FEATURE

University's funding, third 4% premium, fourth subsidy plus premium and fifth solar panel installation with bore well.

In all the scenarios studied, implementing the hydroponic business showed positive net present value results, while scenarios 4 and 5 report the significantly highest net present and delay value.

As per Gyanendra Singh Sisodia, “The study has environmental, economic and social implications, given that the local production of food ensures higher employability while fresh food consumption is directly associated with good health.”

The study also was novel because it addressed the effect of Khalifa funding and investment analysis on solar wells which has not been evaluated before in any hydroponic studies.

UAE agriculture situation

The UAE depends heavily on imported food to meet its population’s needs. In 2018, the UAE imported 21,564 million AED worth of vegetable products. As such the UAE government is encouraging domestic production to decrease its dependence on imports in a more sustainable manner.

Already farmers are supported by 50% of the farming supplements, despite the arid conditions, limited water, and limited fertile soil. The UAE is studying some agricultural technologies, including hydroponics, to adopt them in the future. When hydroponics was evaluated in Dubai, the results were satisfying because it consumed 60–70% less water.

With the development of sustainable cities, there is a strong focus on reducing carbon emissions and producing goods through cleaner production throughout the world.

Hydroponics in UAE a sustainable solution

According to the research hydroponic agriculture is a sustainable solution that can have good potential in desert areas as it can manage pH and extract the required nutrients from the water. The system can recycle the water that is unused by plants, which can significantly eliminate the wastage of water, making it almost 90% more efficient compared to traditional farming. Furthermore, hydroponics is 90% more efficient.

There are four main types of hydroponic systems: ebb and flow, drip system, nutrient film technique (NFT), and passive.

In the UAE and GCC regions, the system may serve the community by providing a healthier food choice and supporting national production, which reduces import rates.

It can be adjusted to the climate and suit certain crops that grow faster such as herbs, tomatoes, and eggplant that do not grow into large trees.

The hydroponic system’s financial viability may be high. It can produce more crops cheaply, which can be exported and sold at higher prices, thus making the business context of the system’s adaptability stronger in the economic environment.

The research recommended that the UAE shift to hydroponic farming for various reasons such as around 80% of the UAE’s land consists of sand desert where only 3% of the total area can be used for agriculture purposes. Hydroponic systems can be adjusted to suit any crop and climate, and they could work in the UAE.

In addition, the system does not require high-quality water; desalination or recycled water can work very well, making it an inexpensive option. The system can be implemented at varying scales through single or multiple partners. Thus, a creative partnership may lead to better performance, and global research and development partnerships can improve innovation.

Sisodia explains, “This study aims to evaluate the feasibility of government premium, finding, premium, and solar panels and bore wells and Monte Carlo simulation with the net present value (NPV) with real options approach. The study adds novelty to the literature already available as we presented the results with tornado graphs using the NPV (an approach used for investment evaluation) risk and real options approach in the Gulf context.

Results of study with UAE in mind

The study used NPV is defined as “the present value of the cash flows at the required rate of return of your project compared to your initial investment”. It helps the practitioners measure the return on investment of a project after generating the amount of money made from the project and converting it into today’s dollar rates. This process will determine whether the project is worth the investment or not.

Under the assumption that Khalifa University's funding covers 50% of the initial investment, the return on investments is higher than the business as usual scenario. When new regulations are added to support emerging businesses, where the government actually purchases the goods produced at a premium price and sells them in the market, the results are highly positive in the NPV.

However, this scenario also includes an elevated risk in terms of acceptance because it increases government investments with a limited budget for project funding in various fields. This scenario can succeed if the number of businesses is limited and the government seeks encouragement.

With the installation of solar panels and tube wells taking full advantage of solar power availability in the UAE and its reduced installation costs, the proposed project would integrate solar panels instead of an excessive cost electricity generator profits for Hydroponic entities becomes higher.

Sisodia states, “Hydroponics is a wonderful area to work and advance in, especially with all the policies, funding, and support of innovation which encourages investors happening in the UAE. This is an important sector because it gives food security, less reliance on imports and fresh fruits, and vegetables.”

He adds, “If the UAE government introduces subsidies for this technology it will flourish in the UAE. The banks could also play a role by offering funding through loans with less interest rate, as well as the government buying all the produce and then reselling it.”

This support will not be forever explains Sisodia but just for a period of time until the sector matures. This can be even faster in the UAE where there is awareness from people towards organic fresh vegetables and fruits as well as good purchasing power.

In addition, as investors make a return on their investments and cover the capital costs, prices will go down as well. In addition, these startups will have a more trained workforce and this ecosystem and knowledge will grow in the society.

Finally, Sisodia believes that Hydroponic agriculture will foster sustainability as it reduces water consumption, energy, and affords a better life for the citizens of the UAE.

Title of Published Paper:

Business Valuation strategy for new hydroponic farm development a proposal towards sustainable agriculture development in United Arab Emirates

Published in: Emerald Insights

The Impact Factor: 3.224

It is published by British Food Journal

The Journal is indexed UGC CARE Scopus Web of Science (SCIE)

The SJR (SCImago Journal Rank): 0.645