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Ex-post Impact of Research and Extension for Shatabdi Wheat Variety

M. Jahangir Kabir
Senior Scientific Officer
Department of Agricultural Economics, Wheat Research Centre, BARI, Nashipur, Dinajpur

M. E. Baksh
Senior Scientific Officer
Department of Agricultural Economics, Wheat Research Centre, BARI, Nashipur, Dinajpur

M.G. Rabbani
ecturer
Department of Basic and Social Science, Dinajpur Government Veterinary Collage, Dinajpur

Rozina Yesmin Lucky
Lecturer
Department of Economics, Hajee Mohammad Danesh Science and Technology University, Dinajpur

Abstract/ Executive Summary:

An ex-post rate of return analysis was considered to estimate the internal rate of return (IRR) to WRC released improved variety Shatabdi that has been replaced the previous varieties. The growth rate of area, production and yield of wheat over the last 14 years were – 3.3 %, - 3.6 % and 0.57% respectively. After the release of improved variety of Shatabdi the area and production have been decreasing due to lack of seed of this variety and disease susceptibility of old variety Kanchan. The internal rate of return in Shatabdi research and extension was calculated at 59%. The average potential relative yield of Shatabdi variety over the Pre Shatabdi varieties was found 28 percent higher. Under various assumptions about the magnitude of the benefits and the research and extension expenditures, the IRR ranged between 46 percent and 73 percent. This indicates that the funding of Shatabdi research and extension is a good investment.

Keywords: Wheat, Ex-post, Impact, Elasticity, Supply Shifter, IRR

Location: Department of Agricultural Economics, Wheat Research Centre, BARI, Nashipur, Dinajpur

Start Date: 00-00-1993

End Date: 00-00-2007

Program Area: Socio-economic and Policy

Commodity: Wheat

Objectives:

The main objective of the research was to estimates the rate of return to Shatabdi variety that has been replacing the old varieties.

Specific objectives of the study are

1. To find the adoption situation of Shatabdi and yield advantages over pre Shatabdi varieties.

2. To estimate the rate of returns from Shatabdi variety research and extension.

Methodology:

The Ex-Post analysis with the help of the Economic Surplus Model was considered for the present study to estimate the rate of returns of the improved variety Shatabdi that have been replacing the pre Shatabdi varieties. The period of the study was 1993/94 to 2006/07. There are two distinct parts of the analysis to obtain the rate of return to research and extension expenditures. The first is estimating the yearly stream of benefits in monetary terms that flow from an adopted intervention such as improved varieties. This was done by using the economic surplus model. Once the yearly benefits have been calculated, they are then related to the yearly cost of research and extension by calculating a benefit-cost ratio or internal rate of return (IRR).

Economic Surplus Model The concept of economic surplus has been used to measure economic welfare and the changes in economic welfare from policy and other interventions. (Alston et al., 1995; Currie, Murphy and Schmits, 1971). The economic surplus concept has been adapted to estimate the benefits from the adoption of improved variety. The components of economic surplus are consumer surplus and producer surplus. Given the initial condition (i.e., pre-research supply curve S1 and demand curve D1), consumer surplus is depicted as area PaPnBC. This is the surplus or benefit to consumers because of a functioning market. That is, consumers are paying a lower price for the commodity because of the quantity available through market activity. Consumer surplus is that area beneath the demand curve less the cost of consumption. The cost of consumption is the area below the price line Pn. Producer surplus is defined by area Area OBC - Area PoPnBA. Area: Area OBC - Area PoPnBA is the surplus left to the farmers after they have paid for the total costs of production. The adoption of an intervention by farmers such as an improved variety usually means one of two things: i. a farmer can supply more of the commodity using the same level of resources (i.e, same land area, other inputs), or ii. a farmer can supply the same level of commodity output but can do it with fewer resources. In either case, this is depicted by a shift to the right of the supply curve as shown in figure 1 (the shift is from S1 to S2). This shift in the supply curve from the adoption of an intervention changes the initial equilibrium price and quantity of the commodity. This new price quantity equilibrium increases economic surplus. The change in economic surplus (economic benefits) is measured by comparing the difference in economic surplus between the pre-adoption period and the post-adoption period.

The IRR can be defined as the rate of interest that makes the accumulated present value of the flow of cost equal to the discounted present value of the flow of returns, at a given point in time (Peterson, 1971, p.148-149). For example, an IRR of 20 percent means that on average, each Taka invested in agricultural research and extension returns 20 percent annually from the date of the investment. Another interpretation is that if the yearly research and extension expenditures had been borrowed at an interest rate of 20 percent, the social benefits from research and extension would equal the cost of borrowing the funds. Two types of data are mainly needed for the analysis: i. market related data, and ii. research related data. Market related data and information were collected from published sources from different libraries and Divisions of the Institute. Market related data required for this analysis included annual wheat prices and production, and wheat supply and demand elasticity’s. Research related data were obtained from the scientists and different department from the Institute. Research related data included annual area of varietals adoption by farmers, yield advantage of improved varieties the input cost change, if any, and research and extension expenditures. Elasticity’s There are two estimated area response elasticity 0.61 and 0.91 (BRRI, 2006). Dey and Norton used 0.5 output supply elasticity for their ex-ante analysis. The present analysis considers 0.61 and 0.91 for supply and demand elasticity respectively. The analysis first used the small openeconomy model and therefore, uses nearly elastic demand elasticity.

Source of Information: J. Sci. technol. (Dinajpur) Vol. 5: 98-110 (2007) ISSN 1994-0386

Article Link (Online Journal):

Funding Source:

Budget:

Total Budget (Tk.) :

Achievement/Findings:

The internal rate of return was found 59%. This IRR for investment in research and extension is a good rate of return. The IRR is estimated on the basis of some base parameters. Data of supply elasticity, percentage yield change, commodity price, quantity, and research cost are collected from different sources and data of input cost change per hectare, probability of success, exogenous output growth rate are assumed on the basis of some condition. The analysis also includes the benefits over the pre Shatabdi varieties was 28%. The benefit cost ratio was found 8.31:1 which indicated much higher benefits to the investment.

In the ex-post analysis, only the direct benefit from the increased yield was considered. Two other aspects have not been included which are: i, the benefits from maintenance research, and ii. the increase in commodity quality through research. For this kind of analysis, the yield advantage was an important parameter for calculating the supply shift. So yield advantage information should have to be accurate. In this analysis, yield advantage has been calculated by the 3 years trial data, but breeder states that there is no fixed year for calculating yield advantage but at least it should be 7-8 years. So the average data needs to be more than 3 years on average experimental yield of competitive wheat variety.

The most important part of the analysis is the research cost. Every research institute expands its research costs for the development of many varieties at a time. So it is a quite difficult task to calculate the research cost needed for the development of one specific variety. So, the cost should be maintained carefully from the beginning of each research.

Undertaking good quality impact assessment requires good data especially on adoption rate. Adoption information is important not only for rate of return studies but also for information feedback to researchers about how well a technology is being accepted, the determinants of adoption (who is adopting or not adopting and why) and the distribution of the adopted varieties. These are issues that need to be brought to the attention of researchers, extension personnel and policy makers.

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