Title: Economic viability of small scale shrimp (Penaeus monodon) farming in north-western province of Sri Lanka

Author(s): Menake Gammanpila
Final project
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Supervisors: Pall Jensson
Cost-benefit analysis; economic viability; profitability; shrimp farming.


Shrimp export is the second most valuable export of fish and fishery products of Sri Lanka and it was 8% of during 2013. Among many commercial aquaculture initiatives so far, shrimp (P. monodon) farming has been the most lucrative, but the business is subject to high risk and uncertainties since it started in the mid-1980s. The present study evaluates the profitability and risks associated with semi intensive small scale shrimp aquaculture practices in the north-western province of Sri Lanka. Data and information for profitability  analysis of the operation over 10 years were collected from small scale shrimp aquaculture farms in the Puttalam district, Sri Lanka, during April to August, 2014. Economic analysis revealed that the variable cost per unit production and break-even production for the black-tiger shrimp through semi-intensive culture system is 4.4 US$/kg and 2,500 kg respectively. Assuming minimum acceptable rate of return (MARR) of this study is 15%, the NPV value at the end 10 years was found 33,003 US$ for the total capital invested and 34,993 US$ for the equity. Internal Rate of Return (IRR) for the total capital investment is 41% and 74% for the equity. At the end of the ten years, sum of total and net cash flow is 95,176 US$ and 84,093 US$ respectively. Pay-back period for the capital investment is 3 years and it was two years for the equity. Sensitivity analysis indicated that profitability was highly sensitive to changes in sales price. When the value of the sales price falls by 20% or more, the IRR value becomes 13% and is not profitable. The sales price has frequency of 28% of receiving negative NPV, followed by sales quantity (6%) and variable cost (5%). Results of present study indicates that investment is highly profitable although the shrimp farming is most sensitive to changes in sales price.

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