Structural change in input use instability and farm profitability in cotton and sugarcane in India

Rising cultivation costs and fluctuating farm incomes have intensified concerns regarding the economic viability of commercial crop cultivation in India. Against this backdrop, the present study examines the trends, instability, and profitability of cotton and sugarcane cultivation, and identifies the major cost components influencing value of output (VoP) across selected major producing states during 1996–97 to 2021–22. The analysis employs descriptive statistics, compound annual growth rates, coefficients of variation, and a Cobb–Douglas fixed-effects panel regression model using state-level cost of cultivation data. The descriptive results reveal a persistent increase in cultivation costs for both crops, with cotton exhibiting relatively higher growth and instability in production costs compared to sugarcane. Although profitability improved over time, substantial inter-state variations and fluctuations were observed, indicating heterogeneous production environments and economic conditions. The econometric results show that seed expenditure, machine & animal labour, irrigation, and family labour significantly influence cotton VoP. For sugarcane, casual labour cost was found to be the dominant determinant of VoP, reflecting the labour-intensive nature of the crop, while fertilizer expenditure exerted a positive influence. In contrast, irrigation expenditure exhibited a negative association with sugarcane VoP. The study concludes that improving input-use efficiency, strengthening seed systems, promoting appropriate mechanization, and enhancing irrigation management remain important for sustaining VoP in commercial crop cultivation.