Investment Viability of Urban Hydroponic Farming: Evidence from Hydroponic Vegetable Farms in Hyderabad, India

Abstract

Hydroponics is a system of growing plants without soil. The plants grown under hydroponic conditions have better quality than the crops cultivated under traditional farming methods. Hydroponics is a cost-effective, labour-saving and high-yielding method, which reduces losses due to natural calamities and pest infestation. Hydroponic farming was initiated in metropolitan cities like Hyderabad, India, targeting the urban market and population. The present study focused on the financial viability of Hydroponic farming under different scales in the Hyderabad region. Data was collected through personal interviews from eight hydroponic farms. Financial viability of the project was evaluated by using the Net Present Value (NPV), Benefit-Cost Ratio (BCR), and Internal Rate of Return (IRR). The results revealed that the total initial investment varied with the farm size (900 sq. ft to 43560 sq. ft) and crops grown (Lettuce, Kale, Basil, Spinach, Amaranthus, Mint, and Coriander), ranging from Rs. 0.42 to 20.4 million. The total fixed cost and variable cost range from Rs. 75,000 to 3.41 million and Rs. 0.12 to 5.95 million, respectively. The NPV reported at a 10.25 per cent discount rate was between Rs. 1.60 and 1.21 million. The B:C ratio was found to be high for 2000 sq. ft hydroponic farming with 2.71 and low for the 1000 sq. ft unit (1.75). The Internal Rate of Return also range between 59 and 85 per cent across the farm scales. Hydroponic farming found to be financially viable in the region, and there is also a lot of scope for the export of the produce, as it fetches high returns. Hydroponic products, facilitating low-interest loans to the hydroponic farmers through government programs and rebates on the plant material and equipment for hydroponic farms. The state and central governments can support farmers initially by providing a rebate on establishment costs and exotic planting material costs at lower prices for increasing the area on hydroponic cultivation, and to protect the interests of the farmers.