Fodder Crop Farming Sustainability Groundwater Management and Risk Management Efficiency
DOI:
https://doi.org/10.9734/bpi/cras/v6/1601CKeywords:
Project investment, economic efficiency, simulation model, risk management strategy, groundwater management, Stochastic efficiency with Respect to Function (SERF), Certainly Equivalent (CE)Abstract
Rhodes Grass crop is continuously cultivated in coastal area of Sultanate of Oman. This farm practices created a negative impact on the overall agriculture system and production. The government stopped the cultivation of Rhodes grass at coastal area and support farmers to cultivate new agriculture area at Najed since 2012. Due to heavy extraction of groundwater for nine years to irrigate Rhodes Grass crop, and competitive abstraction, groundwater tables fall to low level and resulted in exhausted aquifers. The planted area and yield reduced by 49% and 58% respectively, resulting in accumulated loss of 5.3 Mn at September end 2020. The research aims to analyze project environment and economic sustainability and outline the best risk management strategies to improve project profitability. The study applies a stochastic budgeting approach to evaluate the government intensive strategies under uncertainty of fodder crops farming. The stochastic budgeting simulation model performed to represent risk variables and draw NPV probability distributions. Different incentives strategies were evaluated and ranked across various risk aversion levels. The study shows that raw material subsidy for Rhodes Grass cultivation will reduce expected loss probability from 95% to 50% at Hanfeet farm and from 78.6% to 70% at Dawkah area and also increase the chance of getting acceptable positive NPV. The SERF analysis for Alfalfa crop shows that, raw material (RM) subsidy alternative in terms of risk efficiency is the most appropriate strategy for Dawkah farm followed by and minimum revenue grantee (MRG) subsidy at Hanfeet farm. Rhodes Grass crop with raw material subsidy followed by minimum revenue grantee are risk efficient at Hanfeet farm. The analysis indicates that current capital subsidy policy is not sufficient to mitigate risk and achieve sustainability at Najed locations. Government authorities have to monitor and control groundwater and calculate the cost of each risk management tool and select the one could sustain agricultural activates at Najed area.
