Journal of Pharmacognosy and Phytochemistry 2019; SP5: 190-195

E-ISSN: 2278-4136
P-ISSN: 2349-8234 (Special Issue- 5)
JPP 2019; SP5: 190-195 International Conference on
S Ghimire “Food Security through Agriculture & Allied Sciences”
Agriculture and Forestry
University, Rampur, Nepal
(May 27-29, 2019)

B Koirala
Agriculture and Forestry Economic analysis of commercial banana cultivation
University, Rampur, Nepal
and supply chain analysis in Chitwan, Nepal
S Devkota i
Agriculture and Forestry
University, Rampur, Nepal S Ghimire, B Koirala, S Devkota and G Basnet
G Basnet
Agriculture and Forestry Abstract
University, Rampur, Nepal This survey was conducted to assess the economics of commercial banana cultivation and to study the
supply chain in the eastern Chitwan in 2018. The study was conducted in Ratnanagar and Khaireni
municipalities. A household survey of 100 banana growers which includes 50 from each municipality
and of total 20 traders were interviewed for collection of primary data. Data obtained from semi-
structured questionnaire were subjected to descriptive analysis. The result showed that, the cost of banana
cultivation per hectare was NRs 455857.80 and average profit to be NRs 197853.23 per hectare. The
average benefit cross ratio was 1.50. Cobb-Douglas production function analysis showed that labor cost,
machinery expenses, contributed significantly to gross income of banana at 1% level of significance.
Organic manures and fertilizers costs contributed significantly to gross income of banana at 5% level of
significance. Producers-Collectors-Wholesalers-Retailers-Vendors-Consumers supply chain was the
prevailing supply chain in the study area. Most of the respondents perceived that the disease and pest
infestation and fluctuation in price were major problems.

Keywords: Benefit-cost ratio, cobb-Douglas production function, gross return, producer’s share, supply
chain

1. Introduction
Banana (Musa paradisiaca L.) of the family Muscaceae is herbaceous tropical and sub-tropical
fruit growing in clusters, usually elongated and curved, with soft flesh rich in starch covered
with a rind which may be yellow or green when ripe. The complex domestication of wild
bananas in the genus Musa occurred over thousands of years (Langhe, 2009) [8]. Bananas are
excellent sources of Vitamin B6, soluble fibers and contain moderate amounts of vitamins,
manganese and potassium. Consumption of banana may be associated with a reduced risk of
breast cancer and renal cell carcinoma (Bose, 1990) [3].
In Nepal, banana is being grown since time immemorial for home consumption (Gautam,
1994) [6]. Before recent years, Nepalese subsistence farmers grew their banana crops in kitchen
garden and homestead land (Ahamad, 2008) [1]. It ranks the fifth in area and third in production
among fruit crops grown in Nepal (ASD, 1996/1997) [2]. Banana being a prioritized high-value
agricultural product and a major fruit in Nepal in terms of the potential growing area,
production and domestic consumption, is currently grown in 68 districts with total productive
area of 14311 hectares and production of 234319 tones and productivity 13.2 tones per hectare.
Nepal imports 27878 tones of banana annually from India to meet the domestic demand,
particularly in urban and peri-urban areas (TEPC, 2016) [11].
Chitwan is the largest producer of bananas after Saptari, Jhapa, Morang and Rupandehi
districts. The cultivation of banana initiated in Chitwan in 1940 (Shrestha, 1994) [10].
According to Banana Farms Promotion and Development Center, Chitwan district is the
leading banana producing district earning NRs 150 million before 2010/11. Banana production
in the district increased by a whopping 566 percent over the past decade (Ghimire, 2016) [7].
Banana is cultivated in Chitwan in 690 hectares and accounts for 12256 tones of the country’s
Correspondence total production (DADO, 2016) [4, 5]. In Chitwan, banana is widely commercialized and the
S Ghimire number of commercial plantation is rising and current plantations are expanding in the area.
Agriculture and Forestry Most of the region of district is climatically suitable for growing banana, and hence the
University, Rampur, Nepal production potential is high. Farmers have adopted crop rotation that helps to minimize insect-
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pest and disease infestation. Banana is grown for 5 to 6 years “Price Spread” and is the difference between the price paid by
and cleared for rice, maize and mustard for one to two years. the consumers and the price received by the farmer was
This study was targeted at central question of economic determined as frequency of importance given by the
assessment of commercial banana cultivation in Chitwan respondents. This was calculated by subtracting farm gate
district. The primary objective was to study socio-economic price from retailer price.
analysis, economics of production, marketing channel, gross
return, identify problems and suggest appropriate policies and Marketing margin = Retailer price – Farm gate price
measures for improving commercialization of banana MM= Pr – Pf
production.
Similarly, producers share is the price received by the farmer
1.1 Research Methodology expressed as a percentage of the retail price, which is the price
1.2 Study area and sample size paid by the consumer. Considering Pr is the retail price and Pf
The survey was conducted in Prime Minister Agriculture is the producer’s price (farm gate price), the producers share
Modernization Project (PMAMP) Banana zone of Chitwan (Ps) is calculated as:
district. Ratnanagar and Khaireni municipalities were
purposively selected as study site. Sampling frame was
prepared from the member’s directory of Banana Zone
Implementation Unit. Out of the sampling frame, 25% of the
respondents were taken as study sample for this study. Simple 2.5 Indexing
random sampling method was used to select the required So as to know the importance of different production and
number of sample. Thus, selected respondents (100 banana marketing problem five point scale was used based on
growing farmers along with 20 traders comprising 50 growers farmer’s perception about them. It includes very high
and 10 traders) from each municipalities were interviewed by importance, high importance, normal importance, less
using pre-tested semi-structured interview schedule. importance and the least importance to the different problems
Secondary information was obtained through reviewing using numeric values 1, 2, 3, 4, and 5 respectively. The index
different publications of different institutions (DADO of importance was carried out using the following formula:
Chitwan, Banana Producers Association, Banana Zone
Profile, NGOs and INGOs), informal group discussions,
participatory observations and key-informant survey.
The field survey was conducted in November, 2018. The
respondents were interviewed with two interview schedules, Where
one for producers and next for the traders. The collected Iimp = Index of importance
information were first tabulated, coded and entered in to the ∑ = Summation
computer. All the local measurements were converted to Si = ith Scale value (1, 2, 3, 4 and 5)
standard units and final analysis was done by using computer Fi = Frequency of ith importance given by the respondents
software packages: Microsoft Excel and Statistical Package N = Total number of respondents
for Social Sciences (SPSS).
2.6 Factors affecting banana production
2. Methods of data analysis Cob-Douglas production function was chosen to estimate the
2.1 Cost of production banana production function of banana producers. The choice
The total cost of production includes Total Variable Cost of the functional form was based on its theoretical fitness to
(TVC) and Total Fixed Cost (TFC). The cost of production agriculture and its computational manageability. Further, most
encompasses cost of planting material, manure, fertilizer, production studies in agriculture sector have used this
micro nutrients, pesticides, labor, machines, function ((Sahota & S. Geain, 1968); Dhawan and Bansal
marketing/transport and rent/ contract of orchard. 1977; Barman 1993; Barman and Chaudhary, 2000). The
model specified and used was represented by Y =
2.2 Benefit cost ratio αX1b1X2b2X3b3…………Xnbn, where Y was dependent variable
Benefit cost ratio simply gives an idea about recovery of cost and X1 through Xn were factors of production, respectively.
incurred during the production by return from products. This The production function was converted to logarithmic form so
analysis was done after calculating the total cost and gross that it could be solved by least square method i.e. LogY =
return from banana production. B: C ratio was calculated Logα + b1LogX1+………….+bnLogXn
using the formula: Mathematically, the Cobb-Douglas production function can
be expressed as;

Y = αX1b1X2b2X3b3X4b4X5b5X6b6X7b7X8b8X9b9

2.3 Profit analysis In log linear form the above model can be expressed as
The difference between the total revenue and total cost follows
incurred is the profit. The net profit can be determined as:
Π = TR – TC Log Y =
Where, Π = Net profit, TR = Total Revenue, TC = Total Cost Logα+b1LogX1+b2LogX2+b3LogX3+b4LogX4+b5LogX5+
b6LogX6+b7LogX7+b8LogX8+b9LogX9
2.4 Marketing margin and producers share
Marketing margin (MM) is used synonymously with the term Where,
Y = Gross return (Rs/hectare)
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X1 = Planting material cost (Rs/hectare) compared to other field crops, it is a capital intensive
X2=Manure cost (Rs/hectare) enterprise. The total cost of banana cultivation per hectare
X3=Fertilizer cost (Rs/hectare) was NRs. 455857.80. Rent/ contract of orchard contributed to
X4=Micronutrient cost (Rs/hectare) highest share (23.14%) of total production cost. Details of
X5=Pesticide cost (Rs/hectare) cost and share of different factors of banana production are
X5= Labor cost (Rs/hectare) given in Table 1.
X6= Machine cost (Rs/hectare)
X7 = Area (hectare) Table 1: Cost of commercial banana production per hectare
X8 = Rent/Contract of orchard (Rs/hectare) Particulars Cost (NRs) Share %
α = Coefficient Palnting material (suckers) 45398.99 9.95
Manure (FYM) 48569.02 10.65
3. Results and Discussions Fertilizer (Urea, DAP, SOP) 59117.63 12.96
3.1 Farm size and scale of production Micro-nutrients 9289.485 2.03
The scale of production of banana in the study areas appeared Pesticides 37778.99 8.28
in three categories. Those farm sizes were small, medium and Labor 69851.99 15.32
large. Among the total production, 56 percent banana Machine 68941.49 15.12
production was large scale followed by 27 percent medium Marketing/Transport 7174.463 1.57
scale and 17 percent small scale of production as illustrated in Rent/Contract of orchard 97313.02 21.34
figure 1. Others 12422.77 2.72
Total 455857.8 100

3.3 Net return and profit

The average return of commercial banana cultivation was
found to be NRs. 555324.14 per hectare with average profit of
NRs. 197853.23 per hectare. The details of cost, return and
profit of banana cultivation is illustrated in Table 2.

Table 2: Net return and profit of banana production (NRs per

hectare)
Description Minimum Maximum Average
Return 342000 765000 555324.20
Cost 250500 462750 455857.80
Profit 22500 302250 197853.23

3.4 Area under banana cultivation

It was found that banana was mainly cultivated in the upland
Fig 1: Farm size and scale of production of banana of both municipalities of Chitwan district. The total land
under commercial banana cultivation was higher in Khaireni
3.2 Cost of production (179.23 hectares) than Ratnanagar (176.88 hectares). The
Cost of production refers to the outlay of funds for the maximum land under banana in Ratnanagar (5.33 hectares)
procurement of necessary inputs and labor employed. As was greater than Khaireni (4.59 hectares) while minimum
banana cultivation needs higher amounts of inputs as were 0.33 hectares and 0.36 hectares respectively.

Table 3: Distribution of area under banana cultivation by municipality

Municipality Average (Mean ± SE) Minimum Maximum Total Standard Deviation
Ratnanagar (n=50) 1.96±0.23 0.33 5.33 176.88 1.12
Khaireni (n=50) 1.89±0.26 0.36 4.59 179.23 1.45
Total (n=100) 1.92±0.24 0.35 4.96 178.05 1.28

3.5 Average area, production and productivity of banana productivity of banana was observed higher in Khaireni
Different varieties of banana viz Malbogh, Grand Nain, municipality (14.54 tones/hectare) and lower in Ratnanagar
Robestra, Mirchman, Jhapali, Battisa, William hybrid, Basarai municipality (13.96 tones per hectare). The average
dwarf, Harichhal and Chini champa were grown across the productivity of these municipalities were found higher than
study sites. The average area, production and productivity of district average (13.57 tones per hectare) (DADO, 2016) [4, 5]
banana were observed 1.005 hectares, 14.31 tones, 14.25 and national average productivity. (13.2 tones per hectare)
tones per hectare throughout the study area. The average (DOA, 2016/17).

Table 4: Average area, production and productivity of banana in study area

Municipality Area (hectare) Production (tones) Productivity (tones/hectare)
Ratnanagar (n=50) 1.02 14.23 13.96
Khaireni (n=50) 0.99 14.39 14.54
Total (n=100) 1.005 14.31 14.25

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3.6 Benefit cost ratio in both the municipalities as the benefit cost ratio was greater
The study showed the average cost of production and return than one i.e. 1.54 and 1.47 for Ratnanagar and Khaireni
per hectare were NRs 365244.81±1850.67and NRs municipalities respectively. The higher return in Ratnanagar
549719.77±1830.18 respectively and benefit cost ratio was municipality might be due to higher density of bananas trees
1.50, indicating that banana cultivation was profitable per hectare and hybrid varieties cultivation as compared to
enterprise in Chitwan district. The benefit cost ratio analysis Khaireni municipality.
showed that the banana cultivation was profitable enterprise

Table 5: Benefit cost ratio (NRs/hectare) of banana production

Cost Return B:C
Municipality
Mean ± SE Mean ± SE ratio
Ratnanagar (n=50) 355507.50±1245.02 547983.22±2415.06 1.54
Khaireni (n=50) 374982.12±2456.32 551456.32±1245.30 1.47
Total (n=100) 365244.81±1850.67 549719.77±1830.18 1.50

3.7 Marketing margin and producers share study area was found NRs 43.59 per dozen whereas the
From the study, it was found that average farm gate price producer’s share was 44.90 percent. The marketing margin
(NRs/Dozen) of banana was NRs. 34.32 in Ratnanagar and per dozen was almost similar in both municipalities (NRs.
NRs. 36.78 in Khaireni while NRs. 35.55 was the average of 43). The higher marketing margin might be due to lack of
two municipalities. Average retail price was found NRs 79.14 market information. The details are illustrated in Table 6.
per dozen of banana. So overall marketing margin of the

Table 6: Marketing margin and producer’s share of banana production in study area
Municipality
Ratnanagar (n=50) Khaireni (n=50) Total
Average farm gate price (NRs per bunch) 34.32 36.78 35.55
Average retail price (NRs per bunch) 78.05 80.23 79.14
Market margin (NRs per bunch) 43.73 43.45 43.59
Producer’s share % 43.97 45.84 44.90

3.8 Selling practice of banana in study area 3.9 Income share from banana cultivation
Generally, two types of selling were practiced in the surveyed The results in Table 8 showed that the percentage of cash
area i.e. selling to the wholesaler/collector and pre-harvest income obtained from selling banana contributed considerably
contractors were followed by the farmers of respective to household economy. Out of total farm income banana alone
municipalities (Table 7). The non-contract system was the contributed about 42.14 percent to the total household
most commonly preferred system of selling. Majority of the economy, which showed the importance of banana enterprises
respondents (83%) practiced the non-contract system of in the farming economy. The contribution of banana to the
selling compared to pre-harvest contract system of selling total household income was observed higher in Ratnanagar as
(17%). Traders preferred non-contract system because of the compared to Khaireni.
low risk associated with market demand and storage.
Table 8: Contribution of banana production to household income
Table 7: Selling practice of banana in study area Municipality Average annual income (%)
Ratnanagar (n=50) 45.23
Municipality Contract system Non-contract system Total
Khaireni (n=50) 39.56
Ratnanagar (n=50) 5 45 50
Total (n=100) 42.14
Khaireni (n=50) 12 38 50
Total (n=100) 17 83 100
3.10 Factors affecting commercial banana cultivation
Table 9: Parameters estimates of regression models for gross return of banana production with different explanatory variables
Unstandardized coefficients Standardized coefficients
Independent variables t-value Significance error
B SE Beta
Constant 1.08 0.402 6.023 0.000
Log planting materials cost (Rs/hectare) 0.225 0.078 0.023 1.256 0.197
Log manure cost (Rs/hectare) 0.265 0.112 0.237 2.356 0.036*
Log fertilizer cost (Rs/hectare) 0.290 0.245 0.254 1.956 0.145*
Log micronutrient cost (Rs/hectare) -0.137 -0.064 -0.214 -0.222 0.335
Log pesticides cost (Rs/hectare) 0.312 0.014 0.045 0.451 0.256
Log labor cost (Rs/hectare) 0.625 0.245 0.654 4.325 0.215**
Log machinery cost (Rs/hectare) 0.419 0.241 0.745 3.956 0.256**
Log area (hectare) 0.856 0.045 0.520 1.254 0.652
Log rent/contract of orchard (Rs/hectare) 0.877 0.024 0.627 1.562 0.567
Dependent variable: Gross return SE=Standard error
R=0.845, R2=0.650, Adjusted R2=0.742 and standard error of estimate 0.06547, Durbin-Watson test=2.314 and F statistics= 61.235**
Note: ** and * refers to the significant at 0.01 level and 0.05 level of significance, respectively.

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Regression analysis was done for the whole sample with the Table 10: Intensity of problems of banana production faced by
specified functional model i.e. Cob-Douglas production growers in study area
function. The coefficients and estimated values of different Problems Index Ranking
parameters in the model are as illustrated in Table 9. The Disease and pest 0.66 I
coefficient of multiple determination (R2) of the model was Lack of chemicals 0.60 III
0.650. R2 value indicates that 65 percent of the variation in
Lack of labor 0.62 II
gross return from banana was explained by the independent
Wind 0.41 V
variables which were included in the model.
Irrigation 0.57 IV
The F value of the equation was observed to be 61.235 and
highly significant at 1 percent level implying a good fit of the
model. It was clear from the table that the coefficient of Marketing plays important role for the easy disposal of the
fertilizer cost, expenses on manure and pesticides, area under product from producer ultimately to the consumer. Due to low
banana cultivation and expense on labor showed positive and storage life in ordinary condition, easy and safe disposal of
significant relation whereas micronutrient showed negative the commodity after harvesting is imperative.
but non-significant relation with the production. The intensity of marketing problems faced by wholesalers and
retailers is shown in the Table 11. Various problems were
The value indicates that keeping all factors constant 1 percent
mentioned and assigned cores by the banana traders.
increase in manure cost will increase the gross return by 0.26
Problems of seasonal supply, Lack of storage facility, lack of
percent, which is significant at 5 percent level. The value
production, transportation, lack of market information were
indicates that the one percent extra expense on fertilizers,
ranked hierarchically by the wholesalers of the study area.
other things remaining constant increase the gross return by
Similarly, the retailers ranking of problems from very high
0.30 percent significant at 5 percent level. The coefficient
importance to least importance is as follows: Seasonal supply,
indicates that the one percent more expense on labor and
lack of storage facility, lack of market information,
machinery increase the gross return by 0.63 percent and 0.42
transportation and lack of production.
percent which is significant at 5% level.
Table 11: Intensity of problems faced by wholesalers and retailers in
3.11 Intensity of problems of banana production and the study area
marketing
Faced by growers in study area Wholesalers Retailers
From the study it was revealed that the disease and insect pest Problems Index Rank Index Rank
infestation was the major production problem where as Seasonal supply 0.65 I 0.68 I
Lack of market information 0.53 V 0.65 III
second most important problem was labor. Lack of chemical
Lack of storage facility 0.62 II 0.61 II
fertilizers was in third rank. It was followed by wind and
Transportation 0.56 IV 0.59 IV
irrigation. The intensity of problems of banana production Lack of production 0.58 III 0.54 V
faced by farmers in the study area is illustrated in the Table
10.
3.12 Marketing channel and supply chain map of banana

Input Suppliers
Input Supply and
Advices
Producers

Land preparation,
fertilizer, weeding, Commission Agents
irrigation, pest
control
Local Traders
Bargaining setting
prices, collecting,
Wholesalers
transporting,
packaging, selling

Retailers
Buying
transporting,
processing,
Consumers
consuming

Fig 2: Marketing channel and supply chain of banana

The banana producers and the local collectors were the main involved in selling activities only. The marketing channel and
person involved in marketing. Mainly buying, assembling, supply chain that had been operating in the study area for
transportation etc are done by the collectors, while producers banana marketing is illustrated in the Figure 2.
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4. Conclusion 11. TEPC. A Glimipse of Nepal Foreign Trade. Kathmandu,

Banana is identified as the potential sub-tropical fruit in Nepal: Trade and Export Promotion Centre, 2016.
Chitwan due to favorable climatic and edaphic conditions as
well as easy access to regional and national markets.
Ratnanagar and Khaireni municipalities are potential
production area of banana which is indicated by profitable and
lucrative farming due to high Benefit cost ratio in both
municipalities. The average cost of production was NRs
455857.80 and average return was NRs 555324.20 per
hectare. Banana farming was considerably contributing to the
household income and shared 42.14 percent to total household
economy, which showed the importance of banana enterprise
for strengthening socio-economic conditions of farmers.
Although farmers are getting good price for their production
recently, marketing system is still fledging. There is still
larger market margin and farmers are away from reasonable
price of their produces due to lack of market information. The
DADO in collaboration with PMAMP zone implementation
unit, Banana Producers Association, cooperatives need to
work to solve various production and marketing problems
such as storage, grading, processing, orchard management,
disease and pest management procedures to increase farm
efficiency of commercial production of banana in eastern
region of Chitwan district.

5. Acknowledgement
I would like to acknowledge the entire farm households and
traders of the study site for their cooperation in field of study.
PMAMP Banana Zone Implementation Unit personals are
highly acknowledged for providing relevant information

6. References
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4. DADO. Annual Agriculture Development Program and
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5. DADO. Annual Agriculture Development Program and
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