financial and economic analyses of prospective...

Prosiding Multifungsi Pertanian, 2005

FINANCIAL AND ECONOMIC ANALYSES OF PROSPECTIVE AGRICULTURAL TECHNOLOGY

FOR FLOOD MITIGATION

Irawan, Fahmuddin Agus, Edi Husen, Neneng L. Nurida, and Maswar

Balai Penelitian Tanah Jl. Ir. H. Juanda No. 98, Bogor 16123

e-mail: [email protected]

ABSTRAK

Penelitian ini mengkaji kelayakan usaha beberapa sistem usaha tani padi sawah dan lahan kering. Meskipun memberikan manfaat lingkungan dalam hal pengendalian banjir dan erosi tanah, tetapi keberadaannya tertekan oleh perkembangan industri. Penelitian dilakukan di sub-daerah aliran sungai (DAS) Citarum Hulu, Jawa Barat dan DAS Kaligarang, Jawa Tengah dengan kegiatan survei lapangan. Data primer dikumpulkan melalui wawancara dengan responden dan observasi lapangan yang dilakukan pada Mei - Juli 2004. Responden penelitian terdiri atas para petani pemilik penggarap usaha tani sawah irigasi teknis, sawah tadah hujan, lahan kering berbasis tanaman pangan, lahan kering berbasis tanaman sayuran, dan kebun campuran atau agroforestri. Responden lainnya adalah pengambil kebijakan, yakni pegawai pemerintah yang mempunyai wewenang atau akses terhadap pengambilan keputusan, khususnya di bidang pertanian. Selain itu, pengumpulan dan pengkajian data hasil-hasil penelitian terdahulu yang relevan. Hasil penelitian menunjukkan bahwa secara finansial usaha tani lahan sawah dan lahan kering di lokasi penelitian adalah layak, tetapi hasil usaha tani tersebut tidak cukup untuk memenuhi kebutuhan hidup petani dan keluarganya karena luas lahan garapan terbatas (<0,5 ha). Ketergantungan para petani lahan sawah terhadap sektor non-pertanian cukup tinggi dan sekitar 30% dari petani ini cenderung akan menjual lahan sawahnya manakala ada kesempatan. Apabila manfaat dari lahan sawah, khususnya dalam hal pengendalian banjir diikutkan dalam perhitungan ekonomi, nilai tersebut adalah sebesar 33,4% dari pendapatan usaha taninya. Nilai ini bisa lebih tinggi bila jasa multifungsi lainnya diperhitungkan dan, dengan perhitungan ini, minat atau gairah petani untuk terus mengelola usaha taninya dapat meningkat.

ABSTRACT

This study evaluates the feasibility of several farming systems of paddy field and upland agriculture. Despite their environmental functions in flood mitigation

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Irawan et al.

and soil erosion control, but their existence is encroached by industrial development. The study was conducted in Upper Citarum Sub-watershed, West Java and Kaligarang watershed, Central Java through field survey. Primary data were collected from interview of the respondents and field observation started from May to July 2004. The respondents consisted of land owner or worker of paddy field, rainfed, upland agriculture with food crops and vegetables, and mixed garden/agroforestry. Other respondents were policy makers, i.e. local government officials who have responsibility or access to the decision, especially in agriculture. Other relevant data from previous research were also collected and analyzed. The results showed that paddy field and upland agriculture systems were financially feasible, but the margin of these farming systems were not enough to satisfy farmers’ needs for living since land holding per household was so small (<0.5 ha). The dependence of paddy field farmers to non-agricultural sectors was high, and 30% of them tended to sell their land whenever they had chances. If the multifunctionality of paddy field, especially for flood mitigation were included in economic calculation, the value was as much as 33.6% of farmers’ net income. This value may be higher if other multifunctionality were added and, by these calculations, farmers’ interest and motivation to continue farming may increase.

INTRODUCTION

Indonesian government has decided to put food security program as the first priority in agricultural sector (Departemen Pertanian, 2001). Therefore, all efforts to increase the production of rice, corn and soybean become much more important than others to support domestic food production. However, one of the main constraints faced by Indonesian agricultural development is the decrease of productive land (paddy field and other agricultural lands) due to land conversion. According to Kasryno (1999) approximately 30 to 40 thousand hectares of paddy field in Java Island have been converted to non-agricultural purposes. In the period of 1985-1995, 1.28 million hectares of paddy field have been converted (BPS, 1996), 79% of which is located in Java and 68% of the area is paddy field with regulated irrigation system. This conversion reduces rice production and increases rice import that ranges from 2 to 3 million tons annually.

Land use conversion is driven mainly by low financial incentives in farming and short-run financial gains that may be generated from conversion ignoring the long run economic and environmental consequences.

There is a strong indication that massive conversion of agricultural land to non-agriculture accelerates environmental damage. A study by Bakosurtanal (2002) reported that flood in Jakarta could be due to the improper management of water catchment areas and inappropriate use of land in Bopunjur (Bogor Puncak Cianjur)

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Financial and Economic Analyses

area; the upstream area within Ciliwung watershed. The reduction of agricultural land, along with the increase of settlement in Bopunjur could be related to increased runoff, erosion, river flow, as well as sedimentation in the watershed. In general, the conversion not only reduces opportunity to decrease the country’s dependence on imported agricultural products, but also causes disappearance of multifunctionality of paddy field irreversibly (Agus et al., 2003).

A previous study in Japan concluded that paddy field has environmental functions such as flood mitigation, soil erosion control, water resource conservation, organic waste disposal, heat mitigation, and rural amenity (Yoshida, 2001). Partial valuation of the multifunctionality of paddy field in Citarum river basin, using replacement cost method (RCM), revealed that paddy fields contributed to the surrounding society with the value equivalent to 51% of rice produced in this river basin (Agus et al., 2003). Since the beneficiaries of paddy field multifunctionality are public at large, farmers deserve to get an appropriate reward in managing and sustaining their agricultural land.

The study also showed the positive response of the society to support the government in maintaining agricultural land (Irawan et al., 2004). This response was exhibited by their willingness to pay for the multifunctionality of agriculture, especially for flood mitigation and water resource conservation functions. People also believed that food security program could be achieved merely by maintaining agricultural land, especially paddy field and other agricultural land for food production.

In Japan, for example, people and the government work together to sustain agricultural land while protecting the environment by maintaining the existence of agriculture (and its multifunctionality). In the district of Nagoya, the government supported farmers as high as $ 600 to $ 1,750 ha-1 yr-1 for maintaining dry land farming and $ 3.300 ha-1 yr-1 for maintaining paddy farming (MAFF, 2001).

This study evaluated several farming systems in relation to flood mitigation functions. This information will be useful in assessing farmers’ (service providers’) willingness to accept the contribution. The information can be used to develop policy inputs in providing incentives to the service providers.

Objectives 1. To analyze the financial and economic feasibility of prospective farming

systems technology for flood mitigation and erosion control on different land use types, and

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2. To study farmers’ response on a minimum incentive in implementing soil and water conservation technology on their lands

MATERIALS AND METHODS

The study was conducted in Citarum Hulu sub-watershed in Bandung District, West Java, and Kaligarang watershed in Semarang District, Central Java. Preservation of agricultural region and improvement of land management in these two sites will increase the functionality of the regions as flood mitigation function for the lower part of the watersheds, buffering zones (soil and water conservation), and water resource conservation.

Data Gathering Primary data consisted of benefit and cost of farming, technology used in

farming management, farmer perceptions on the implementation of soil and water conservation, local government policies on agricultural sector, etc. Secondary data included land uses and crops planted, yield and prices of agricultural products, cost and benefit of soil and water conservation practices.

Primary data were collected from field survey through interview and discussion with farmers and other related resources, and field observation. Secondary data were gathered from selected documentation of institutions and literatures.

Farming studied included: (1) irrigated paddy field, (2) rainfed rice, (3) upland annual crops, (4) upland vegetables crops, and (5) mixed garden or agroforestry.

This study interviewed 45 government officers and 171 farmers as the respondents in both locations. The number of respondents (samples) was based on population variance, desired precision, and expected maximum estimation differences (Sudjana, 1989).

Data Analysis Feasibility analysis of the farming was conducted based on two criteria, i.e.

(1) financial and economic feasibility and (2) household feasibility. Financial and economic feasibilities of farming were based on NPV (net present value), B/C (benefit cost ratio) and IRR (internal rate of return) (Gittinger, 1982). The formula of these indicators is as follows:

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…………………………………….. (1)

…………………………………….. (2)

……………………………..(3)

Where: NPV = net present value; Bt= benefit in the year t; Ct = Cost in the year t; i = discounted factor; B/C = benefit cost ratio, and IRR = internal rate of return.

Financial feasibility was analyzed based on direct cost and benefit valued at

the current market prices, meanwhile economic feasibility was analyzed based on direct and indirect cost and benefit valued at the shadow prices. Financial feasibility is important for making decision on private point of view; meanwhile economic feasibility is important for making decision on the community bases. Household feasibility was analyzed based on the minimum household requirement indicators that were approached by cost of living. A farming can be said feasible or viable if it meets the criteria of B/C ratio > 1.0 (or Net B/C ratio >0), or NPV > 0, or IRR > loan interest rates. If the output of a farm meets cost of family living, the farming is considered household feasible.

Σ (1+i)

n

t=1

B t t

Σ n

t=1

C t (1+i)t

B/C =

Σn B t - C

t

t=1 NPV= (1+i)t

Σ B t - C t (1+IRR)t

n

t=1 IRR=> = 0

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RESULTS AND DISCUSSION

Profile of respondent The respondents consisted of policy makers and farmers from five different

farming systems. Policy makers are local government officers who have an access and responsibility to the decision makers, such as head of village/sub district, structural and professional officers of local government at district and province level in the office of agriculture (Diperta, BPTP), landuse (BPN), and regional development planning (Bappeda, Sekda). All policy maker respondents were selected purposely based on the number and their strategic positions in the offices.

The profile of government employee respondents is presented in Table 1. Most of the respondents were highly educated officers. In general, the level of education of respondents in Kaligarang watershed was higher than that of Citarum Hulu Sub-watershed. Around 82% of structural and professional level of respondents in Kaligarang was Echelon II and III, and agricultural expert level in agricultural research and extension.

Table 1. The profile of government employee respondents

Description Citarum Hulu Sub-watershed

Kaligarang Watershed

Total

Number of respondents 28 17 45 Education level: -Graduated (%) -Non-graduated (%)

75 25

100

0

87.5 12.5

Employment grade: -High (%) -Low (%)

53.6 46.4

82.4 17.6

68.0 32.0

Farmer respondents were the owners of selected farming, namely irrigated

paddy field, rainfed rice field, upland food crop, upland vegetable crop, and mixed garden/agroforestry (Table 2). The selection of respondents was conducted purposely for farmers’ location and group (Kelompok tani) and randomly for farmers in each location and group. Respondents in Citarum watershed were located in Sub districts of Ciparay and Majalaya for irrigated sawah; Cicalengka and Rancaekek for rainfed rice field farming; Ciwidey, Pangalengan and Soreang for upland vegetable crop farming; Ciparay and Cikancung for upland food crop farming; Cikancung, Soreang and Banjaran for mixed garden/agroforestry. Respondents in Kaligarang watershed were located in sub-districts of Bergas for

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upland vegetable crop farming; Keji for irrigated paddy field; and Gunungpati for irrigated paddy field, rainfed rice field, upland food crop and vegetable crop farming, and mixed garden/agroforestry.

Table 2. Profile of farmer respondents in Citarum and Kaligarang watershed

Land use Irrigated paddy

field Rainfed rice

field Upland food

crop Upland

vegetable crop Mixed garden/ agroforestry

Description

Citarum Kali-garang Citarum Kali-

garang Citarum Kali-garang Citarum Kali-

garang Citarum Kali-garang

Number of respondents 23 15 18 12 18 13 18 8 24 22 Age (year) 49 44 60 46 55 47 43 32 53 47 Household member 4 4 4 5 5 4 5 5 5 4

Total land (ha) 1.32 0.49 1.19 0.43 1.37 0.56 1.05 0.27 0.85

0.51 - Paddy field (ha) 1.28 0.39 1.17 0.25 0.09 0.18 0.13 0.04 0.25 0.27 - Upland (ha) 0.05 0.10 0.02 0.18 1.28 0.38 0.92 0.23 0.60 0.24 Source of income (%)

a. On Farm 29 35 60 35 67 65 86 94 51 42 b. Off Farm 4 15 2 2 0 2 1 2 6 7 c. Non-agriculture 67 50 38 63 33 33 14 4 43 51

Note: on-farm = direct income from farming system off-farm = direct wage of working on other farmer farms, such as hoeing, planting, etc.

Most respondents were in a stage of productive age with 4 to 5 household

members. The sources of farmers' income could be on-farm, off-farm and non-farm. In this study direct income from farming system, such as nominal value of agricultural products is called as an on-farm income, meanwhile having paid for working on other farmer’s fields, such as agricultural product processing, hoeing, planting, or harvesting is called as off-farm income. Non-farm or non-agricultural income is generating money outside of farm, such as professional wage (teacher) or merchant.

In general, farm contribution to total income was higher than that of non-agricultural income, except for irrigated paddy field in Citarum Hulu Sub-watershed, rainfed rice field and mixed garden farming in Kaligarang Watershed. Data also showed that contribution of non-agriculture sector in generating money for irrigated farmers in Citarum Hulu Sub-watershed was extremely high. The highest farm contribution to total income was exhibited by upland vegetable crop farming in both locations.

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Site description

Landuse change Citarum Hulu and Kaligarang watersheds were located in Bandung and

Semarang Districts, respectively. Administratively, the coverage area of Bandung and Semarang districts was 309,198 ha and 93,334 ha, respectively. Land use in both locations was consisted of irrigated paddy field, rainfed rice field, housing or setlement, upland food crop, forest, estate plantation, and others (Figure 1). The proportion of forest (24%) and estate plantation (15%) was higher in Bandung than in Semarang, but area of paddy and rainfed rice field was vice versa.

Figure 2 shows land use change in Bandung district from 1992 to 2002. In this period, area of paddy field, rainfed rice field, and upland food crop decreased 0.77%, 1.53%, 0.19% year-1, respectively. On the other hand, the settlement developed 1.69% year-1. It indicates that the decrease of agricultural area was due to the development of settlement.

In Semarang district, land use change was higher than that in Bandung area, especially for irrigated paddy field (Figure 2). The decrease of pady field from 1998 to 2002 was in the rate of 1.87% year-1. There was also a trend that paddy field was converted to rainfed rice field with the rate of 1.05% year-1 due to water shortage. Annual upland food crop field decreased 1.14% year-1 and settlement or housing developed 1.80% year-1.

Agricultural development program Agriculture was the third and the second important sectors in economic

development, which contributed 8.3% (Bandung District) and 20% (Semarang District) to PDRB (product domestic regional brutto), respectively. Agricultural program was part of Economic Development Program (EDP) that consisted of two sectors, namely agriculture and forestry & estate. Agricultural program was devoted to farming technology development, agribusiness, food security, rehabilitation of degraded land, and natural disaster aids (especially for flood and landslide).

In 2003, the allocation of local government budget (APBD) for EDP was 20% in Bandung and 33.9% in Semarang. Meanwhile the agricultural budget was only 4.4% and 20.5% from the EDP budget in Bandung and Semarang Districts, respectively. It means that the allocation of agricultural budget from APBD was less than 1% in Bandung and 7% in Semarang Districts, respectively.

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15%

3%

12%

22%24%

15%

9%

Paddy fieldRainfed rice fieldSettlementUpland food cropForestEstate plantationOthers

17%

8%

24%30%

6%

12%3%

Paddy fieldRainfed rice fieldSettlementUpland food cropForestEstate plantationOthers

Figure 1. Land use in Bandung (above) and Semarang (below), 2002

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0

10000

20000

30000

40000

50000

60000

70000

80000

1996 1997 1998 1999 2000 2001 2002

Ha

Paddy Field

Rainfed ricefieldSettlement

Upland foodcrop

0

5000

10000

15000

20000

25000

30000

1998 1999 2000 2001 2002

Ha

Paddy fieldRainfed rice fieldSettlementUpland food crop

Figure 2. The changes of irrigated paddy field, rainfed rice field, housing, andupland field from 1996 to 2002 in Bandung (above) and from 1998 to2002 in Semarang (below)

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Flood disaster Flood disaster occurs periodically in both locations, but the frequency and

the damage increase over time, especially in Semarang District. There is an indication that the decrease of agricultural land exacerbates the disaster. The total lost value of flood disaster was correlated with the number of sub districts affected by flood in Bandung area (Figure 3). Meanwhile the total lost value of flood disaster in Semarang District was correlated with its frequency that increased every year (Figure 4).

0

5

10

15

20

25

2000 2001 2002 2003Year

Num

ber o

f sub

dis

tric

affe

cted

0

100

200

300

400

500

600

700

US

$ x

100

0

Sub-districLost

Figure 3. Total sub-district and lost value affected by flooded in Bandung district, West Java

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Irawan et al.

0

5

10

15

20

25

1999 2000 2001 2002 2003

Year

Floo

d (ti

mes

)

0

10000

20000

30000

40000

50000

60000

Lost

(US

$)

FloodLost

Figure 4. Frequency of flood and its lost value in Semarang District, Central Java

Government employee's perception on agricultural land conversion Table 3 shows the government employee’s perception on the degree of

agricultural land conversion, especially irrigated paddy field to non-agriculture (industrial area). Approximately 43% and 71% of respondents in Citarum Hulu and Kaligarang watersheds, respectively, believed that agricultural land conversion occurred massively. They also believed that the reducing size of agricultural land, due to land conversion, had the negative as well as positive impacts. Some negative impacts were related to food insecurity as perceived by about 47% respondents and decreasing environmental quality as perceived by about 35% respondents (Table 4). The direct response of respondent in relation to the paddy field conversion was the reduction of rice yield, and to the environmental pollution was limited to water pollution from the factories. It means that the majority of respondents did not believe, or else unaware of the negative environmental impacts of paddy field conversion, such as flood and soil erosion.

About half of respondents believed that agricultural land conversion resulted from the improvement of local economic growth and about 25% respondents believed that employment opportunity and infrastructure development become higher as agricultural lands were converted to non agricultural uses (Table 5). Based on statistical data (BPS, 2003) on Figures 5 and 6, the average monthly population expenditure in rural was less than urban areas, and the proportion of food

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expenditure in rural was higher than that in urban areas. It seems likely related to the respondents' perception that urban economic growth was better than rural areas. However, the economic inequality existed in urban area as shown on Figure 5.

Table 3. Government employee's perception on the degree and mode of irrigated paddy field conversion to non-agricultural purposes in Citarum Hulu and Kaligarang watersheds

Watershed Respondents' perception

Citarum Hulu Kaligarang

% Massively 42.9 70.6 Spot/Locally 46.4 29.4 No Idea 10.7 0 Total 100.0 100.0

Table 4. Government employees’ opinion on the negative impacts of irrigated paddy field conversion in Citarum Hulu and Kaligarang watersheds

Watershed Respondents' opinion


% Food insecurity 53.1 42.9 Environmental pollution 28.1 47.6 Other 18.8 9.5 Total 100.0 100.0

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Table 5. Government employees’ opinion on the positive impacts of irrigated paddy field conversion in Citarum Hulu and Kaligarang watersheds

Watershed Respondents' opinion


% Local economic growth 50.0 54.2 Employment opportunity 23.3 20.8 Availability of infrastructure 26.7 25.0 Total 100.0 100.0

01020304050607080

7 9 11 17 22

Expenditure (US$ month-1)

% P

opul

atio

n

BandungUrban areaRural area

Figure 5. Percentage of population based on the expenditure in urban and rural areas in Bandung District (BPS, 2003)

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01020304050607080

7 9 11 17 22

Expenditure (US$ month-1)

Food

exp

endi

ture

(%)

BandungUrban areaRural area

Figure 6. Percentage of food expenditure in urban and rural areas in Bandung District (BPS, 2003)

The effort to control paddy field conversion has been conducted by the

government of Semarang District by mapping of paddy field area that may or may not be converted to non-agricultural purposes. Paddy fields may not be converted if the average yield is higher than 4.5 t ha-1 season-1. Paddy field area may be converted with some justifications if the yield is between 3.0 - 4.5 t/ha-1 and it may be converted if the yield is less than 3.0 t ha-1 season-1. The process of paddy field conversion is decided by special Tim consisted of relevant institutions, such as land or agrarian agency (BPN), Bapeda, DPU (Dinas Pekerjaan Umum or Public Works Agency), Diperta, and others. However, the decision still reflects that rice production was the main judgment for paddy field conversion rather than multifunctionality aspects, indicating that multifunctionality of paddy field was either not yet understood unknown.

Economic analyses

Farming viability Based on the market prices, the farming systems studied were economically

viable or profitable (Tables 6 and 7). Although the value of net B/C ratio was greater than zero, the benefit of upland food crop farming, especially in Citarum Hulu watershed was very low (0.06). In contrast, vegetable and agroforestry farming in both locations were much more profitable. The profitable of upland food crop in Citarum Hulu was very low due to high production cost and the wage rate in this area was more expensive than that in Kaligarang watershed.

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Multistrata agroforestry farming was not only profitable as shown by the high B/C ratios (Tables 6 and 7) but also more environmental friendly in terms of erosion and runoff reduction (Agus et al., 2004) and offering higher biodiversity and carbon sequestration. Moreover, agroforestry system using vegetable crops (Agrof-Veg) was more profitable than agroforestry system using food crops (Agrof-Food) in the initial years (Table 8).

Table 6. Economic analyses of farming on several landuse in Citarum watershed

Land use type

Description Paddy field

Rainfed rice field

Upland food crop

Upland vegetable

crop

Mixed garden/

agrofores-try 1

US $ ha-1 year-1

Production cost 424.3 222.3 846.7 3,492.5 110.0Benefit 793.7 583.5 899.3 7,928.3 383.6Net benefit 359.4 361.2 52.6 4,435.8 273.6Net B/C 0.87 1.62 0.06 1.27 2.49Land ownership (ha) 1.08 0.69 1.23 0.78 0.48Farmer net income 388.2 249.2 64.7 3,459.9 131.3Note: based on current analyses (perennial, timber, or fruit plants were less than 6 years old)

Table 7. Economic analyses of farming on several land use in Kaligarang watershed

Land use type (farming system)


Rainfed rice field

Upland food crop

Upland vegetable

crop

Mixed garden/

agrofores-try 1

US $ ha-1 year-1 Production cost 449.8 389.6 402.0 4,886.5 44.3Benefit 793.6 480.3 738.9 19,118.5 516.8Net benefit 343.8 90.7 336.9 14,232,0 472.5Net B/C 0.76 0.23 0.84 2.91 10.66Land ownership (ha) 0.37 0.68 0.38 0.10 0.24Farmer net income 127.2 61.7 128.0 1,423.2 113.4Note: based on current analyses (perennial and fruit plants were more than 12 years old)

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Table 8. Investment analyses of agroforestry system in Citarum Hulu sub-watershed

Indicator Unitary Agrof-Veg Agrof-Food Comment

NPV of Benefit (18%) US $ ha-1 year-1 401.4 262.2 Viable Net B/C 3.36 2.46 Viable IRR (%) 28.04 21.70 Viable Source: DLH (2003) Note: Agrof-Veg = using vegetable crops in the initial years Agrof-Food= using food crops in the initial years

Environmentally, all of the studied land uses have a function in mitigating flood. Based on the previous study, the magnitude of water buffering capacity of paddy field, mixed garden and upland food crops were 930, 850, 660 m3 ha-1 year-1, respectively (Agus et al., 2003). In terms of biophysical aspect the paddy field and mixed garden farming were more prospective than upland food crop farming. Water buffering capacity of industrial or settlement area was 200 m3 ha-1 year-1. Therefore, if one hectare of paddy field is converted to settlement area there will be an additional runoff as much as 730 m3 ha-1 year-1. If this figure is valued using RCM method by applying the reservoir or dam depreciation and maintenance cost at US $ 0.157 m-3 year-1, the studied farming system actually gives social benefit as much as 115, 102, and 72 US $ ha-1 year-1 for irrigated paddy field, mixed garden, and upland food crop farming, respectively. These are environmental value of agricultural land to the society in terms of flood mitigation function only. Thus, it concluded that irrigated paddy field and mixed garden are prospective farming for flood mitigation and financially viable to farmer.

Farmers' income and living costs Tables 9 and 10 show the total of farmer family income. Farmer’s family

income consisted of on-farm (studied farming system) and others (off-farm, non-farm, and on-farm from other land use type). The income of farmer from vegetable and irrigated paddy field farmings, and vegetable and food crop farmings in Citarum and Kaligarang watersheds, respectively had the highest income.

In terms of living cost, the income of all farmers in Kaligarang watershed and farmers rice field and vegetable farmings in Citarum watershed met the minimum cost of living (MCL). The criterian of MCL in rural region is based on income that is nominally equal to US $ 735.0 year-1 for the size of family 3-4 people. However, as presented on Table 2 the income of paddy field farmers was low. As such, the paddy field farmers did not so dependent on their farming to generate income.

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Table 9. Farmers' family income and its proportion to the minimum cost of living (MCL) in Citarum watershed

Farming system

Source of income Paddy field

Rainfed rice field

Upland food crop

Upland vegetable

crop

Mixed garden/

agrofores-try 1

Farming studied 388.2 (29.7)

249.2 (56.4)

64.7 (24.6)

3,459.9 (83.5)

131.3 (18.8)

Others *) 918.6 (70.3)

193.0 (43.6)

198.5 (75.4)

721.9 (16.5)

567.6 (81.2)

Total 1,306.8 (100)

442.2 (100)

263.2 (100)

4,181.8 (100)

698.9 (100)

Proportion to MCL (%)

178 60.2 35.8 568 95

*) Off-farm, non-farm and on-farm from other land use type.

Table 10. Farmers' family income and its proportion to the minimum cost of living (MCL) in Kaligarang watershed

Farming system

Source of income Paddy field

Rainfed rice field

Upland food crop

Upland vegetable

crop

Mixed garden/

agrofores-try 1

Farming studied 127.2 (16.8)

61.7 (6.0)

128.0 (13.7)

1,423.2 (74.9)

113.4 (10.1)

Others *) 628.8 (83.2)

958.7 (94.0)

1,466.8 (86.3)

477.3 (25.1)

1,013.3 (89.9)

Total 756.0 (100.0)

1,020.4 (100.0)

1,594.8 (100.0)

1,900.5 (100.0)

1,126.7 (100.0)

Proportion to MCL(%)

103 139 217 258 153

*) Off-farm, non-farm and on-farm from other land use type.

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The analysis showed that even though the farming in general was financially viable, as shown by the B/C ratios (Tables 6 and 7), the net benefit was not enough to meet the minimum costs of living. Farmers were very dependent on other source of income (non-agricultural sectors), especially for rice field farmers because of very small landholdings. As farm size per family gets smaller, there will be an increasing tendency to maintain agriculture as the main source of living and as a result there will be lower attachment of the community to the farm. In order to maintain farmers' willingness to manage their field, the social or environmental benefit of farming system must be considered as an additional benefit provided by farmer. Considering the multifunctionality of farming, there should be a policy to control the decreasing size of farm/landholding besides increasing various incentives for farming. The transfer of benefit from the society or government to the farmer could be implemented, for example, by supporting farm inputs, higher floor price of agricultural products, free taxes of agricultural land, direct payment, and others.

Farmer perception Farmers’ perception on the benefit of farming and the kinds of incentives

they prefer to keep their farm business continuing is shown on Table 11. More than 50% of lowland farmers expressed that their farms are profitable. However, farmer’s criteria on the profitability mostly related to food self-sufficiency (subsistence living) rather than meeting the minimum cost of living. Less than 50% of farmers considered that their farming was not profitable and thus about 30% of them tend to sell their farm whenever there were attractive opportunities. This will treat the sustainability of farming in the future due to agricultural land conversion.

In terms of subsidies or incentives expected, farmers preferred to have a subsidy on price reduction of farm inputs rather than increased floor price of rice or agricultural products. This may be associated with the fact that they also have to buy rice 2 to 3 months in a year and that the rice floor price, as set by the government, most of the time was ineffective.

The expectation of irrigated paddy or lowland rice farmers on price reduction of farm inputs is illustrated in Figure 7. The expected reduction of market price of urea, SP-36, and KCl ranged from 20% to 42%. Meanwhile, the price reduction of pesticides was expected as much as 18 % to 26%. Farmers believed that if the current price of farm inputs decrease to those expected levels, the profit of rice farming will be much more acceptable.

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Table 11. Farmers’ perception on the profitability of irrigated paddy field and rainfed rice field, incentive preferences and willingness to keep farming in Citarum and Kaligarang watersheds, expressed by the percentage of farmers’ responses to each description

Citarum watershed Kaligarang watershed

Average


Rainfed rice field

Paddy field

Rainfed rice field

Paddy field

Rainfed rice field

Profitability: -Profitable 57.1 78.6 72.7 40.0 64.9 59.3 -Unprofitable 42.9 21.4 27.3 60.0 35.1 40.7 Support preferences: -Input supplies 83.3 81.8 66.7 75.0 75.0 78.4 -Increase floor price 16.7 18.2 33.3 25.0 25.0 21.6 Willingness to: -Keep farms 62.9 71.4 81.8 70.0 72.4 70.7 -Sale farms 37.1 28.6 18.2 30.0 27.6 29.3

0

10

20

30

40

50

Urea SP-36 KCl Pesticide

Req

uest

ed p

rice

redu

ctio

n (%

)

CitarumKaligarang

Figure 7. The percentage of price reduction of farm inputs requested by paddy field farmers in Citarum Hulu and Kaligarang watersheds

The expectation of upland farmers on price reduction of farm inputs is

illustrated in Figure 8. Much higher reduction of farm input prices was expected by farmers in Citarum watershed. It may be associated with high intensity of farming per year and low farming profitability, especially for upland food crops.

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Furthermore, farmers in Citarum Hulu and Kaligarang watersheds expected rice price to increase as much as 20% and 32%, respectively (Figure 9). Presently, the different rice price in both sites was US$ 0.141 and US$ 0.129 kg-1 of husked rice in Citarum Hulu and Kaligarang watershed, respectively.

0

10

20

30

40

50

Urea SP-36 KCl Pesticide

Req

uest

ed p

rice

redu

ctio

n (%

)

CitarumKaligarang

Figure 8. The percentage of price reduction of farm inputs requested by upland

farmers in Citarum Hulu and Kaligarang watersheds

0

5

10

15

20

25

30

35

Citarum Kaligarang

Req

uest

ed p

rice

incr

ease

(%)

Figure 9. The percentage of rice price increase requested by farmers in Citarum Hulu and Kaligarang watersheds

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Soil and water conservation (SWC) measures on upland agriculture In general, most areas of upland agriculture were situated in landscape with

slope of 25% or steeper (Table 11). In some villages there were areas with >60% slope. However, most farmers (> 80%) have implemented soil and water conservation (SWC) measures, such as bench terraces, contour or graded trenches, strip cropping (Veg), or application of mulch, mostly because of the support of various past projects. Some bench terraces and graded trenches were supported with grasses. In Cemenggal-Munding Village (Semarang district), bench terraces in the area with slope 60% were supported by stones. Dominant grass for SWC were elephant grass, king grass, and sulonjono grass.

Farmers who have not implemented SWC (20%) argued that they have limited sources (capital) and labors, land was not too steep, or they were waiting for government support. The motivation of farmers to implement SWC could be grouped into four categories, i.e., self-awareness, government support, tradition, and others (following others) (Figure 10). Government supports in West Java was from the National Regreening Project in Soreang and International Funders in Cikancung-Cikamuning in the form of conservation demonstration plots in 1980 and 1984. In Central Java, such as in Gunung Pati Village, government supports were coordinated by the forestry service under the National Regreening Project.

Table 11. Soil and water conservation (SWC) measures implementation in Citarum Hulu and Kaligarang watersheds

Kinds of SWC implementation

Farming

Farm size per family

Land slope

Percent-age of

farmers applied SWC

Bench terraces

Graded trenches

Vegeta-tive

ha % Citarum hulu watershed - Upland food crop 0.981 26 100.0 57.2 42.8 - - Upland vegetable 0.808 24 88.9 32.8 67.2 - - Mixed garden 0.433 30 87.5 49.5 50.5 - Kaligarang watershed - Upland food crop 0.538 33 84.6 68.2 4.5 27.3 - Upland vegetable 0.129 61 100.0 81.3 12.5 6.3 - Mixed garden 0.256 33 53.8 100.0 0 0

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0.0

10.0

20.0

30.0

40.0

50.0

60.0

Self-aw areness

Governmentsupport

Heritage Others

Res

pond

ent (

%)

Citarum

Kaligarang

Figure 10. Farmer motivation in implementing SWC in Citarum Hulu and Kaligarang watersheds

Self-awareness of farmers to implement SWC measures as shown in Figure

10 was more than 50%. It indicates that most farmers have already known the benefit of SWC for their land, such as stabilizing the soil, control of soil erosion and landslide, facilitating soil preparation, and conservation of fertilizers.

Investment and maintenance costs of SWC and the willingness to accept (WTA; level of support to implement SWC in selected farming systems) is shown in Table 12. The investment of bench terrace in Citarum Hulu (West Java) was higher than that of Kaligarang watersheds (Central Java), while the maintenance cost was almost similar in both locations. The preliminary value of WTA to implement bench terrace and graded trenches in Citarum Hulu was much higher than that of Kaligarang watersheds. This means that farmers in Citarum Hulu request higher (direct) support from the government to implement SWC measures.

According to Agus et al (1999), labors required to construct bench terrace range from 400 to 1,900 MD (man days) depending on land position and slope. The average of labor cost per day was US$ 1.18. Thus, the WTA of farmers to implement bench terrace was about 50% than the estimated standard labor cost. On the other hand, the WTA to construct graded trench in Citarum Hulu Sub-watershed was higher than standard labor cost (Figure 11).

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Table 12. Investment, maintenance cost, and WTA for SWC in Citarum Hulu and Kaligarang watersheds

Description Upland food crop

Upland vegetable

crop

Mixed cropping/

agroforestry Average

Citarum Hulu watershed Investment (US $ ha-1) - Bench terrace 432.2 709.2 395.8 512.4 Maintenance ($ ha-1 yr-1) - Graded trenches 60.5 133.6 93.0 95.7 WTA ($ ha-1) - Bench terrace 410.7 381.7 389.3 393.9 - Graded trenches 274.5 212.2 162.4 216.4 - Mulch (annually) - - 35.3 35.3 Kaligarang watershed Investment (US$ ha-1) - Bench terrace - 508.0 177.6 342.8 - Vegetative 26.4 - - 26.4 Maintenance ($ ha-1 yr-1) - Bench terrace 226.6 27.6 111.1 121.8 - Vegetative 37.3 - - 37.3 WTA ($ ha-1) - Bench terrace 189.0 187.8 389.3 255.4 - Graded trenches 54.5 - - 54.5

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0.0 200.0 400.0 600.0 800.0 1,000.0

Bench terrace

Graded trenches

WTA and Standard cost (US $ ha-1)

KaligarangCitarumStandard

Figure 11. Farmers’ willingness to accept (WTA) versus standard cost of soil and water conservation (SWC) in Citarum Hulu and Kaligarang watersheds

CONCLUSION

1. Irrigated paddy field and upland area in Citarum Hulu watershed decreased

approximately 0.92% and 0.19% year-1, respectively, while in Kaligarang watershed decreased about 1.87% and 1.14%, respectively. On the other hand, settlement and industrial area increased 1.69% year-1 in Citarum Hulu watershed and 1.80% year-1 in Kaligarang watershed.

2. About 43% and 71% of policy maker respondents in Citarum Hulu and Kaligarang watersheds, respectively believed that paddy field conversion to settlement and industrial area occurred massively.

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3. Besides having positive impacts on local economic growth and employment opportunity, paddy field conversion, in both watersheds has threatened (negative impacts) food self-sufficiency program and increased environmental pollution.

4. Floods disaster were frequently occurred in studied area, its intensity and damage increased over time. There is a strong indication that the increase of flood disaster is due to the decrease of agricultural area.

5. Agricultural sector plays an important role in economic development in both locations. Agricultural is the third and the second important sectors in economic development of Bandung and Semarang districts, respectively. However, its important role were not reflected in the current agricultural budget.

6. Most farming systems studied are economically viable, but because of limited land ownership, the income of rice and upland food crops did not meet farmer family’s cost of living. Most lowland farmers are dependent on non-farming source of income and about 30% of them are willing to sell their paddy field.

7. Paddy field and mixed garden or agroforestry were the prospective farming for flood mitigation, and these farms are financially viable to farmer. The social benefit of paddy field in terms of flood mitigation was as much as 33.4% from its current net benefit. This value must be considered as an additional paddy field benefit to farmer.

8. Farmers preferred lower price of farm inputs rather than higher floor price of agricultural products (output). The requested price reduction of farm inputs by farmers were 20% for fertilizers and 40% for pesticides.

9. Most farmers have implemented soil and water conservation (SWC) measures. They were willing to continue the implementation of SWC if partial support was given for bench terraces and full support for graded terraces.

10. Farming beneficiaries are not only farmers, but also the public at large. There-fore, farmers as the provider of environmental services should receive incentives in farming, such as farm input supports, higher floor price of agricultural products, free taxes of agricultural land, or direct payment.

AKNOWLEDGEMENT

The authors wish to express their gratitude and thank to Ir. Cahyati Setyani, MS (BPTP Jawa Tengah), Ir. Enjang Suyitno (BPTP Jawa Barat), Ir. Husnaen, SP (Balai Penelitian Tanah, Bogor), and Ir. Sidik H. Tala’ohu, MM (Balai Penelitian Tanah, Bogor) for their contribution in assisting and gathering relevant information.

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