While spending or investing some amount in agriculture equipment is always better to calculate the return on investment. Every rupee we spend on the 2 HP chaff cutter must be given back to us the value in return.
This calculation of ROI is not that hard it’s just a simple calculation of Efficiency and reduction of waste.
What is a 2 HP Chaff cutter?
A 2 HP chaff cutter is medium-sized farming equipment to cuts grass and hay into small pieces called chaff which is used to feed the animals
The chaff cutter is the most used equipment in the dairy industry to cut hard grasses like Super Napier and Sorghum.
These 2 HP chaff cutters are widely used by small-sized farms with the capacity of 2-5 cows.
This machine has a high impact on the reduction of wastage, the small pieces of grass can help the animals to easily eat and digest
The first step to calculate the ROI is to determine the initial investment. The price of 2 HP chaff cutters in India is INR. 14,000 to 25,000 depending on the brand.
We can assume the average cost of 19,500 The initial investment is the cost of the machine with the transport charges.
To maintain the accuracy of the ROI calculation, consider the costs associated with the 2 HP chaff cutter
We need to include the cost of electricity, the cost including sharpening the blades and occasional maintenance costs. We can assume INR 2,000 as the operating costs
Increase in Efficiency
The major benefit of the chaff cutter is an increase in efficiency. The increase in the production of milk and the weight gain of the livestock increases the profit and revenue. we can assume a total of INR. 20,000 in revenue per year.
Reduction in wastage
We can see a drastic change in a reduction in waste with the use of the chaff cutter with an estimate of 20% to 30% of grass going to waste.
At least 5% of the grass can be saved in small-scale operations. This could save up to INR 4,000 per year.
Total ROI Calculation
Now, let’s calculate the ROI for the 2 HP chaff cutter.
Initial Investment: ₹19,500
Operating Costs: ₹2,000 per year
Increase in Efficiency: ₹20,000 per year
Reduction in Wastage: ₹4,000 per year
ROI = [(Total Gain – Total Investment) / Total Investment] x 100
ROI = [₹20,000 + ₹4,000 – ₹19,500 – ₹2,000] / ₹19,500 + ₹2,000] x 100
ROI = (₹24,000 – ₹21,500) / ₹21,500) x 100
ROI = (₹2,500 / ₹21,500) x 100
ROI = 11.63%
Interpreting the ROI calculation
ROI of 11.63% means every rupee invested in a chaff cutter will give a profit of 11.63 paise. This positive ROI can help us to understand the decision on choosing the chaff cutter for the farm. With this ROI the investment in the 2 HP chaff cutter is financially worthwhile
It is important to note that the calculation may vary based on the cost of the machine, and operating conditions. After recovering the complete investment in the chaff cutter over time we may realize the complete benefits