Economic Viability and Risk Assessment of Traditional Smallholder Betel Leaf Cultivation in Eastern India Using Monte Carlo Simulation

Abstract

The livelihoods of smallholding farmers are at risk from changing agro-economic and agro-climatic situations, especially those cultivating high-value cash crops. We evaluated the economic viability of betel leaf cultivation in the Tamluk sub-division of West Bengal using cost–benefit and net present value (NPV) analysis and a multiple regression model. A probabilistic NPV analysis was done using Monte Carlo simulation for a medium-sized betel leaf farm, wherein overhead costs were assessed over 10 years. The cost–benefit ratio for each overhead component was highest for the Mitha variety of betel leaf, followed by the Sanchi and Bangla varieties. The NPV of betel leaf farming was positive for discount rates (5% and 10%), except for small-sized Bangla leaves. Simulation analysis of NPV for investing in a medium-sized betel leaf cultivation, growing it for 10 years, was estimated as ₹122,100.14, with the probabilistic NPV of ₹143,387.82. Since both NPV and probabilistic NPV were positive, and the chances of obtaining the estimated probabilistic NPV that is greater than or equal to the mean probabilistic NPV were almost 50%, such an investment was considered viable for the medium-sized Bangla variety of betel leaves, and all leaf sizes of the Sanchi and Mitha types, except for the small-size Bangla leaf.

JEL Classification: Q10, Q11, Q12, Q13