An analysis of Business Performance of Dairy Enterprises in Kittur Karnataka Region of Karnataka State in India

Abstract

The study analyzed the cost structure, returns, financial feasibility and economic performance of dairy enterprises of Small, Medium and large Enterprises in Kittur Karnataka region in India. Belagavi, Bagalkot and Uttara Kannada districts were selected and two talukas were selected from each district based on highest number of dairy animals. The data were obtained from 135 sample dairy farmers, consisting of 45 small (1-3 animals), 45 medium (4-10 animals) and 45 large (>10 animals) herd size category farmers through personal interview. The study focused on per unit efficiency and profitability of the business. The tools like budgeting technique, financial feasibility analysis and ratio analysis techniques were employed. The study results indicate that total costs increased with herd size averaging 2,70,766 per unit annually. Variable costs dominated across all herd sizes, accounting for 86.75 percent of total costs. Fixed costs, mainly interest on fixed capital, made up 13.25 per cent of the total. Large dairy units achieved lower per-litre costs (₹32.03) compared to small (₹35.29), indicating operational efficiency and economies of scale. Net returns per animal and per litre also favoured larger scale operations, with an overall average net return of ₹11,928 per animal and ₹10.82 per litre. Financial feasibility analysis confirmed that large dairy units were most viable, with highest Net Present Worth (₹54,953/animal), Internal Rate of Return (44%), and Benefit-Cost Ratio (1.35), along with shortest payback period (2.60 years). Operating and gross ratios improved with herd size, reflecting better cost control. Profitability indicators such as net profit ratio (0.26 for large units) and return on total assets (0.151) highlighted financial strength. Liquidity, solvency and fixed asset utilization also improved with scale, showcasing the economic resilience of larger enterprises. Overall, the study concludes that while all dairy units are financially viable, larger units offer superior cost-efficiency, profitability and sustainability.