A Pricing Model for Milk Based on Cost of Production

Transcription

1 Tropical Agricultural Research Vol: 9: (007) A Pricing Model for Mil Based on Cost of Production V Saravanauar and DK Jain Agribusiness Developent Division Tail Nadu Agricultural University Coibatore - 3,Tail Nadu, ndia ABSTRACT Pricing policy is very iportant for any organized enterprises Two axis pricing syste is followed in dairy business centers of Tail Nadu Though it is scientifically rational, this pricing syste ignores the input prices, technology and governent policies Since the econoic refors have been taen for achieving an annual average growth of 7-8 % in the next five years and dairying is practiced as a coponent of ixed faring systes, it becoes iperative to tae into account the interrelationship aong the enterprises and general econoic factors So, the study ade an attept to develop the price odel based on cost of production and projected different price scenarios of il for forthcoing years To achieve the above issues, the present study was undertaen in the Tail Nadu state with the specific objective to deterine the cost and price odels for il The priary data were collected for the year and noralized restricted quadratic profit function analysis and price deterination odels were used To aintain constant returns to the production cost of il, the il price would need an upward adjustent of 045%, whereas to provide constant net onetary incoe, the il price would need an upward adjustent by 79% Considering as the base year, the cost of il production per litre of il would be ndian Rs558 during the year With the assuption of 0% increase in all the variable inputs prices, the estiated price for il per litre is expected to be ndian Rs865 at constant onetary incoe and ndian Rs74 at constant return to production cost in the year NTRODUCTON At present, livestoc sector is eerging as a driving force in the growth as well as econoic sybiosis of agricultural sector of ndia n ndia, 7% GDP of Agriculture and allied sector contributed by this sector in (Econoic Survey, ) Mil production alone involves ore than 30 illion sall producers, each raising one or two cows or buffaloes With 97illion tons of il output, ndia is sustaining the status of global leader in il production (Econoic Survey, ) t accounts for ore than 65 percent of the total value of livestoc output Though, ndia is the world s top il producer, but the per capita il availability reains low at 4 g/day (Econoic Survey, ), which is lower than the iniu recoended requireent of 50 g/ day as recoended by ndian Council of Medical Research (CMR) The deand for il is estiated to 93 illion tons by 00 assuing the growth rate of the econoy at 5% per annu Mil supply projections indicated a deficit of 57 illion tons by 00 (Kuar, 998) Principal Scientist, Dairy Econoics, Statistics and Manageent Division, National Dairy Research nstitute, Karnal, Haryana-300, ndia

2 Saravanauar & Jain The fast growth in huan population and the liberalization of dairy trade as a consequence of econoic developent, lead to a strong pressure on deand for il, which needs to be et by its atching supply Thus, there is a need of reliable epirical nowledge with regard to the degree of responsiveness of deand and supply of il, and associated inputs to fluctuations in their relative prices However, the degree of responsiveness will not be sae in all the regions and for all the periods Therefore, developent of suitable dynaic cost and price odels for il for ajor species of il anials in various seasons is essential to worout cost and price structure, thereby helping in fixation of il prices in advance n ndia, such type of price policy for il and other livestoc products has not yet been adopted by the governent and the sae is being handled by iddlean, individual traders and vendors Previous studies conducted by Ray (978) and Gandhi (00) with respect to il pricing policy and concluded that two axis pricing policy was suitable for il and il producers also not affected by this policy However, Patel (975), Raut and Singh (979) and Pundir (996) concluded that the cost of il production, seasonal variation and general aret trend should be taen into account for pricing of il Keeping above in ind, the study ade an attept to develop price odel based on cost of production and project different price scenarios of il in future Sapling fraewor and data collection METHODOLOGY The state of Tail Nadu has been purposively selected t has eerged as the ninth largest il producer state of the country with a il production of 475 illion tons accounting for 540% to the total il production in the country and the second largest il producer in the southern region (CSO, 004) n order to achieve the objectives of the present study, a ulti-stage stratified rando sapling technique was adopted to select the saple households Erode and Trichy districts of Tail Nadu were purposively selected for the study Two blocs were selected randoly fro each of the two districts n order to select saple households, a coplete enueration of all households in the selected villages was carried out A saple of 0 households fro each village was randoly selected and thus totally, 60 saple households were selected The data for the investigation consisted of both priary data for two seasons, naely, flush (August to February) and lean (March to July) for the year through a well structured, pre-tested profora by personal interview ethod and secondary data obtained fro published sources Existing il pricing syste The basic purpose of this study has been to apply ethodology for deterination of product price to il output in the study area The il price is set to cover production costs, including reuneration of faily and a noral profit rate, and to follow the general evolution of aret prices Norally, in ndia, the price of il is deterined in cooperatives by two ways (Ray, 978 and Gandhi, 00), viz, () bul line cost ethod, which is that level of cost which covers / reflects bul line (ie, 85 th percentile) of il production, () two axis pricing policy (ie, considering both fat and SNF), fat is estiated by Gerber ethod (BS, 98), lactoeter reading and odified Richond s forula is used to estiate SNF in il But there is no unifor pattern followed throughout the country to give weightage to SNF-Fat value, and bul line costing ethod, while fixing the 3

3 A Pricing Model for Mil price of il Generally, the dairy plants fix their own SNF-fat weight, fat rates to attract higher il procureent These pricing policies copletely ignore the factor allocation, yield levels and incoe, which are very uch affected by oveents of relative prices n such situations, it is iportant to tae into account the interrelationships of il on both the factor and product aret sides for deterining the price of il Price deterination odel for il Kuar (984) and Kuar and Mruthyunjaya (989) developed and used the ethodology for factor and product price deterination taing into account product interrelationships through price and non-price factors, which easure the adjustents needed in product price in relation to factor price, inflation, infrastructure developent and technological change They proposed price odel based on cost of production This price odel requires inforation on growth in cost of production and net incoe The growth equations of cost of production and net incoe can be obtained by using the elasticities of noralized restricted quadratic profit equation odel Price odel based on cost of production The price of il ought to be at level, which covers production cost and leaves sufficient argin of profit to induce farers to iprove the productivity of il anials by adopting odern technology The il output price under different incoe policies for farers (Kuar, 984) can be deterined as follows: At specific rate of return: P t = Ct ( + Π t ) At constant rate of return: Ċ t P t = P t- ( + ) At constant onetary net incoe: P t = P t- ( + (P) d=0 ) 3 Where, P t is the price per litre of il in year t, Π t is the rate of return to production cost in year t, is the cost of production C t of il in year t and (P) d=0 is the growth in il price corresponding to constant net incoe Thus, price odel requires inforation on growth in cost of production and net incoe n the subsequent section cost of il production and net incoe odels have been aply elaborated Model for cost of production of il Consider the il production function: Q = F (X, Z, T) 4 Where, Q is the il yield per il anial, X is a vector of inputs whose deand is variable with prices (variable inputs), Z is a vector of inputs whose deand is fixed in short-run (fixed inputs) and T is technology The factor deand for variable inputs is given as: X D = X (p/p, Z, T) 5 33

4 Saravanauar & Jain Where, The cost of production per il anial is : C = p X D + g Z 6 C is total cost per il anial and g is a vector of prices of fixed inputs Z By substituting X D fro (5) we get : C = p X (p/p, Z, T) + g Z 7 Taing total differentials of (7) and writing in ters of relative changes and elasticities, we get : C = E P C P + E i Cp p i + E i Cg g i + E i CZ Z i + E T C T 8 Where, dc dc P C =, E P C = and so on C dp C These elasticities are, in turn, equal to: P E C = p j x j E p i / P X j p C i = E + E p i / P C p i x i p j x j C X C j i =,, ; j =,, where p i price of i th input, P- price of il and X i quantity of i th input g j Z i g E i = C C i =,, Z i p E = i X i E Zi + E gi C C X j C j =,, E = T p i x i E T C C X i The il supply function is : Q = Q (P, p, Z, T) 9 34

5 A Pricing Model for Mil Based on il supply function (9), the il supply growth odel in ters of elasticities and relative changes is estiated as: Q = P E Q P + E Q pi p i + EQ Zj T Z j + E Q T 0 Where, () denotes the growth of respective paraeter Let, C = C / Q be the production cost per litre of il, the growth in production cost per litre of il can then be derived as : Ċ = C Q Substituting (8) and (0) into () and the cost of il production odel to inflation will be as : C = (E P C E P Q ) P + (EC pi E pi Q ) p i + EC gi g i + (E C Zj E Zj Q ) Z j + (E T C E T Q ) T At brea-even point : C = P (or) C = P Therefore, odel () reduces to: C = P P ( E C + E Q ) (E i p Cp E i g Q ) p i + E i C g i + (E C Zj E Zj Q ) Z j + (E T C E T Q ) T 3 Model (3) easures the growth in production cost per litre of il with regard to observed changes in factor prices, production cost per litre of il for any tie period can then be projected as : C t = C t- ( + C ) 4 t Where, C t is the cost of production per litre of il in year t and C t is the growth in the sae period Once, the production cost is nown for one year (based on survey data), the production cost for subsequent tie periods can be generated by aing use of equation (4) and be used for deterining the price of il 35

6 Saravanauar & Jain c) ncoe Model for Mil Producers f the net incoe is positive and larger, the il producers will be induced to produce ore il by adopting new technologies On the other hand, if it is negative, il producers will quit fro the dairy enterprise at long run The price of il should be fixed in the liit of incoe elasticity between zero and one, where the il producers will get reasonable net incoe Therefore, the estiation of net incoe elasticities is very iportant to fix the price Net incoe () fro il is : = P Q (P, p, Z, T) p X (p / P, Z, T) g Z 5 The growth in net incoe fro il in ters of elasticities can be written as = E P P + E p i p i + E g i g i + E Z i Z i + E T T 6 Where, P = d, E P = and so on P These derived elasticities of incoe with respect to prices are given by: E P = P Q p E i /P Q p j X j + E Xj p i /P E pi = P Q p E i/ P p i X i Q p j X j p E i/ P Xj E Zi E T E gi g i Z i = i =,, P Q p = E Zi Q j X j E Zi gi + E P Q p i X i = E T Q EXi T Fro the above odel, the equation (6) easures the growth in net incoe of dairy farers The growth odels of cost of production and net incoe can be obtained by using the elasticities for output supply and factor deand for il derived fro the estiated paraeters of noralized restricted quadratic profit equation odel give in Annexure- 36

7 A Pricing Model for Mil (Evenson and Biswanger, 980, and Pundir, 996) and the cost and return structure of il based on survey data Further the profit function and factor deand functions were jointly estiated by Zellners seeingly unrelated regression equations (SURE) to overcoe the deerit of OLS ethod (Zellner s, 96) (ie Estiation of OLS would result inefficiency, as it would ignore the correlation of error ters across equations, Greene,997) Using the elasticities of output supply and factor deand for il output (Annexure-4) derived fro the estiated paraeters of noralized restricted quadratic profit equation and the cost and returns structure of il output based on survey data (Annexure-5), the paraeters of growth odels of cost of production and net incoe for il were derived RESULTS AND DSCUSSON The price deterination odel based on cost of production was developed for il and the results thereon are presented in the following sections Cost of production odel The growth odel for cost of il production during the current year with respect to realized changes in price and non-price factors were wored out fro the following odel 7* C = 03 p + 08 p p p 4 06 Z 07 Z 7 * The econoetric procedure for deriving the odels 7 is: Where, p, p, p 3 and p 4 represent the growth in prices of green fodder, dry fodder, concentrate and wage rate, respectively; Z is the veterinary and iscellaneous cost and Z is the fixed cost t was observed fro odel 7 that the elasticities of growth of cost of production with respect to prices of variable inputs were positive and less than one The elasticities of fixed inputs Z and Z were negative for crossbred cows during the year t iplied that the increase in both fixed resources lie veterinary and iscellaneous cost and interest and depreciation on fixed assets would iprove the productivity of il and reduce the cost of il production The prices of green fodder and dry fodder had the ajor ipact in raising the cost of il production for crossbred cows which iplied one percent increase in these prices would increase the cost of il production by 03 and 08%, respectively Net incoe odel The growth odel for net incoe fro il with respect to observed changes in price and non-price factors during the current year can be wored out fro the following odel 8* = 635 P 073 p p 00 p p Z + 59 Z 8 * The econoetric procedure for deriving the odels 8 is: 37

8 Saravanauar & Jain The signs of net incoe elasticities with respect to the prices of green fodder, dry fodder, concentrate and wage rate were observed to be negative, which was anticipated with the theoretical fraewor t was found that the elasticity estiates were less than unity in both the equations except for dry fodder price in the odel 8, which was elastic The net incoe elasticity with respect to the fixed inputs (Z, Z ) was found to be positive and elastic With respect to il price, the net incoe elasticity showed ore responsiveness, ie, one percent increase in il price would raise the incoe at 635 percent for crossbred cows during the year Under the assuption that there are no changes in the fixed factors, viz, veterinary and iscellaneous cost (Z ) and interest and depreciation on fixed inputs (Z ) and that factor price inflation in prices of green fodder, dry fodder, concentrate and wage rate will continue to rise in future at a rate of 0 percent, the growth equations of cost of production and net incoe for crossbred cow il be as reduced as follows: C = 0045, = 635 P The extent of ten percent increase in the level of price of factors used in il production for crossbred cows will be 045 percent Thus, if the objective of the policy aers is to aintain constant returns to the production cost of il production during the year, the price of il needs to be adjusted upwards at a rate equal to the agnitude of costpush inflation For aintaining constant onetary net incoe ( = 0) to the il producers, the adjustent in il price for crossbred cows would be P = 079 during the year Projected estiates of cost of production of il and prices of il at constant onetary net incoe (d = 0) and at constant return to production cost based on the odel developed in the study Considering as the base year, cost of il production, and prices of il at constant onetary net incoe ( = 0) as well as at constant returns to production cost were estiated for crossbred cows during the year and overall up to 00 AD The projected estiates are depicted in Table A perusal of Table revealed that the estiated overall cost of production per litre of crossbred cow il would be Rs558 respectively during the year And, the estiated price for crossbred cow il is expected to be Rs865 and Rs74, respectively, at constant onetary incoe ( = 0) and constant return to production cost during the year based on the price deterination odel with the assuption of 0 percent increase in all the variable inputs prices every year Table Estiated production cost and price of il, based on the cost and price odel for crossbred cow fars Year Cost of Mil Mil Price (Rs/L) Production At Constant Monetary At Constant Return (Rs/L) Net ncoe ( = 0) to Production Cost

9 A Pricing Model for Mil Note: * Based on survey data Technological change allows productivity growth to copensate for cost-push inflation, while aintaining product price and rate of profit to be constant However, productivity change itself is conditioned by the rate of profit on investent in dairying Hence, there is a need to set the liits of il price at the existing cost-push inflation Net incoe fro il for both the species during the year will face negative growth, if the il price is adjusted below the level at which net incoe elasticity with respect to il price is negative This would act as disincentive to the il producers in context of adoption of iproved technology On the other hand, the price adjustent above the liit, where net incoe elasticity is positive and elastic, will leave the il producers with high profit rates So, the il price is adjusted within the range of where net incoe elasticity floats between zero and one; it ay provide fair incoe to il producers, so as to induce the towards the adoption of iproved il production technology Further, eeping in view, the copetition aong the far enterprises, constraints in rapid adoption of new technology, general econoic condition and scenario of the international aret, the prices are required to be adjusted The changes in net incoe and elasticity of net incoe for corresponding changes in il prices for crossbred cows during the year were calculated and presented in Table Table Changes in net incoe elasticity and net incoe due to change incorresponding price of il of Crossbred cow fars Changes in Net ncoe Change in Net Changes in Mil Price Elasticity P (E ) ncoe () (P) - α to to to to 000 to to 0399 > > 0399 > 0399 t is evident fro the sae table that the growth in il price will copensate for the cost-push inflation if it lies between 79 to 399 percent during the year The adjustent of il price below 79 percent per annu will generate a negative growth in net incoe and ay not provide enough incentive to the il producers for the adoption of iproved technology Price adjustent above 399 percent will give high rate of profit to the iddle producers which ay led to specialization of dairy fars The results obtained in the present study were in confority with the findings of Pundir (996) who obtained siilar results for crossbred cow il production in Hiachal Pradesh CONCLUSONS AND POLCY MPLCATONS The Pricing odel for il based on cost of production revealed that the price of green fodder, dry fodder and concentrate played a significant role in raising the cost of il production and the fixed factors influenced negatively in order to reducing the cost The growth of net incoe of il with respect to il price was also positively influenced These results indicating that the price of inputs and fixed factors were significantly 39

10 Saravanauar & Jain influencing the cost of il production These results were in confority with the findings of the Pundir (996) who obtained siilar results for crossbred cow il production in Hiachal Pradesh and the results of Patel (975) and Raut and Singh (979) The study concluded that the price of feeds are iportant factors in deterining the cost of il production, therefore, in order to have a rational price policy of il, the price and non-price factors lie technology should be considered for taing up the appropriate decisions The price odel based on cost of production developed in the study used to project the future price of il by taing into account of cost of inputs, technology and general econoic conditions The calculated paraeters of the odel are to be treated with caution in as uch as they are based on the reference year for the il The results of the paper are illustrative of the utility approach in generating consistent price sets for il in response to alternative policy interventions REFERENCES BS (98) S hand boo of food analysis Part X Dairy Products Bureau of ndian Standards, New Delhi : - 44 CSO (004) National Accounts Statistics, Central Statistical Organisation, Ministry of Statistics and Prograe pleentation, New Delhi Econoic Survey (005-06) Econoics Division, Ministry of Finance, Governent of ndia, New Delhi Evenson, RE and Binswanger, HP (980) Estiating labour deand function for ndian agriculture Centre Discussion Paper No356 Econoic Growth Centre, Yale University, New Haven, Connecticut Gandhi, PMKC (00) Pricing policy and cost of production of il in Coibatore dairy cooperatives MSc Thesis, National Dairy Research nstitute (Deeed University), Karnal, ndia Greene, WH (997) Econoetric analysis Prentice Hall, New Jersey, USA Kuar, P (984) Price policy odel of sugarcane and its products ndian J Agril Econ 39 (4): Kuar, P and Mruthyunjaya (989) Methodology for siultaneous deterination of factor product prices: Project report Division of Agricultural Econoics, ndian Agricultural Research nstitute, New Delhi Kuar, P (998) Food deand and supply projections for ndia Agricultural Econoics Policy Paper 98-0, New Delhi, ndia ndian Agricultural Research nstitute, New Delhi Patel, RK (975) Sound basis of pricing il ndian Dairyan, 36(): - 7 Pundir, RS (996) Cost and price deterination odels for il PhD Thesis, National Dairy Research nstitute (Deeed University), Karnal, ndia 330

11 A Pricing Model for Mil Raut, KC and Singh, S (979) A syste of continuous il costing by balancing interest of both producers and consuers ndian Dairyan 3 (9): Ray, AKC (978) Pricing of il ndian Dairyan 30 (): Zellner, A (96) An efficient ethod of estiating seeingly unrelated regressions and tests for aggregation bias J Aer Stat Assoc 57 (98): ANNEXURE Epirical estiation of noralized quadratic restricted (NRQP) profit function odel The specification of the odel in actual variables used in the present investigation is given as under The noralized quadratic profit function and factor deand functions for green fodder, dry fodder, concentrate and huan labour are given as follows: Π* = a 0 + a q + a q + a 3 q 3 + a 4 q 4 + ½ [a q + a q + a 33 q 3 + a 44 q 4 ] + a q q + a 3 q q 3 + a 4 q q 4 + a 3 q q 3 + a 4 q q 4 + a 34 q 3 q 4 + r q Z + r q Z + r q Z + r q Z + r 3 q 3 Z + r 3 q 3 Z + r 4 q 4 Z + r 4 q 4 Z + b Z + b Z + ½ [b Z + b Z ] + b Z Z X * = [a + a q + a q + a 3 q 3 + a 4 q 4 + r Z + r Z ] X * = [a + a q + a q + a 3 q 3 + a 4 q 4 + r Z + r Z ] X 3 * = [a 3 + a 3 q + a 3 q + a 33 q 3 + a 34 q 4 + r 3 Z + r 3 Z ] X 4 * = [a 4 + a 4 q + a 4 q + a 43 q 3 + a 44 q 4 + r 4 Z + r 4 Z ] Where, Π*, q, q, q 3 and q 4 are the noralized profit, noralized green fodder price, noralized dry fodder price, noralized concentrate price and noralized wage rate, respectively Z is veterinary cost and iscellaneous cost Though veterinary cost is a variable cost, it is very difficult to quantify the optial quantities of veterinary edicines and services Therefore, it is taen as a fixed input for the profit function analysis and Z is interest and depreciation on fixed capital and assets The syste coprising noralized restricted quadratic profit (NRQP) and factor deand equations (Equations to 5 in the Annexure ) were estiated with syetry and equality restrictions using Zellner s SURE ethod (96) The NRQP odel for both flush and lean season were estiated by econoetric odels and tested statistically given in Annexure and 3 The goodness of fit (ie Adj R ) of NRQP odels for flush and lean seasons were 85 and 8 percent, respectively Majority of paraeter estiates found to be statistically significant at percent (P<00) The elasticity estiates for flush and lean seasons were calculated only fro the significant coefficients and aggregated* these two seasons elasticities for the overall year (Annexure 4) The value of elasticities in the odels 7 and 8 were not directly estiated but wored out by using elasticities during the year (Annexure 4), and price and cost indices (Annexure 5) which were elaborately discussed in the ethodology part * The season-wise estiates were aggregated as : Where, η ip = ηipj (x ij x i ), 33

12 Saravanauar & Jain x i = x ij, η ipj = The elasticity of i th factor with respect to variable P for the j th species, x ij = The deand for i th factor for j th species, and x i = The aggregate deand for i th factor for all species in the sae season or period ANNXEURE Paraeter estiates of noralized restricted quadratic profit (NRQP) function, factor deand and supply functions for il of crossbred cows during flush season Type of Function Constan t ter Green Fodder Price (q ) Dry Fodder Price (q ) Noralized Quadratic Profit Function : NQ (Π*) function Concentrate Price (q 3 ) Wage Rate (q 4 ) Veterinary and Miscellaneous Cost (Z ) nterest and Depreciation on Fixed Assets (Z ) -0890*** -7950*** -9370*** -006*** 390*** ½ q ½ q ½ q 3 ½ q 4 q q q q *** *** *** q q 4 q q 3 q q 4 q 3 q 4 q Z q Z *** -0780*** 0040*** Factor Deand Function : q Z q Z q 3 Z q 3 Z q 4 Z q 4 Z *** -0053** 0003 ½ Z ½ Z Z Z AdjR -0796** 000*** Green (X * ) fodder q q q 3 q 4 Z Z 0890*** *** 54080*** Dry fodder (X * ) Concentrate (X * 3 ) Huan labour (X * 4 ) 7950*** 54080*** *** 0780*** *** 4570*** 0770*** -0860*** -0040** *** 006*** *** -0040** ** Output Supply Function : Mil supply function (Y*) -½ q -½ q -½ q 3 -½ q 4 -q q -q q *** *** *** q q 4 -q q 3 -q q 4 -q 3 q 4 Z Z *** 0780*** -0040*** 390*** ½ Z ½ Z Z Z -0796** 000***

13 A Pricing Model for Mil Note: *** Significant (P<00); ** Significant (P<005) ANNXEURE 3 Paraeter estiates of noralized restricted quadratic profit (NRQP) function, factor deand and supply functions for il of crossbred cows during lean season Type of Function Constant ter Green Fodder Price (q ) Noralized Quadratic Profit Function : NQ 4665* function (Π*) Dry Fodder Price (q ) -4369*** *** Concentrate Price (q 3 ) Wage Rate (q 4 ) -5980*** *** ½ q 3 ½ q 4 Veterinary and Miscellaneous Cost (Z ) nterest and Depreciation on Fixed Assets (Z ) 05838*** 0045*** ½ q ½ q q q q q *** 05968*** 8700*** 0066*** 00944* -848*** q q 4 q q 3 q q 4 q 3 q 4 q Z q Z -098*** *** -000*** ** -000** Factor Deand Function : q Z q Z q 3 Z q 3 Z q 4 Z q 4 Z *** -0070*** *** -0005*** 00087*** ½ Z ½ Z Z Z Adj R 076** -0000** 0038** 0898 Green fodder (X * ) Dry fodder (X * ) Concentrate (X * 3 ) Huan labour (X * 4 ) q q q 3 q 4 Z Z 4369* *** 098*** 000* *** 9700* *** 000*** *** 5980* 848*** 00384*** -8700*** 00076** 0070*** *** 0940* 098*** 000*** 00076* *** Output Supply Function : -½ q -½ q -½ q 3 -½ q 4 -q q -q q 3 Mil supply 4665* *** *** -8700*** *** * 848*** function -q q 4 -q q 3 -q q 4 -q 3 q 4 Z Z (Y*) *** 000*** 00076* 05838*** 0045*** ½ Z ½ Z Z Z 076** -0000** 0038** Note: *** Significant (P<00); ** Significant (P<005); * Significant (P<0) 333

14 Saravanauar & Jain ANNEXURE 4 Factor deand and output supply aggregated elasticity estiates of crossbred cows for il production during the year Deand Functio n Green fodder (X * ) Dry fodder (X * ) Concentr ate (X * 3 ) Huan labour (X * 4 ) Mil supply (Y * ) Price of Green Fodder (q ) Price of Dry Fodder (q ) Price of Concentra te (q 3 ) Wage Rate (q 4 ) Veterinary and Miscellane ous Cost (Z ) nterest and Depreciati on on Fixed Cost (Z ) Price of Mil (P Y ) Sl No ANNEXURE 5 Cost and returns structure of il production Particulars Description Rs/day/ilch anial Green fodder cost X p 855 Dry fodder cost X p 69 Concentrate cost X 3 p Total labour cost X 4 p Veterinary and Miscellaneous cost Z 6 Total fixed cost Z 585 Gross cost Cost C 546 Mil production Q

15 A Pricing Model for Mil (litres/day) 9 Per litre cost of il production (Rs/Lit) C Net ncoe