12. Is Paddy Cultivation Profitable in Telangana? Evidence from CACP Data

Paddy cultivation in Telangana has experienced substantial growth, expanding from 1.97 million hectares in 2010-11 to 3.65 million hectares in 2021-22, with a Compound Annual Growth Rate (CAGR) of 7.85%, the highest among Indian states. This study investigates the profitability of paddy cultivation in the state by utilizing the most recent cost and return data published by the Commission for Agricultural Costs and Prices (CACP) for the period 2017-18 to 2021-22. The analysis revealed that operational costs increased at a CAGR of 8.92%, primarily driven by expenditures on machinery, human labour, and irrigation, while fixed costs, including the imputed rental value of owned land and interest on owned capital, increased marginally by 0.12%. The total cost of cultivation rose by 6.10% under Cost A2+FL and 5.76% under Cost C2. Net income increased by 8.12% at Cost A2+FL but declined by 44.84% at Cost C2. Correspondingly, the profitability ratio was 1.43 and 1.00 at Cost A2+FL and Cost C2 respectively, indicating that profitability diminishes considerably when fixed costs are fully accounted for. The findings emphasize the need for policy interventions aimed at controlling input cost escalation, ensuring remunerative returns through support prices that reflect comprehensive cost structures, and promoting income sustainability for paddy farmers in the region.