Business analysis of silkworm production: A case study of gayatri Kitak Sangopan Kendra, Terkheda, District - Dharashiv
Abstract
The research project titled Business Analysis of Silkworm Production: A Case Study of Gayatri Kitak Sangopan Kendra, Terkheda focuses on understanding the economic and operational dynamics of a silkworm rearing unit in Dharashiv district. The study evaluates the capital investment, cost structures, returns, and marketing strategies involved in silkworm production, particularly during the early stages of chawki rearing. The analysis of the silkworm rearing project revealed that the total capital investment was Rs. 15.09 lakhs, with major expenses directed toward building and land, comprising 46.39% and 33.13%, respectively. The fixed cost averaged Rs. 9.08 lakhs annually, with building depreciation (58.59%) and permanent labor charges (22.47%) being significant contributors. Variable costs were dominant, amounting to Rs. 54.11 lakhs, with raw materials (77.45%) and casual labor (19.96%) forming the majority. Marketing costs were minimal at Rs. 0.28 lakhs, primarily driven by transportation and packaging expenses. Overall, the total cost incurred by the producer was Rs. 63.19 lakhs, with variable costs accounting for 54.11%. The gross returns were Rs. 80.10 lakhs, yielding a net return of Rs. 16.91 lakhs, while the market margin stood at Rs. 16.63 lakhs, with no price spread due to direct sales to farmers. The break-even point was 92641 dfls in physical terms and Rs. 27.79 lakhs in monetary terms. The major challenges faced in production were securing initial capital, lack of skilled labor, and climate control, while marketing difficulties included damage during transport and inadequate storage facilities.
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Introduction
Sericulture is a key rural agro-based sector in India that combines farming and manufacturing, offering significant opportunities due to its high quality, employment potential, low capital requirements, and substantial returns. This sector, crucial for socio-economic growth, employs around 8.60 million people in India, including many from economically disadvantaged backgrounds, particularly women. The constant domestic demand for silk, which holds religious significance in India, supports the country's leadership in the silk industry. Employment in sericulture increased by 1.06% from 8.51 million in 2016-17 to 8.60 million in 2017-18, but saw a slight decrease of 0.7% in 2020-21 compared to 2019-20. (Source: Central Silk Board, Bengalore, Karnataka 2020-21). Sericulture involves the cultivation of silkworms to produce cocoons, which are then processed into silk. Revered as the "queen of fabrics," silk has been highly esteemed from ancient Vedic times to today. There are four main types of silkworms: Mulberry (Bombyx mori), Tassar (Antheraea paphia), Eri (Philosamia ricini), and Muga (Antheraea assama). This agro-based industry has a significant potential to create substantial employment opportunities in rural areas, improving the financial conditions of the poor. The process includes growing mulberry plants to feed the silkworms, rearing the silkworms to produce cocoons, and then converting these cocoons into silk yarn through reeling and spinning. The cultivation of mulberry plants and the rearing of silkworms are essential for silk cocoon production. Known as moriculture, mulberry cultivation includes several farming techniques. Among the approximately 20 species of mulberry, four are most commonly used: Morus alba, Morus indica, Morus serrata, and Morus lalifolia.
The quality of silk cocoons is greatly influenced by the nutritional content of the mulberry leaves.
The Present scenario of global silk industry: India is the second-largest raw silk producer globally, after China. In 2022, the global raw silk production was 91319 MT, with China producing 50000 MT. India's production for 2022 was 36582 MT, including 27654 MT of mulberry silk. (Source https://www.inserco.org/en/statistics) Regarding Need and importance of the sericulture This study emphasizes the crucial role of sericulture in tackling socio-economic issues in India. Agriculture, a vital sector, supports approximately half of the population. However, with around 70% of people living in rural areas and over 40% of them living below the poverty line, the sector faces significant challenges. Rapid population growth has led to a reduction in the size of agricultural land holdings, exacerbating rural poverty and stalling agricultural progress. The limited availability of land, combined with modest financial returns and the seasonal nature of agriculture, constrains its capacity to generate stable employment. This situation highlights the need for alternative income sources. Agro-based industries, particularly sericulture, offer a promising solution by generating employment opportunities and providing a consistent income throughout the year. This is particularly important in densely populated regions like India, where many rural residents are either unemployed or landless. Sericulture presents a valuable opportunity for socioeconomic advancement, potentially improving the economic conditions of the rural poor and supporting their livelihoods throughout the year.
Scope of the study on sericulture
Sericulture, when compared to other agricultural crops and rural industries, requires relatively low investment for maintaining mulberry gardens and rearing silkworms after the initial setup. Once a mulberry garden is established, the ongoing costs for upkeep and silkworm rearing are minimal. This makes sericulture a cost-efficient enterprise with the potential to create significant employment and income opportunities. The initial expense of starting a mulberry garden is relatively low, and the recurring costs associated with silkworm rearing are modest compared to other sectors. Therefore, sericulture presents an affordable and sustainable option for enhancing employment and income, making it an attractive choice for individuals and communities seeking low-cost economic opportunities. Therefore, this study intends to explore the cost structure, income generation, marketing approaches for silkworms, and the difficulties encountered by farmers in the sericulture To study the capital requirement of selected silkworm rearing unit 2. To work out cost and returns of silkworm 3. To estimate breakeven point of selected unit 4. To study the marketing of silkworm 5. To identify the constraints faced by owner in production and marketing.
Company
Methodology
Area of Study
The present study was conducted at Gayatri Kitak Sangopan Kendra, Terkheda dist. Dharashiv.
Period of Study
The data was collected for FY 2023-2024 i.e., from April 2023 to March 2024.
Source of Data
Primary data was collected by pretested schedule from concern person, officials of selected firm by personal interview method regarding the production and marketing of silkworm.
Analytical Tools Cost and Returns of Silkworm Rearing
The collected data related to required cost and returns from silkworm were analyzed, tabulated on the following different aspects viz.
Fixed Cost
The fixed cost includes the data regarding the cost of machinery, building, land, furniture, wages of payment employed labour, salary of staff, electricity charges, insurance premium and taxes. These information were collected from Gayatri Kitak Sangopan Kendra, Terkheda
Variable Cost
The variable cost consists of expenditure on purchase of raw material, wages of casual labour, oil and lubricants, repair and maintenance of machinery, electricity and stationary charges, etc.
Total Cost
Total cost was comprised of the total fixed cost and total variable cost and will be calculated by adding all these costs together.
Total cost = Fixed cost + Variable cost
Gross Returns
The gross returns for production of silkworm rearing was calculated by adding together value of main product received after production of silkworm rearing. The gross returns defined as the total rate of return on an investment before the deduction of any expenses.
Gross returns = Quantity of product X Price per unit
Net Returns
The net returns refer to returns after deducting all expenses from the gross return generated by the investment.
Net returns = Gross returns -Total cost
B:C ratio
The benefit cost ratio compares the present value of all benefits with that of the cost and investment of the project.
B:C ratio = Gross returns / Total cost
Breakeven Point Analysis
The point at which the two curves i.e. total cost curve and total revenue curve intersect is called as breakeven point, which indicates the level of production at which neither losses money nor makes profit. Computation in physical quantity, BEP = F / (P -V)
Computation in monetary value,
Where, F = Annual fixed cost in Rs. P = Selling price per unit in Rs. V = Variable cost per unit in Rs.
Margin of safety
• Margin of Safety (in physical units) = Total output -output at BEР • Margin of Safety (in monetary value) = Total revenue -Revenue at BEP • Percentage of margin of safety = BEP / Volume of total output X 100
Marketing of Silkworm
Initially the marketing cost, market margins and price spread were calculated required for silkworm.
Marketing Cost: The total cost incurred by the producer involved in packaging, transportation, sell and purchase of silkworms till it reaches to farmers.
Market Margin
It refers to difference between the prices prevailing as successive stages of marketing at given period of time.
Market Margin = Selling Price -(Purchase Price + Marketing Cost)
Price Spread
The price spread indicates shares of various agencies involved in marketing along with the cost incurred by them. The price spread of the produce was the difference between the net price received by producer in the assembling market and price paid by consumer for equivalent quantity of produce.
Price Spread = Price paid by consumer -Net Price received by producer
Constraints faced by Owner
The different constraints in production and marketing of Silkworm Rearing were identified by personal interview method.
Results and Discussion Capital Requirement of Selected Silkworm Rearing Unit
To fulfil the first objectives of the study in respect of organizational study of the Silkworm rearing, the results has been obtained on capital investment, summary of capacity utilization are given as under.
Capacity Utilization of Selected Unit
Cost and returns of selected unit
To fulfill the second objectives of the study in respect of organizational study of the Silkworm rearing results has been obtained on cost required, returns obtained from the unit are given as under.
Fixed cost for Silkworm Rearing
The fixed cost for a silkworm rearing project includes several essential components, such as the construction of buildings, purchase of machinery, furniture, and electrical appliances.
Additionally, it covers permanent labor charges and interest on the fixed capital invested in the project. These costs are crucial for establishing and maintaining the infrastructure necessary for successful silkworm rearing operations.
Variable cost required for Silkworm Rearing
The variable cost consists of expenditure on purchase of raw material, wages of casual labor, repair and maintenance of machinery, energy charges, postage, and stationery etc.
Total cost incurred by producer for production of Silkworm.
Total cost incurred by producer for production of Silkworm is the sum of fixed cost and variable cost incurred by producer.
Breakeven point analysis
The break-even point is the number of silkworms reared to cover all costs associated with the rearing process, including both fixed and variable expenses. It is the level at which the total revenue from sell silkworms matches the total costs incurred, meaning that no profit or loss is achieved.
References
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