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Profitability of Mechanical Thresher and Dryer in Rice Processing System in Bangladesh: a Financial Analysis

H. Mamtaz
Department of Agricultural Economics Bangladesh Agricultural University, Mymensingh-2202

M. Akteruzzaman
Department of Agricultural Economics Bangladesh Agricultural University, Mymensingh-2202

S. Akhter
Department of Agricultural Finance, Bangladesh Agricultural University, Mymensingh-2202

Abstract/ Executive Summary:

This study surveyed 30-power thresher and one STR-1 dryer operation during April to June 2003 in some villages of Barhatta Upazila in Netrakona district. Project appraisal technique was adopted to compare the performance of the two types of devices in terms of benefit-cost ratio, net present value and internal rate of return (IRR). The costs of threshing and drying per quintal were respectively Tk 25.36 and Tk 30.03. The cost of firing wood, diesel and labour costs constitutes the major share of the total drying cost while the labour and diesel cost constituted the major share of the threshing cost of paddy. IRR of the dryer machine was found -2 percent and for thresher, it was 89.12 percent. The dryer was used only 10 working days during the rainy season of 2003. If it is considered 30 working days due to an increase in rainy weather, the IRR will be 72 percent. Rainy weather is very important factor for using the dryer. Finally, the study strongly recommended for rapid extension of thresher and dryer technologies through government and non-government agencies for improving the livelihood of the resource-poor farmers.

Keywords: Mechanical dryer, Drying and Threshing cost, Benefit cost ratio, Net present value, Internal rate of return

Location: Mowati village of Bawoshi union under Barhatta Upazila of Netrakona district and Bangladesh Agricultural University Research System (BAURES) project

Start Date: 00-00-2003

End Date:

Program Area: Socio-economic and Policy

Commodity: Thresher, Drier

Objectives:

As a result, the rice farmer becomes more losers and the same cycle is running in the rice economy without the mechanical thresher and dryer. It is a hypothesis that the introduction of mechanical dryer and thresher may ensure reduction of post-harvest loss, grain saved, quality improvement, and get a fair price which resulted in increase income from rice consequently induced thresher and dryer technology in the rice economy of Bangladesh. This study is a modest effort to examine the financial profitability of using a mechanical thresher and dryer for the rice processing system.

Methodology:

To achieve the objectives, the project has jointly collaborated with an NGO named as Association for Social Advancement (ASA). One group of members of ASA was selected for this project, where one close drum power thresher had already been established by the informal group of ASA at Mowati village of Bawoshi union under Barhatta Upazila of Netrakona district. One STR-1 dryer was distributed to the informal group of ASA free of cost from the Bangladesh Agricultural University Research System (BAURES) project in May 2003. The group appointed the operator for the operation of the machine. The moisture meter and the necessary spare parts were supplied from this project free of cost. The operators worked under close supervision of the project research assistant. The group also shared all the operating costs and charged a fixed amount of rent per unit of output from the user, which was prior, approved from their parent NGO, ASA. The group maintained proper records of accounts of power thresher and dryers on a daily basis and corresponding income and expenses.

The project appraisal technique has been followed to find out the profitability of power thresher and STR-1 mechanical dryer from owner's point of view. The following three major discounting measures are applied for project appraisal (Gittinger, 1994). These measures are a. Benefit-Cost Ratio (BCR), b. Net Present Value(NPV), c. Internal Rate of Return (IRR).

Source of Information: J. Bangladesh Agri!. Univ. 3(1): 155-162, 2005 ISSN 1810-3030

Article Link (Online Journal):

Funding Source:

Budget:

Total Budget (Tk.) :

Achievement/Findings:

Based on the above findings the following conclusions could be drawn- (i) A large quantity of Boro paddy harvested and sold during the peak period of the wet season and mechanical threshing reduce the post-harvest loss, timeliness, and labor cost. Thus, the higher demand for mechanical threshers and dryers was observed in that period and ensured a fair price to the farmer. (ii) The price of rice increased by 10% on the subsequent rainy day while the price of paddy decreased by 8% In the same time; so, the dryer could help farmers for earning additional income by taking it as a business motive. (iii) The price of paddy as well as rice increased about 30% after 3 months of harvesting, thus, mechanical thresher and dryer should ensure the quality of paddy and rice for getting the higher price to the farmers. (iv) The thresher cost of one quintal was about Taka 25.38 and the drying cost of one quintal was about Taka 30.03, which was much lower than the incremental market price that induces threshing and drying of paddy by using the devices. (v) In terms of rate of return on investment with an existing condition, power thresher was found highly profitable but because of sunshine weather dryer was not profitable. If the working period increases due to cloudy weather, the return on investment is found much higher than the opportunity cost of capital. The result of sensitivity analysis found that if the operation and maintenance cost increased by 10 '3/0 and the benefit of owners' equipment decreased by 10%, the profitability of the thresher is still much higher than the opportunity cost of capital. (vi) The study strongly recommended rapid extension of the dryer project through government and non-government agencies.

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