Neem tree has great potential to help small and marginal farmers in rural India, Africa and Latin America. Farmers, who have limited resources, can benefit in many ways from neem. There are easily exploitable, employment and income generation opportunities in the cultivation of neem and processing of neem products, some of which are possible in a decentralized manner on the basis of small investments.

Most developing countries have vast areas under marginal lands with low productivity. As neem has multiple uses, its crop on marginal lands can make a significant contribution to rural economies.

There have not been very many studies dealing with economics of neem trees. There are many tangible and intangible costs and returns from the cultivation of neem tree and processing of neem products which need to be estimated through experiments and surveys. One important study in this area is by which tries to estimates costs and benefits.

In this study, done in the Indian context, the economic felling cycle for Neem is fixed at 23 years. The discount rate used is 12 % per annum. The study takes into account only tangible inputs for and outputs from neem. For inputs, a shadow price factor of 0.80 is used and for outputs a shadows price factor of 1.25 is used. Using data on costs and returns obtained from various published sources, the study provides estimates of benefit-cost (B-C) ration, net present worth (NPW) and internal rate of return (IRR) from raising one hectare of neem over a felling cycle of 23 years.

It is hypothetical case of cluster of 5 or 10 neem trees and their economic costs and benefits.

On the basis of results given in Table III, the authors recommend investment in neem plantation. The net present worth of Rs. 40,838 implies a result in excess of the value of the capital invested plus the specified rate of the return (12%) on that capital invested.

Table No. III

B-C Ratio, NPW and IRR from raising one ha of neem over a felling cycle of 23 years.

I. B-C Ratio (Rs.) 3.59
II. NPW (Rs. / ha) 40838
III. IRR (%) 45.88

Source: Mruthunjaya & Jha, 1993

It can be seen that the benefit – cost ratio is Rs. 3.59

Yet another positive feature of neem plantation is its ability to generate employment. Most of the operations/practices connected with neem plantation and processing are labour intensive. Since NPW is a positive sum (Rs. 40838), B-C ratio is greater than unity (3.59) and IRR is much above the discount rate (48.88 %) investment in neem plantation is recommended as a highly profitable proposition.

The authors further argue that ‘neem plantation can be made much more profitable if efforts are made towards processing of the products from neem. It will only add value to these products but also generate substantial employment in rural sector, e.g……….processing of neem seed through expeller can provide a net income of Rs. 281 per ton’.

The Arid Forest Research Institute (AFRI), Jodhpur, India are conducting experiments with plantation of neem trees and monitoring its progress in order to work out the timber content and economic viability. They report that very positive results have been obtained, as per hectare 800 neem trees can be grown and give good timber yield. For the neem age ranging between 15 – 25 years, the timber volume per hectare ranges from over 77 thousands cubic metres to 2.6 lakhs cubic metres. However, since the experimental plantations are still being worked on, more detailed information is awaited.