FARM MANAGEMENT

FARM CREDIT

Analysis for credit. A banker's plan is something more than the farm management specialist's plan. A banker is more concerned with the recovery of the loan advanced by him to the farmer. A farm-management specialist's plan is all right, but a banker, if he is to call it his plan, must examine it, as not only the additional returnsfrom the alternative plan, but also whether the farmer would be able to repay the loan from the additional returns or not.

The credit forms the total capital requirement minus the farmer's owned funds. Most of the banks expect the farmer to contribute 25% of the total capital requirement as margin money so that he has some stake in the business.

Season-wise analysis. Because the loan is to be paid at the end of every season, repayments include:
(a) The total amount in the case of self-liquidating loans which are for short periods & for purchasing seeds, fertilisers, hiring casual labour, etc.
(b) The instalments of the medium & long-term loans which are not self-liquidating & are for constructing buildings, raising irrigation structures, purchasing implements, machinery etc.

The format to compare the existing & the alternative plans for credit is given in Table 2. Section A gives crop combinations which can increase yields & farm income in an alternative plan. Section B shows how to work out short-term credit requirements. Section C shows how to work out the repaying capacity & economic feasibility of the credit proposal.

TABLE 2. Format to compare existing & alternative plans for credit

Cropping pattern	Existing plan (without credit)	Existing plan (without credit)	Existing plan (without credit)		Alternative plan (without credit)	Alternative plan (without credit)	Alternative plan (without credit)
Season/ crop	Area	Yield hectare	Total production	Area hectare	Yield production	Total production	Gross returns
Kharif
1
2
Sub-total:
Rabi
1
2
Sub-total
Total

(B)Short term credit requirements	Capital & credit requirements(Existing plan)	Capital & credit requirements(Existing plan)	Alternative plan	Alternative plan
Item	Kharif	Rabi	Kharif	Rabi
I. Variable expenses
(i) Seed
(ii) Fertilisers/manures
(iii) Insecticides /fungicides
(iv) Hired casual labour
(v) Diesel petrol
(vi) Miscellaneous cash expenses
Sub-total:
II. Fixed expenses
(i) Land revenue/water-rates/cash rent
(ii) Permanent labour
(iii) Flat-rate electricity bills
(iv) Repairs
Other miscellaneous expenses
Sub-total
Total operational expenses(variable & fixed)
Farmer's availability
Short-term credit
Interest on credit amount
Amount to be repaid
(C) Economic feasibility tests of the farm credit proposal
I. Return analysis
	Existing plan(Kharif)	Existing plan(Rabi)	Alternative plan(Kharif)	Alternative plan(Rabi)
(i) Gross income(A)
(ii) Total operational expenses(B)
(iii) Returns from fixed factors
Net farm income:
Incremental income:
II. Repayment capacity:
(i) Returns from fixed factors
(ii) Income from other sources
(iii) Total family income(i plus ii)
(iv) Old debts/loan instalment(s)
(v) Family living expenses
(vi) Social expenses(unavoidable)
(vii) Total deductions(iv plus v plus vi)
Repayment capacity(iii minus vii)
III Risk-bearing ability:
(ix) Less % of income against risk & uncertainties
(x) Net repayment capacity(vii minus ix)

FARM-EFFICIENCY MEASURES

Efficiency is the ratio of the output to the input. This concept is important as it shows how much profitable the farming business is. Various measures to explain the efficiency of the business as a whole, & in parts, are available. When examined together they help to point out the weaknesses in the farm business & provide a guideline as to which part of the business deserves special attention for making improvements. In a particular situation due importance is given to a particular measure.For instance different measures would be adopted for indicating the volume or size of the business, agregate earnings from particular factors or the business as a whole & returns per unit of a particular factor input. Further, the efficiency of a farm can be judged from the costs or returns or both. No single efficiency measure is so complete as to give a true picture of the entire farm business. These efficiency measures help to reorganise the same farm for which they are calculated but they must be used with great caution, while comparing different farms. This is especially important in the developing countries where farming is of diversified nature & individual farm business has wide variations in respect of soil type, resource restraints, capacities & capabilities of the farmers to undertake risks, their attitude towards innovations, etc. Also, these measures suffer from limitations for making comparisons because of their changing prices, costs, & conditions of the farm business. Adjustments with the price & coat indices are necessary before such comparisons give any valuable information.