Impact of organic farming on annual average income and cost of production of tea smallholders in Sri Lanka

Abstract

Sri Lankan government has planned to extend and promote organic tea cultivation in Sri Lanka through Haritha Lanka Programme which is the national cooperate plan to greening the Sri Lankan economy. Though positive environmental impacts of organic farming have been proven limited studies have been carried out in Sri Lanka to find out the impact of organic farming on the average annual income and cost of production (COP). Therefore, this paper attempts to examine the impact of adopting organic farming on annual average income and COP in high grown organic tea smallholdings (TSHs) in Sri Lanka. The data for the study were collected from a sample survey of 107 TSHs in four Grama Niladari divisions of Bandarawela secretariat of Badulla district. The study used two sample pooled t - test to identify the possible impact of adopting organic farming on two economic variables: annual average income and COP of TSHs. Ordinary Least Squared (OLS) estimate of a multiple linear regression was performed to estimate the impact of organic tea cultivation on the income and expenditure. The results suggest that the adoption of organic farming has strong positive impact on annual average income of TSHs while there is no significant impact of organic tea cultivation on cost of production and other off–farm income generations. The regression results further reveal that the annual average on–farm income of organically cultivated land is considerably higher than the non-organic TSHs in the study area. These findings conclude that adoption of organic farming improves the productivity of cultivated land, income and profit margin of the TSHs while maintaining the environmental sustainability.