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Development of Entrepreneurship for Custom Hire Service of Tractor in Bangladesh

MOST LATIFUNNAHAR
Student, Master of Science (M.S)
Examination Roll No.: 08, Agri. Engg. FPM JD 06 M, Registration No.: 30841, Session: 2003-2004, Semester: July-December-2010

Dr. Md. Monjurul Alam
Professor & Supervisor
Department of Farm Power and Machinery, Faculty of Agricultural Engineering and Technology, Bangladesh Agricultural University, Mymensing

Dr. Md. Mosharraf Hossain
Professor & Co-Supervisor
Department of Farm Power and Machinery, Faculty of Agricultural Engineering and Technology, Bangladesh Agricultural University, Mymensing

Chairman, Examination Committee and Head
Department of Farm Power and Machinery, Faculty of Agricultural Engineering and Technology, Bangladesh Agricultural University, Mymensing

Abstract/ Executive Summary:

The main purpose of the study was to determine the economic parameters for developing a tractor custom hire entrepreneurship and identify most important maintenance and effective schedules for tractor operation. Secondary data from various sources were used in this peace of research. Some essential data were collected from primary sources through surveys. Operating costs were calculated and project financial profitability was determined by four major on-farm financial measurement techniques namely, Benefit-cost ratio (BCR), Net Present Value (NPV), Internal Rate of Return (IRR), Payback period. Considering Bangladesh condition, an effective scheduling for maintenance for tractor operation was developed for custom hire tractor entrepreneurs. Considering the economic use, land topography and cropping pattern was developed to effective scheduling for tractor operation. The operating cost of tractor with implement was found 781 Tk/ha. For replacement of the existing tractor on expiry of economic life, the entrepreneur has to save an amount of Tk. 17,520 per year in a bank account. Based on the operating cost, annual savings for replacement and a profit margin for the entrepreneur, the rent-out charge of the tractor is estimated as Tk. 1007 per hectare. Considering 10 percent interest rate, the NPV of the tractor at exiting conditions is Tk 15,13,420. The NPV of tractor indicates that tractor entrepreneurship is considered financially sound and the project is said financially viable. The average IRR was 36.96 percent. In view of these circumstances, the project is said financially viable because IRR of the tractor was greater than the bank interest rate and highly profitable from the viewpoint of individual investors. The payback period of tractor with implement was determined as 2.03 yrs. The minimum tenure for an economic use of a common tractor used in agriculture is about 2788 hours. Above this critical use, the utilization of a tractor is economical for a tractor entrepreneur. Depending on the cropping pattern two major and one minor turn-around periods are available in between cropping seasons for tilling operation. The time available for tilling of land is estimated about 140 days @ 12 hours a day in a year. For transportation and other purposes, the minimum usages of tractor would be 138 days @ 8 hour a day. To strengthen the existing capacity of the tractor custom hire service entrepreneurs and to develop new entrepreneurs, appropriate adoption and dissemination programs must be launched all over Bangladesh.

Keywords: Economic parameters, Tractor custom, Hire entrepreneurship, Identify most important, Maintenance schedules for tractor, Tractor operation

Location: Department of farm Power and Machinery, BAU

Start Date: 00-06-2010

End Date:

Program Area: Farm Mechanization

Commodity: Tractor

Objectives:

Considering the problems stated above the following specific objectives were formulated to give proper direction of the study:

1. To determine the economic parameters for developing a tractor custom hire entrepreneurship.

2. To identify most important maintenance schedules for tractor. and

3. To identify effective scheduling for tractor operation.

Methodology:

The reliability of scientific research depends to a great extent on the appropriate methodology used in the research. Farm management research is mainly based on field-level primary data. Again, collection of data depends on the objectives of the study. This study is based on field-level data collection from farmers, custom hire providers of tractors and tractor owner in Jessore district. Secondary data from various sources were used in this piece of research. The main sources of data were from the traders of tractors and machines, Journals, published reports and theses. Some essential operational data were collected from primary sources though a survey designed for this purpose. An interview schedule was developed and data collected from key informants (farmers, machine owners, operators, SAAO, extension personnel etc.) through personal interviews during December - February, (2009-2010). The data were verified in consultation with the specialists in the relevant fields. In this study, primary data were collected from a field survey. Before field survey, a set of questionnaire were developed based on the objectives and methodologies used for this research. Draft questionnaires have been prepared and pretested, and necessary addition and subtraction has been done accordingly to finalize the questionnaire. In this study, the interview method was followed to achieve the research objectives, as it is less costly and less time-consuming. The researcher herself conducted the whole survey after preparation the final schedule. Data were collected through direct interviews with the operators of tractor and custom hire service providers of tractor. While data were collected, introduction about the nature and purposes of the study was given to all of the respondents and the researcher also assured them that, all information would be kept confidential so that they did not hesitate answering to the relevant questions. The collected data were then coded, summarized and processed for the analysis. Having interviewed a respondent, each schedule was checked and verified so that information on each item has been properly recorded. If any item seemed to be inconsistent or contradictory, the respondents were revisited and the missing information was collected. Secondly, processed data were entered into computer by using the MS Excel (Microsoft Excel) programming and analyzed as per objectives. During the period of data collection, the researcher faced various problems. Some of the major problems are briefly discussed below. 1. Most of the respondents initially hesitated to answer questions because they had no previous idea about such type of research. 2. Most of the respondents were afraid of tax imposition or tax increase; they were reluctant to provide information relating to their land holding and other assets. Not only that, some of them asked the researcher whether they would get any benefit from these interviews.

Source of Information: A Thesis, Master of Science (M.S.), Department of farm Power and Machinery, BAU, June 2010

Article Link (Online Journal):

Funding Source:

Budget:

Total Budget (Tk.) :

Achievement/Findings:

Based on the findings and their interpretation the following conclusions are drawn. • Estimation of tractor operating cost is important economic aspect for sustainable tractor custom hire service entrepreneurship. A simple and easy way of estimating the operating cost of tractor for an entrepreneur would be: Tractor operating cost = {(11% of purchase price (Tk.) / Annual Use in ha.} + {558.29 x area (ha)}. For replacement of the existing tractor on expiry of economic life, the entrepreneur has to save an amount of Tk. 17,520 per year in a bank account. • Based on the operating cost, annual savings for replacement and a profit margin for the entrepreneur, the rent-out charge of the tractor is estimated as Tk. 1007 per hectare. • Considering 10 percent interest rate, the NPV of the tractor at exiting conditions is Tk 15,13,420. The NPV of tractor indicates that tractor • For replacement of the existing tractor on expiry of economic life, the entrepreneur has to save an amount of Tk. 17,520 per year in a bank account. • Based on the operating cost, annual savings for replacement and a profit margin for the entrepreneur, the rent-out charge of the tractor is estimated as Tk. 1007 per hectare. • Considering 10 percent interest rate, the NPV of the tractor at exiting conditions is Tk 15,13,420. The NPV of tractor indicates that tractor entrepreneurship is considered financially sound and the project is said financially viable. • The average IRR was 36.96 percent. In view of these circumstances, the project is said financially viable because IRR of the tractor was greater than the bank interest rate and highly profitable from the viewpoint of individual investors. • The payback period of tractor with implement was determined as 2.03 yrs. • Proper maintenance and service adjustments must be performed at regular intervals to assure economical, efficient, and safe operation of the tractor. Always follow these general practices to keep the tractor in good condition: 1. Clean the tractor when needed. 2. Inspect the tractor each day. 3. Keep all parts firmly attached. 4. Keep good maintenance records. 5. Perform daily and periodic maintenance regularly. 6. Don’t abuse the tractor. 7. Use correct procedures to store the tractor. • The minimum tenure for an economic use of a common tractor used in agriculture is about 2788 hours. Above this critical use, the utilization of a tractor is economical for a tractor entrepreneur. • Depending on the cropping pattern two major and one minor turnaround periods are available in between cropping seasons for tilling operation. The time available for tilling of land is estimated about 140 days @ 12 hours a day in a year. • For transportation and other purposes, the minimum usages of tractor would be 138 days @ 8 hours a day in a year.

Knowledge Management: Thesis