed sale (checking the price condition, which can be worse than interest).
- If only the moneylender is available, borrow the minimum for the shortest period, get the rate and the total written down, and never sign a bond with land as security.
- Compare the cost of borrowing with the return from the loan: at ₹3,600, borrowing to fund Plan B's extra ₹1,995 does not pay. Credit should fund the plan that already clears its costs, not rescue one that does not.