Agriculture Farming

Costs and ROI of Smart Farming in India with Breakeven Analysis

By: Jagdish Reddy
Published on

Table of Contents [show]

Hello smart farmers, if you plan to start smart farming in India and want to know the complete details of setting up advanced technologies to increase crop yields with high productivity and reduce resource usage, this article will explain to you all the calculations of costs and profits involved.  What are you waiting for? Let us jump in.

Smart Farming

A. Upfront and Initial Setup Costs for a Smart Farm

1. Average Land Costs per Acre

  1. Usually, it depends on farm location and also varies based on infrastructure and water source. 
  2. You can get an Average land cost per acre between INR 20 lakhs to INR 50 lakhs in rural areas with proper road facing. You can expect more costs close to cities and big towns.

2. How Much Does It Cost for Infrastructure Setup

  • If you are planning for Greenhouses or polyhouse farming, expect to pay 800 INR per square foot.
  • Establishing water set up with drip or sprinkler irrigation will cost you about 60, 000 to 90,000 INR per 1 acre.
  • Expect any additional costs for the borewell or electricity set up.

3. Expected Cost of Equipment and Technology Required  

  • To take care of your soil and use water efficiently, you require IoT sensors which may cost an average of INR 40,000 to INR 70,000 per unit.
  • For spraying pesticides and to monitor overall field crops, you are required to purchase agricultural Drones, this may cost around 3 to 5 lakhs per unit.
  • You are required to buy automated planters/seeders and harvesters. Expect to pay between 5 to 10 lakhs.

4. Buying Farm Software and Management Tools

  • This depends mainly on what kind of farm software you are buying and the functionality of the software. Usually, you should be ready to pay for field management and crop analytics software between 1 lakh to 5 lakhs.
  • You must also pay for a subscription to data services for getting weather information and others like crop analytics. This can cost you around 25,000 to 50,000 annually.

5. Hiring and Training for Skilled Labor

  • You must hire and train the labor to operate these tools accurately. These costs may include around Rs. 30,000 to 35,000 per month.
  • If you already have labor working on the farm, you may arrange technical training sessions for them. 

In case you missed it: Climate-Resilient Crop Varieties: Why You Should Consider Climate-Smart Agriculture

Smart Agriculture

B. Calculation of Monthly and Annual Recurring Costs 

1. Expected Yearly Maintenance Costs

  • In general, your farm equipment like IoT devices and sensors and any other smart tools require regular maintenance and you can expect around 10,000 to 15,000 INR per unit annually.
  • Agriculture drones also require annual servicing, for this you need to shell out around 15,000 to 20,000 INR.

2. Monthly Average Energy Costs

  • If your farm is powered by solar, you can expect almost zero maintenance cost. However, one-time initial installation may cost between 2 to 5 lakhs.
  • To run all these devices and equipment, you would be spending 10,000 to 20,000 INR per month on electricity bills.

3. Cost of Seasonal Consumable Inputs

  • Seeds cost varies based on crop and it may cost around INR 10,000 per acre per season.
  • Other input costs include fertilizers and pesticides which you may be paying around INR 10,000 to INR 15,000 per acre per crop season.

4. Farm Software and Data Analytics Subscription Renewals

  • You can expect to pay INR 20, 000 per year for farm management software 
  • You can renew data subscription packages for INR 15,000 to INR 20,000 annually.

C. Expected Return on Investment in Smart Farming (ROI)

1. Expected Increased in Crop Yields

  • With these smart tools and technology, you can easily achieve crop yield of 30% to 50% improvement.
  • You can easily reduce yield losses by early detection of pests, diseases, water stress and weather patterns.

2. How Much Can You Save

  • Using sensors in irrigation can reduce water usage by up to 30% to 40%. This also helps smart fertigation through irrigation methods.
  • You can save 20% to 30% savings on pest control with precision farming techniques.

3. Improved Market Access to Smart Grown Produce

  • Using smart technology, one can grow premium-quality crops for export markets as well as domestic consumption.
  • If you are growing organic crops using these precision smart technologies,  it is very easy  to fetch 25% to 50% higher prices in agriculture commodity markets.

4. Revenue Comparison of Smart Farming and Traditional Farming

  • You can expect up to 1 lakh per acre annually in traditional farming 
  • You can expect up to 3 lakh per acre annually with Smart farming techniques. 

In case you missed it: Climate-Smart Agricultural Methods for More Yields and High Profits

Growing Vegetables under Grow Lights

D. How Break-Even Analysis Works in Smart Farming

1.  Three Factors Influence Breakeven

  • The first one is an Initial investment size.
  • The second one is the type of crop grown and the increase in yield.
  • The third one is current market prices and accessibility for more profits.

2. Small- and Large-Scale Smart Farm Breakeven Period

  • Usually, small-scale smart farms can take 2 to 3 years to break even.
  • On average, a large-scale smart farm can take about 3 to 6 years.

3. How to Calculate Breakeven Point in Smart Farming

  • For example, an Initial investment spent was INR 20 lakhs.
  • If you see revenue increase 4 lakhs in 2 years.
  • The calculation of the breakeven point is 20 lakhs / 4 lakhs = 5 years.

In case you missed it: Agriculture Drone Subsidy Scheme: Government Kisan Subsidy, License, and How to Apply Online

Drone in the farm

E. Get Government Support and Subsidies for Smart Farming in India

  1. How Much Financial Assistance is Possible: You can avail of up to 25% subsidy on equipment and machinery for smart farms. You can also apply for subsidies for the structure of polyhouse/greenhouses, irrigation systems (drip and sprinkler systems), and solar energy. The percentage of subsidy depends on the state.
  2. Avail Tax Benefits with Smart Farming: You can get Exemptions on agriculture income. 
  3. Training Programs: There are many states offering training programs on various technologies in smear farming. You can contact state specific agriculture departments. 

F. Common Difficulties Faced in Smart Farming

  1. Expect High Upfront Expenses: This is not feasible for small and marginal farmers.
  2. No Knowledge on Smart Technologies: Usually, rural farmers have limited or no knowledge about smart technologies. This is the main concern and needs to be aware.  
  3. Integration Issues in Smart Agriculture: Usually, you can find device and equipment compatibility issues. You must have the proper technical knowledge to solve this. 
  4. Gaining Market Access: It is very difficult to reach premium markets for high-tech produce and also you need to work out for export market access.

G. Act Smartly to Reduce Input Costs and Maximize Agricultural Profits

  1. Make it Small Initially: It is best to start with minimal technologies.
  2. Sharing Resources and Equipment: You can share smart equipment like drones with your neighbouring farms to reduce the cost.
  3. Benefit from Government Subsidies: You can avail subsidies and grants to lower initial investments on smart farming equipment and infrastructure development.
  4. Grow High-Value Crops for Better Profits: You can start with high demand and vale crops like saffron, mushrooms, exotic vegetables, herbs, or organic millets.

In case you missed it: Growing Vegetables Under Lights: Indoor, Led Lights, Artificial Lights For Beginners

Spraying farm using the agricultural drone

Conclusion

If you concentrate on smart farming technologies and plan properly by utilizing various government subsidies and schemes, one can achieve the best ROI. Many farmers may fear initial costs, however long-term advantages may include greater yields, input cost savings. 

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