Estimation of Unit Cost and Full Supply Price of Pepper in Kerala: An Empirical Exercise

Pepper is an important commercial crop in India, as it is a source of foreign exchange earnings for the country. Being a labour intensive crop, it is also a source of employment for rural labour households. Highly fluctuating prices, high cost of production and devastating diseases plunged the area under production of pepper by driving many farmers to shift from pepper to other crops. In this context a holistic attempt is made to estimate unit cost, cost per kilogram and cost per stand, and full supply price, that is, the price which, if received over the entire economic life of the plant, would cover all expenditures and would provide a desired rate of return on all capital involved in the production operations. The study is carried out in Kerala which accounts for 97 percent of total pepper production in the country. In this paper life cycle approach is used to estimate cost of production of pepper. Also and fully supply price is estimated at various discount rate, suitable for policy decision. Estimation of cost and field level experience reveals that the comprehensive cost is below the farm price level. However, fluctuation in price coupled by magnitude of disease impedes many farmers to switch over to other lucrative crops.