The Journal of Research ANGRAU

AN ECONOMIC ANALYSIS OF VALUE ADDITION TO COTTON
The processing of one quintal of kapas
resulted in 33 kg of lint, 65 kg of seed and 2 kg of
waste. The gross returns obtained from ginning one
quintal of kapas were Rs. 4970.41 of which the returns
from main product (lint) were Rs. 3978.81 and that
from byproduct (seed) were Rs. 991.6. Cost of raw
material (kapas) was Rs. 4238 with a value addition
to the product in the process being Rs. 732.41 and
cost of processing accounting Rs. 392.87. The net
value added as a result of processing of kapas to lint
was Rs. 339.54 per quintal of kapas processed. The
benefit cost ratio worked out to 0.86 in kapas
processing. Similar results were observed with
Mundinamani (2000) and Dodamani (2007).
Among all the costs incurred in marketing of
ginned cotton, the maximum cost was incurred on
packing material Rs.30.36 per quintal, accounting for
37.47 per cent of the total cost of marketing. As the
packing material was very important in case of lint
marketing, it constituted the maximum percent. This
was followed by sales tax, miscellaneous costs and
selling expenditure, which accounted for 25.02 per
cent, 20.33 per cent and 17.18 per cent of the total
cost of marketing of one quintal lint, respectively.
These results are on par with the results of
Shivakumar et al. (2001).
The average total cost incurred in the
processing of lint to yarn was Rs.17201.64 per quintal,
of which the total variable cost was Rs.15497.16
forming the major component (90.09%) of the total
cost of processing of lint. The total fixed cost being
Rs.1704.48 per quintal accounted for 9.91 per cent
of the total cost of processing. Of the variable cost
the cost of raw material (Rs.12000/quintal) accounted
for 69.76 per cent followed by electricity charges
(9.82%) and interest rate on working capital (5.72%).
The cost on wages to casual labour, repair and
maintenance, office maintenance, telephone charges
together accounted for 4.76 per cent of the total cost
of processing.
In the total fixed cost (Rs.1704.48),
depreciation amounts Rs.1427.06 (8.27%), which was
found to be major component. This was followed by
salary to permanent staff i.e., Rs.176.9 (1.02%) and
interest on fixed capital, insurance, taxes, license
fee, together accounting 0.58 per cent of the total
cost of lint to yarn. These results are in line with
Mundinamani (2000) and Shivakumar et.al (2001).
The processing of one quintal of lint on an average
yielded 73 kg of yarn and 27 kg of waste material.
The gross returns obtained from processing (spinning)
of one quintal of lint were Rs.20435, which comprised
of mainly returns from yarn (Rs.18250) and wastage
(Rs.2185). The value addition in the process was
Rs.8435. The net value added as a result of
processing of lint to yarn was Rs.5933.36 per quintal
of lint processed. The resultant benefit-cost ratio was
1.62.
Table 2. Returns in processing of lint to yarn (for one quintal of lint spinned)
S.No Particulars Amount (Rs)
1 Returns from main product(yarn) 18250
2 Returns from wastage 2185
3 Gross returns 20435
4 Raw material cost (kapas) 12000
5 Value addition 8435
6 Processing cost 5201.64
7 Net value addition 5933.36
8 Benefit-cost ratio 1.62
Among all the costs incurred in marketing of
spinned cotton, the maximum cost was incurred on
packing material, Rs.275.48 per quintal, accounting
for 47.9 per cent of the total cost of marketing. This
was followed by commission charges Rs.246.45
(42.85%) and export expenses, yarn sale expenses,
yarn freight together accounting for 9.22 per cent of
the total cost of marketing of one quintal yarn. These
results are in line with the results of Shivakumar et
al. (2001).
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