Tools and Techniques for Accurate ROI Calculation
Installing a drip irrigation system is costly and requires maintenance and regular upkeep to keep it functioning well. These are factors you, as a farmer or horticulturist, might consider before making the purchase. Getting specific data or information, or at least understanding how this irrigation system will save your money, will be beneficial and help you calculate the long-term benefits of buying and installing a drip irrigation system. You will be able to compare the rising costs of water, labour and other inputs necessary to run a farm or orchard with what a one-time, smart, long-term investment in a drip irrigation system can bring you.
What is ROI in Drip Irrigation?
ROI, or return on investment, is a measure of the profit that can be accrued from a one-time, significant investment. Usually meant to give an estimated value of how much a costly investment may pay off in the long term. Such an ROI is important for farmers to consider, as cultivation cycles may last more than a year. The numbers may not make sense in the short term when calculating the benefit versus the cost of purchase and installation, but they will more than make up for it in the long term. These are decisions that the farmers have to take based on the data available to them and what they hope to accomplish.
Initial Investment
Equipment - A drip irrigation system will require various components such as pipes of different circumferences, emitters or drippers to drop the water at the plants’ and trees’ root zones, filters to filter the water for the main pipe, and pumps to pump the water out of the water source.
Installation and design costs - The installation of the drip irrigation will depend on what kind of land and soil it is, whether the lines can be put on surface or need to be kept subsurface, whether the pipes need to be pressure compensated due to the level or the slope or the area of the field or orchard.
Operational Costs
Maintenance - The drip irrigation system, after being installed, has to be maintained regularly. That includes cleaning emitters and drippers if they are clogged, ensuring the pipes are working properly, and changing filter screens if needed, or replacing the pumps if they go out of commission.
Energy consumption - Consistent and steady electricity is required to run a drip irrigation system. A fully automated system with sensors and a monitor to check for moisture levels, even more so. This could be solved with solar energy, but that level of energy is non-negotiable.
Labour costs - There are some labour costs when it comes to a drip irrigation system, as workers will have to maintain the upkeep of the system. They will keep an eye on how things run, fix any issues that may arise, and ensure the work proceeds as intended.
Key Benefits That Contribute to ROI
1. Water Savings :
Reduced water usage compared to traditional irrigation : Less water is used in drip irrigation than traditional methods of watering, such as flooding. Flooding is letting a large amount of water run through the plants, usually once a day, so they can absorb as much as they can in this short period.
Cost savings on water bills or pumping : Since less water is required in drip irrigation, there are fewer water bills or a need to pump. The amount of water used in traditional irrigation methods is more than halved by using drip irrigation systems.
2. Increased Crop Yield :
Better plant growth due to precise watering : The water is delivered to the root zones only, and no excess water is wasted. Since the plants can access water regularly, they don't experience water stress. The plants grow healthily and better.
More consistent and higher-quality produce : Since each plant or tree is provided with water continuously, with no chance for weeds to grow and leach nutrients, the plants that do grow using a drip irrigation system have a more consistent and higher quality yields.
3. Reduced Input Costs :
Lower fertiliser usage - Due to the ability of a drip irrigation system to use fertigation, where fertilisers can be added to the water to ensure uniform distribution without wastage, a lower amount of fertilisers is required, and none is wasted.
Reduced labour requirements - With the drip irrigation system taking care of both the irrigation part and the fertigation part, farmers no longer require a huge number of labourers to individually go around and water and fertilise the plants. This means that the farmer can employ only a few workers and save money.
4. Energy Savings :
Since only a specific amount of water is required to irrigate the plants, farmers need not keep pumping all the time to cover their whole field or orchard. They can pump less and save on energy and money by using a lower amount of energy.
Step-by-Step Method to Calculate ROI
Calculate the total initial investment - A drip irrigation kit can cost Rs. 35,000/- to Rs. 60,000/- for an area of around 1 acre. For a field or orchard with a much wider area, this number will have to be calculated based on the number of pumps in use, the number of drippers and emitters required, the energy needed to run the system, and the filtration setup.
Estimate annual operating costs - The money required to run a drip irrigation system can be and has to be calculated. If it is the first year, the installation cost must be added to the purchase cost. In succeeding years, maintenance and other materials and requirements, such as water source, electricity, or energy, will be mostly the responsibility of maintenance and labour to ensure maintenance.
Quantify annual savings - Against the above costs, savings have to be calculated as well. Saving in water, on labour, on fertiliser, energy and any other inputs. Everything has to be compiled to give you a good idea of what you can save and how much you can save.
Estimate the increase in revenue from higher yields - Since the fields and orchards are going to give higher yields every harvest cycle with the use of a drip irrigation system, yielding 50%-90%, depending on the crops, that amount has to be calculated as well. With less loss of plants and trees, and a lower chance of your crops facing stress due to a lack of water and fertilizer, this number will determine how much profit you can gain from using this irrigation system.
Compute net annual benefit - Calculate how much you will profit in one harvest cycle or in one year, whichever is shorter, and then hold it against your investment. Your one-time investment in setting up a drip irrigation system will pale in comparison to the profits you will earn over the years. This one-time investment will ensure you achieve a higher yield each cycle and reduce your labour and other inputs while still making a profit.
Payback Period Analysis
What Is Payback Period - Payback period is the time required to recover the initial investment, usually a one-time investment such as the purchase and installation of a drip irrigation system. Using the drip irrigation system to achieve higher yields and profits will cover your initial investment within 1 to 3 years. That means that you could make up for the purchase within the first year itself with fast-growing crops.
Why It’s Useful Alongside ROI - Return On Investment gives you the estimate of how much profit you will be able to make on the basis of a one-time investment of setting up a drip irrigation system. The payback period is the time required to recover the cost of the initial investment. Combining the two will give you a net profit over drip irrigation.
Tools and Techniques for Accurate ROI Calculation
Farm management software or spreadsheets
Just like using sensors and monitors to measure the moisture and alkaline levels of soil is important to grow healthy plants so is farm management software or spreadsheets important to give you an accurate idea of how to calculate your ROI, or return on investment. There is software that can be installed during the automation of your drip irrigation system to provide you with detailed data on how much you are spending on energy, water, and other inputs.
Monitoring water usage and yield data
How much water is used for the duration of a harvest will give the exact numbers of water usage in measurable amounts. The yields from each harvest will have to be calculated differently. Maintaining these two accounts will make cost and profit breakdowns far easier.
Importance of record-keeping
Everything has to be recorded to the minute details to get an exact and accurate number of ROI. The more accurately the information is compiled, the higher the ROI will be.
Factors That Influence ROI
Crop type and value - Long-duration crops such as sugarcane can take 10-18 months to reach full maturity, whereas seasonal vegetables need a few months to complete their cycles. A farmer who grows sugarcane will have a different kind of ROI than that of a seasonal vegetable farmer. Vegetables are also more appropriate for immediate consumption, but sugarcanes can be made into sugar and jaggery, among others. This variation in crop type and the crop's value will help better determine the ROI for each farm.
Climate and soil conditions - Cultivating in places that are already facing water scarcity is going to be different from farming in water-rich areas. So, climate and soil conditions can change requirements and yield different ROIs.
Farm size and layout - A small field of 1 acre could be easily covered by a portable drip irrigation system, where everything is transportable. For a larger field, the pipes and system have to be modelled based on the land type. If the land is sloped, in a hilly area, or too large, pressure-compensating pipes such as those manufactured by Netafim will be required. Emitters and drippers with silicone diaphragms to compensate for this pressure drop across long pipes will also be required.
Quality of system design and installation - While you should always strive to install the best drip irrigation system for your farm or orchard, certain factors may arise that make that impossible. But the higher the investment in purchasing a fully automated, drip irrigation system, the better your ROI will be.
Ignoring maintenance costs
Do not ignore, underestimate, or overestimate maintenance costs. For example, if you purchase Netafim FlexNet flexible pipes for irrigation system, they come with a three-year warranty, but can easily last for a decade with proper maintenance. A PVC pipe of similar build will not last that long (if laying on ground).
Overestimating yield improvements
While calculating possible yields, it is best that you keep the number realistic. The numbers will change based on crop, field, climate, cycle, and more, and having realistic, relatable numbers will be better in the long run.
Not considering long-term benefits
The long term benefits of a drip irrigation system become apparent only after having used it for some time. The long-term benefits are not only the money saved, but also the help it offers the planet and our fellow human beings.
Using incomplete or inaccurate data
Every bit of data or information that you are able to gather from your field will give you a clearer picture of how much you are profiting from this one-time investment.
Tips to Maximise ROI
Regular system maintenance - Maintenance must be regular, done by the people who understand the system, and issues must be addressed immediately.
Proper filtration to prevent clogging - Whether Netafim media filters or Screen filters are required or not for your main water source. Preventing as much clogging as possible extends the shelf life of these pipes and drippers.
Efficient scheduling of irrigation - The irrigation must be scheduled with a proper understanding of the plants. Sugarcanes require consistent watering; fruit-bearing trees can manage with scheduled watering.
Training staff or farmers - All the workers who are working in your field must have a good understanding of the system and help with its maintenance in due time. Training is something you will have to take over seriously.
Conclusion
Knowing how to calculate the ROI of a drip irrigation system can give the farmer or cultivator peace of mind when purchasing one. You will have a real idea of how purchasing and installing such a system will help your field. Drip irrigation is a very cost-effective and sustainable investment that will put your farm at its best yields for years. Given all this information, you can make a very informed decision regarding getting your own drip irrigation system.
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