Risk aversion model for small and marginal farmers in the Cauvery Delta Zone, Tamil Nadu

Agriculture in India largely depends on the monsoon. As a result, the production of food grains fluctuates year after year. Although the ownership of agricultural land in India is fairly widely distributed, there is some degree of concentration of landholding. A farmer is often required to make decisions under various vulnerable and uncertain conditions, which stem from social uncertainties, natural hazards, market fluctuations and changes in state policies. Risk aversion is the tendency to avoid risk and have a low risk tolerance. The districts of Thanjavur, Tiruvarur and Nagapattinam in the Cauvery Delta Zone were selected for the study due to their risk-prone areas and crops affected by natural calamities. The total sample size for the study was 366 and it was estimated by the Cochran’s sample size formula and the samples were selected by using a proportionate random sampling technique. The standardized coefficient of demise of an elder in the family (P1) was 0.797, dissension among family members (P2) was 0.829, parental control on decision making (P3) was 0.681 and location of farmlands in risk-prone areas (P4) was 0.604 and represents the partial effect of the personal factor. The hurdles in the procurement process (M1) were 0.519, lack of infrastructure facilities in the markets (M2) was 0.774, increase in transportation charges (M3) was 0.685 and timely unavailability of procurement centres (M4) was 0.542 and together represented the partial effect of the market factor. These factors not only increase the transaction costs for farmers but also reduce their bargaining power, delay the sale of produce and in some cases compel distress sales. Although risk management strategies are adopted more frequently by farmers with higher risk aversion, the overall differences across groups are relatively small. This suggests that many farmers, regardless of their individual risk tolerance, remain exposed to similar structural challenges. Beyond individual coping strategies, systemic reforms are needed. Strengthening rural infrastructure, improving procurement processes and ensuring timely market access can reduce risks, stabilize incomes and enhance resilience for farmers in risk-prone areas.