Introduction

Aquaculture is the fastest-growing segment of food production in this universe (Ali 2012). In 2018, the world produced about 179 million tonnes of fish, of which 82 million tonnes were contributed by aquaculture production and attributed 46% of the total production (FAO 2020). It contributes to enriched nutrition, food security and promotes economic growth, not only in developed but also in developing countries. Fish are recognized as a leading nutrient-dense animal food source for nutritionally vulnerable people. In Bangladesh, the second most valuable agricultural crop is fish (Belton et al. 2011).

In the past, oceans were considered as the inexhaustible source of fishery products (Timmons and Ebeling 2013). However, the current statistical calculation indicates an alarming decrease in fisheries resources, and already many fish species are overfished. It is projected that an additional 30 million tonnes of aquatic food would be obligated by 2030 to maintain the world per capita fish consumption which is 20% higher than in 2016 (FAO 2018). At the same time, sustainable intensification is necessary for more food production without compromising environmental health to feed 9 billion people of the world (Godfray et al. 2010). Here comes the importance of recirculating aquaculture system (RAS), which uses limited resources for greater fish production and provides a sustainable environment. RASs are novel technologies in aquaculture for holding and rearing a wide diversity of aquatic organisms, including fish and other aquatic species (Kazmierczak and Caffey 1995). RASs are designed to reuse the water by using biological filters, mechanical filters, and other treatment steps; as a consequence, it minimizes water use in an aquaculture system, maintains the culture condition, and assists in waste management (Murray et al. 2014). RASs bring about more advantages than any other culture system (i.e., pond, cage, and pen) due to the high degree of control and provide a basis for better risk management (Rawlinson 2002). Under this technology, a high level of biosecurity can be achieved by isolating the stock from the external environment (Murray et al. 2014).

The systems are aimed to satisfy different capacities and efficiencies. Several countries are now adopting RAS in fish production; however, compared to other methods of fish culture, its contribution to production is very low (Martins et al. 2010). High capital is required for the construction and operation of these facilities, and this sometimes serves as a discouragement to potential stakeholders (Schneider et al. 2006). To framework RAS, high stocking densities are required to cover the investment costs and yield profit. Fish species is one of the critical factors that must be considered in order to make a profit. The main purpose is to sell the fish at a high price, and in the meantime, the production cost must be kept in a minimal conceivable dimension.

Bostock et al. (2016) reported that less than 3% of EU finfish production was contributed by RAS in 2012. Norway produces about 85 million smolts (Salmo sp.) using RAS (Del Campo et al. 2010), and they are not only good in quality but also have a higher rate of survival and growth in the sea (Terjesen et al. 2008). Tilapia culture using RAS is also received much attention in Norway because of the world growing population and high demand (Appiah-Kubi 2012).

Due to increased population, Bangladesh is losing 1% of its land or 82,900 ha of cropland every year and 221 ha of land every day due to overgrowing population and its infrastructural development; 17.66% of the waterbody and 52.44% of river area have been decreased from 1977 to 2010 in Rajshahi district of Bangladesh because of the growing industrial and household infrastructure, and also for the increased orchard and char land (Islam and Hassan 2011). The agricultural land and water areas are decreasing due to unplanned infrastructure development, and also, there is increasing demand for food to feed the 190 million population of Bangladesh (Islam and Hassan 2011), and 20% higher fish consumption in the world projected by 2030 (FAO 2018). In this situation, RAS has great significance to overcome the extra food demand and to reduce land usage. It can be called the future of aquaculture in the world, with enormously high production volume as well as the quality of fish, guarantees the continuous year-round supply of fishes in coming days. Not only it produces quality fish with a very high yield, but it also might be very effective to cease the horizontal expansion of aquaculture and thereby effective to save precious land. Therefore, RAS may impact tremendously the aquaculture sector of Bangladesh. It is noteworthy that RAS technology has been adopted in Bangladesh. A news entitled “Indoor farming: Novel way to up fish yield” has been published in “The Daily Star,” a daily newspaper of Bangladesh, in 2017. The news reports that the owner of Agro3 Fishery, ABM Shamsul Alam, has introduced RAS technology in Bangladesh. He has pioneered this indoor fish farming by installing an RAS facility at Mymensingh late in 2016. Bangladesh Council of Scientific and Industrial Research (BCSIR), the leading Government scientific research body, comes next to Agro3 Fishery in installing an RAS at its head office in November 2016. The scientist of BCSIR also mentioned that about 23 entrepreneurs have shown their interest to know about this technology, the cost involved, and the source of required equipment (Ahmad 2017). However, there are no organized studies have been published regarding the economic feasibility of RAS in Bangladesh.

It is expensive to develop and construct a recirculating aquaculture system (Bregnballe 2015). As a result, it is important to conduct an economic feasibility analysis prior to entering the target business. Mainly three methods are used to determine investment feasibility, viz., breakeven analysis, profitability analysis, and sensitivity analysis. Shang (1990) stated the following methods that are used to evaluate economic feasibility analysis. These are payback period, average rate of return, net present value (NPV), benefit–cost ratio method (B/C), and internal rate of return (IRR). In a study, De Ionno et al. (2006) used cumulative cash flows, NPV, IRR, payback period, and discounted payback period method as the indicator of economic feasibility. The main limitation is the capital investment which is higher for setting up RAS than any other traditional production system due to the requirement of additional equipment to treat water for aeration and waste removal (Lazur et al. 2003). RASs offer a more secure control environment from the external, which can deliver a basis for enhanced risk management (Rawlinson 2002). These enunciations highlight the need for more economic analysis based on real data set for RAS facilities.

There are various studies in different countries about the model RAS design (Ebeling et al. 1995), economic comparison among other fish culture technique (Fern 2014), bio-economic evaluation (De Ionno et al. 2006), but as a new intervention, almost no study or well-planned research has done in Bangladesh. Therefore, it is of utmost necessary to study the economic feasibility of this super-intensive system to optimize the cost-benefit of various aquaculture species. The objective of this study was to analyze the various aspects of the economic feasibility of RAS by calculating PI, NPV, IRR, payback period, discounted payback period, and breakeven unit and price on the production of Pabda and stinging catfish. Moreover, sensitivity analysis was also conducted based on different variables.

Materials and methods

System description of Agro3 Fish Farm: the study site

For the present study, “Agro3 Fish Hatchery and Culture Farm” was selected as a study site as it is the first mini RAS farm in Bangladesh operating since 2016, located in Bangladesh Small and Cottage Industries Corporation (BSCIC) Industrial State, Mymensingh city. It consists of eight culture tanks that are circular shaped and made of aluminum. Each tank has a water carrying capacity of 10,000 L. One biofilter has supported the whole system to circulate 800,000 L water per hour. A mechanical filter contains a 100-micron screen, and it is capable of filtering out any suspended solids. Nearly 25–35% of the applied feed is altered to solid waste in the form of fish droppings and uneaten feed waste. Three centrifugal pumps (power: 5 HP) were used on this farm. No automatic feeder was installed, and basically, a hand-feeding method was used. The total water volume of the system was 80,000 tonnes, and more than 99% of the water was re-used; as a result, only 2 L of freshwater per day per tank needs to supplement. The water flow rate was on an average of 56 L/min, water temperature of 28°C, and dissolved oxygen was maintained at 7.18 mg/L throughout the system.

Studied fish species and RAS culture condition

Data were collected on the two fish species, viz., Pabda catfish Ompok pabda and Stinging catfish Heteropneustes fossilis (locally known as Shing). Ten thousand fingerlings of Pabda and Shing weighing 1 g and 1.5 to 2.0 g, respectively, were primarily stocked in each fish growing tank. A feed that contains all the essential minerals and vitamins was offered at the rate of 3 to 5% of their body weight. FCR value was 1.02 for Shing and 1.03 for Pabda. A good healthy fish was harvested with an average body weight of 44 g (Pabda) and 72 g (Shing) individually. Although the culture period of Pabda was five months and Shing was harvested after four months of stocking. Additionally, the total number of days to harvest may differ with species, culture temperature, and final average harvest size.

Questionnaire survey for data collection

A structured questionnaire was developed to collect all primary information (economic and technical) on Pabda and Shing fish culture during the period of April 2018 to February 2019. The questionnaire consists of two sections such as (1) input variables and (2) output variables (summarized in Fig. 1). Input variable then partition into five subsections. These subdivisions include fixed cost, variable cost, equipment’s description, information on land size, and information on cultured species. All data regarding all costs of fish production in RAS were assembled from input variables. On the contrary, income cash flow was calculated based on information from output variables parts. Output variables were mortality of fish, survival rate of fingerlings, final length and weight of the harvested fish, harvested biomass, and market price of fish.

Fig. 1
figure 1

Summary of all the parameters, including all input variables and output variables

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Economic feasibility analysis methods

Economic analysis methods used in the present study include the following analysis of biological model and economic model, both of which together complete the fish production in RAS.

Analysis of biological model

Following equations were used to estimate fish biomass, fish value, and FCR value (Appiah-Kubi 2012).

Fish biomass B(t) = N(t) ∗ W(t), where N(t) is the number of fish at time t and W(t) is the weight of fish at time t.

Value of the fish V(t) = P(w) ∗ B(t), where P(w)is the price of 1 kg fish. The real wholesale fish market price was used to calculate the value of the fish.

Feed conversion ratio (FCR) is a significant biological production constraint to deliberate and could be calculated from the following equation (Einen and Roem 1997),

$$FCR=\frac{FB}{B{M}_2-B{M}_1- FT}$$
(1)

Here, FB = Consumed feed amount(kg), BM2 = Biomass at hervest (kg)

BM 1 = Stocking biomass (kg), FT = Fish losts due to mortality (kg)

Analysis of economic model

In aquaculture, methods used to evaluate and compare the economic feasibility of investment are payback period, average rate of return, and the discounting method. The discounting method is used to calculate NPV and IRR values. The economic analyses done in this present study were profitability index, net present value (NPV), internal rate of return (IRR), payback period, and breakeven analysis.

  1. (1)

    Net income value can be calculated by subtracting total production cost from total revenue.

$$Net\ income= Total\ revenue\hbox{--} Total\ production\ cost$$
(2)
  1. (2)

    Variable unit (kg) cost is the cost required to produce 1 kg of production (Hoff 1998).

$$Variable\ unit\ (kg)\ cost=\frac{Variable\ costs}{Harvested\ Biomass}$$
(3)
  1. (3)

    The profitability index is also known as the income–outcome ratio, profit investment ratio (PIR), value investment ratio (VIR) and is also popular in the name of benefit–cost ratio or cost–benefit ratio. The profitability index used the time value of money concept. It is the ratio of income cash flow and outcome cash flow. It is also a popular method to evaluate a project’s feasibility, like NPV and IRR.

$$Income\ and\ Outcome\ Ratio=\frac{Income\ cashflow}{outcome\ cashflow}$$
(4)
  1. (4)

    Cumulative cash flows and net present value (NPV). Net present value is the sum of the present value of the net benefit in an investment (Shang 1990). The time value of money to cash inflows and outflows is analyzed by NPV. It is estimated by discounting the future net cash inflows at the project’s useful life at the required rate of return and then invested initial amount subtracted (Larson et al. 2002).

NPV method was used for evaluating a capital budgeting project (O’Rourke 1991). The mathematical equation used to estimate NPV is

$$NPV=\frac{B_1-{C}_1}{\left(1+r\right)}+\frac{B_2-{C}_2}{{\left(1+r\right)}^2}+\dots +\frac{B_n-{C}_n}{{\left(1+r\right)}^n}$$
(5)

where Bi is the total benefit (or revenue) of year i, Ci is the total cost of the year i (both capital and operating cost), r is the discount rate, n is the operational year (0, 1, 2, 3… n), and i is the ith year.

  1. (5)

    Internal rate of return (IRR). This is the value of the discount rate at which the net present value of an investment project is zero (O’Rourke 1991). According to Shang (1990), it is the discount rate that equals the present value of the benefit stream to the present value of the cost stream. Mathematically, IRR can be called a discount rate that results in an NPV of zero for an investment (Larson et al. 2002). If IRR is greater than or equal to the required rate of return, then a project will be evaluated according to IRR (Petty et al. 1996). The discount rate of 10% was used in the present study which has been estimated as merging a 5% risk-free rate (i.e., the return from investing in a bank or term deposit), plus a risk premium of 5%.

  2. (6)

    Payback period. In general, the payback period is the ratio of initial investment and average annual net income before depreciation. The payback period is not only the oldest but also the most widely used method for evaluating a capital investment proposal. In financial terms, it can be defined as the required time period to recover the initial investment or the initial cash outlay. A short payback period is always desired by companies to increase return and reduce risk (Larson et al. 2002). For example, an investment will be feasible while a payback period is less than a project’s useful life or a pre-specified period (Head and Watanabe 1995).

$$Payback\ period=\frac{initial\ investment}{average\ annual\ net\ income\ before\ depreciation}$$
(6)
  1. (7)

    Discounted payback period. The main difference with the payback period was that discounted future net cash inflows were used (i.e., a 10% discount rate was used to calculate present value) to calculate discounted payback period; on the other hand, non-discounted future net cash inflows were used to estimate payback periods.

  2. (8)

    Breakeven analysis. Through breakeven analysis, producers get clarified about the price they need to receive for their products so that they can shield all the costs of production. The breakeven cost/price is the price at which profit from the product sold to be zero. It can also be called the sales level at which the accumulating income is exactly alike to the cost of making the output (Appiah-Kubi 2012).

$$Breakeven\ point=\frac{total\ cost\ of\ production}{quantity\ (kg) produced}$$
(7)

The breakeven per unit yield signifies the number of units or kilograms needed to be sold in order to break even.

$$\frac{Breakeven}{unit\ kg} = \frac{total\ cost\ of\ production}{Unit\ price\ per\ kg}$$
(8)
  1. (9)

    Sensitivity analysis. The simplest form was used to conduct sensitivity analysis (one-way sensitivity analysis). This was performed by altering one variable by a (+/−) percentage, and the impact on the financial performance due to varying variables was examined. Sensitivity analysis was done on the initial investment, feed, fingerling purchase, electricity cost, fish production, and fish price by varying the variables at +/−20% since such variations are more often used in business operation (De Ionno et al. 2006)

To facilitate the above-mentioned parameters, an Excel program was developed to calculate the initial investment, operating costs, and annual returns for the RA system in the present study.

Initial investment

The initial investment (Table 1) includes the total price of land, building construction, RAS equipment, and construction labor.

Table 1 Initial investment and operating cost required to complete one harvest cycle of Pabda and Shing under RAS technology
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Operating costs

Table 1 summarizes operational costs, including fingerling cost, electricity bill, feed cost, labor salary, and other miscellaneous costs. The calculations for these parameters are shown in the Supplementary tables.

Future cost valuation of the core operational areas in a production setup.

Agro3 Fish Hatchery installed RAS system’s useful life is 16 years. The net operating cash flows must be valued for each year of the project’s life to calculate NPV, IRR, payback period, breakeven point, and income–outcome ratio. In order to calculate future cash flow, the following assumptions were made in Tables 2 and 3. It was assumed that the project would end at the end of the 16th year and fish production would be constant in the next 16 years. After 16 years, the owner of Agro3 will get some non-operating cash flow (salvage value). It is assumed that the owner will sell the remaining assets like land, infrastructure, and equipment at the end of the 16th year and will get the pointed cash flow that is given in Table 3. The salvage value and the related parameters, viz., book value, ordinary income, and depreciable basis, were calculated according to O’Rourke (1991).

Table 2 Assumed per unit increased cost of parameters in every year
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Table 3 Net cash salvage value calculation after project useful life
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Results and discussion

Economic feasibility analysis of an RAS farm

Analysis of production model

Harvested Shing fish biomass was 3440 kg (number of fish 79,200 with individual average weight 44 g) and 5600 kg (number of fish 78,400 with an individual average weight of 72 g) for Pabda. Marketable fish was sold at wholesale price. Pabda was sold at Bangladesh Taka, 300 BDT per kg of fish, whereas the wholesale price was slightly low for Shing (285 BDT per kg of fish).

3440 kg Pabda and 5600 kg Shing fish were harvested; the value of which was 10,32,000 BDT and 15,96,000 BDT, respectively, from one harvest period (Table 5); 8256 kg of Pabda and 16,800 kg of Shing fish were harvested annually from Agro3 Fish Farm. The FCR value was 1.03 and 0.82 for the feed of Pabda and Shing farming, respectively.

Initial investment and operating cost of an RAS farm

From Table 4, the total initial investment to set up an RAS farm was 1,94,52,104 BDT. This initial investment is required to start a successful production in the RAS system in terms of the culture of any fish species. The total fixed cost (sum of electricity bill, labor cost, and other miscellaneous costs) was 2,15,074 BDT, and the total variable cost was 3,21,500 BDT to produce Pabda. The estimated production cost was 5,36,574 BDT for 3440kg of Pabda production. Total cash outflow to complete one harvest cycle of Pabda was 1,99,88,678 BDT (Table 4). Total fixed and variable costs were 1,72,059.2 BDT and 3,95,000 BDT, respectively, for Shing culture to complete a harvest under the RAS system. The assessed production cost of Shing was 5,67,059.2 BDT. Annually, it requires 12,87,777.6 BDT and 17,01,177.6 BDT as production cost of twelve decimal-size RAS farm for Pabda and Shing farming, respectively.

Table 4 Summary of initial investment, production cost (fixed cost and variable cost), cost to produce 1 kg of Pabda and Shing, and percentage of all parameters of the total cost
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Boulet et al. (2010) feasibility study revealed that an RAS farm would necessitate an initial capital investment of USD 22.6 million (190,11,00,000 BDT) and annual operating costs of USD 7.2 million (60,56,00,000 BDT) in order to produce 2500 tonnes fish per annum, which provide an annual net profit of USD 3,81,467 (3,20,90,339.17 BDT). This study found capital investment 1,94,52,104 BDT to get annual profit of 11,93,736 BDT and 30,20,822.4 BDT from Pabda (yearly 8256 kg production) and Shing (yearly 16,800 kg fish production) farming in RAS, respectively.

This study shows that the total production cost for Pabda and Shing culture was 5,36,574 BDT and 5,67,059.2 BDT, respectively, to complete one cycle under the RAS system. Annually, it requires 12,83,064 BDT and 17,01,177.6 BDT as production cost for RAS farm of twelve decimals. Ngoc et al. (2016) work on the economic feasibility of recirculating aquaculture systems in Pangasius farming. They found USD 7,00,800 per ha/year as a variable cost and USD 41,500 per ha/year as a fixed cost. So, USD 742,300 per ha/year is needed to complete the cycle of Pangasius farming. Ngoc et al. (2016) showed USD 74.23 per m2/year (6229.38 BDT per m2/year) as production cost, and in the present study, it has been found that the production costs of Pabda and Shing were 2640.05 BDT per m2/year and 3500.36 BDT per m2/year, respectively. This calculated result notifies that the production cost of Shing culture requires more cost than Pabda fish culture. While fingerling purchase cost was the same in the case of both culture cycles, production cost mainly varied because of feed cost. Pabda fish takes five months to complete one harvest cycle; on the contrary, Shing takes only four months to be the harvestable size. As Pabda takes one month extra than Shing, so extra electricity bill, labor salary, and miscellaneous cost were added with Pabda production cost. Even though electricity bill, labor salary, and miscellaneous cost are greater in Pabda production; however, Shing production cost is greater due to the greater feed cost of Shing. Feed cost makes a difference between production costs of them. Shing fish consumed more feed (about 1050 kg more) than Pabda, even though Shing showed lower FCR than Pabda.

Capital budgeting of Pabda and Shing to complete one harvest cycle

The land cost covered the maximum amount of cost than any other variables, and it was about 60% of the total cost (Table 4). Cost to buy RAS facility was the second expenditure factor, and third costing factor was infrastructure establishment cost, and they covered about 25% and 10%, respectively. Other input costing variables was contributing very small of the total cost. The initial investment was 97.32% of the total cost; on the other hand, production cost was very low, taking only 2.68% of the total cost. In the present study, feed cost covers the highest percentage (about 45%) of production cost. Electricity bill covers 19%, followed by fingerling purchase cost (15%), labor salary (14%), and other costs were about 7% of total production cost (Figs. 2 and 3).

Fig. 2
figure 2

Capital budgeting of initial investment to set up an RAS system

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Fig. 3
figure 3

Capital budgeting of production cost of producing 3440 kg of Pabda (a) and 5600 kg of Shing (b)

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The initial investment cost was 97.17% of the production cost of Shing culture. Among them, land cost alone covers 59.94%of total cash outflow (Table 4; Fig. 2). Feed cost covered the highest percentage, and it was about 55% of the total production cost of Shing, followed by electricity bill (15%), fingerling purchase cost (14%), labor salary (11%), and others (5%) of total production cost. In this study, electricity bill and labor salary were treated as fixed cost as the cost of electricity per unit was the same regardless of fish species.

In a study, Appiah-Kubi (2012) highlighted the operating cost for the various scenarios, where UMB laboratory production cost was summarized as labor salary (35.2%), electricity cost (29%), feed (19.3%), and fingerlings (0.5%) as a percentage of production cost of Tilapia. De Ionno et al. (2006) observed that the major operating costs of Murray cod as labor, electricity, and feed were the three highest operating cost variables (35%, 15%, and 14% of total operating costs, respectively), followed by depreciation (9%) and stock (9%) in their study. Mohammad et al.’s (2018) study showed feed, energy, chemical, labor, and fingerling cost of 5.53%, 17.33%, 9.92%, 29.75%, and 27.55%, respectively, as the percentage of production cost for goldfish culture. The present study recorded feed cost (45% for Pabda and 55% for Shing) as the prime operating cost for both Pabda and Shing farming, followed by electricity, fingerling, labor salary, and others in that order for both of Pabda and Shing. Appiah-Kubi (2012), De Ionno et al. (2006), and Mohammad et al. (2018) revealed labor salary as the prime operating cost, but our study found feed as the prime operating cost. In a feasibility study of imperial zebra, pleco production in RAS revealed that the highest costing factor was labor and tax (Pereira and Henriques 2019). However, Engle et al. (2020) studied cost drivers and profitability of pond, raceways, and RAS aquaculture in the USA. They found major cost-driving factors, viz., feed, labor, management, energy, and fingerling cost, contributed to production cost. Since Bangladesh has abounded working people, labor salary is quite low. Besides, Agro3 Fish Farm did not appoint any fisheries graduate to manage the farm. As feed was imported from China, it counted more cost than any other variables of operating cost (Table 5).

Table 5 Summary of the results of production model calculation
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Analysis of economic model

Net income from Pabda and Shing culture

The calculated net income was 4,95,426.00 BDT and 10,06,940.80 BDT from Pabda and Shing, respectively (Table 6). This result shows profit relative to the production cost. The result indicates that it is more than two times profitable to culture Shing than Pabda fish. This is due to the more production of Shing and less time period to complete a harvest cycle. On the basis of the published literature, no work has been done yet on Pabda and Shing in the RAS system. Appiah-Kubi (2012) worked on the production of Tilapia in recirculating aquaculture systems, and the calculated net income was −3,59,662 NOK (USD 40,979.42), −2,898.4 NOK (USD 330.24), and −21,720 NOK (USD 2,474.75) for Tilapia laboratory at UMB, alternative budget, and scaled-up (hypothetical) production, respectively. In Appiah-Kubi’s (2012) study, no profit was found from Tilapia production, but our study observed profit from both Pabda and Shing culture. The net operating income from Appiah-Kubi (2012) directs a loss in comparison to the production cost. Total production cost was 79,610.4 NOK (USD 9,070.71 or 77,3,102.77 BDT) to produce 1091.2 kg of Tilapia. On the contrary, our study found 536,574 and 567,059.2 BDT as production cost to produce 3440 kg and 5600 kg Pabda and Shing, respectively. The results of Appiah-Kubi’s study indicated that not only production cost was greater but also fish production was low compared to the present study. Relative profitability was observed by Engle et al. (2020) among pond, raceway, and RAS in the USA and found that either catfish pond production or raceway production of trout was profitable than RAS. This may be due to greater production cost, especially a high level of fixed cost. But another two feasibility studies (Wright and Arianpoo 2010; Boulet et al. 2010) exhibited positive returns from RAS fish farming that also agreed with this study.

Table 6 Summary of the financial feasibility of both Pabda and Shing under RAS (details calculation of the various parameters are included in the supplementary files)
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Variable unit cost

Variable unit cost was 93.46 BDT per kg for Pabda culture and 70.54 BDT per kg for culturing Shing. Pabda fish culture requires more cost to produce 1 kg of fish than Shing culture. It is because of the high FCR value of Pabda fish. From Appiah-Kubi’s study (2012), 17.1 NOK (USD 1.95 or 166.04 BDT) was used to produce 1 kg of Tilapia. The present study does not match with the results of the study of Appiah-Kubi (2012), and the reason might be due to different fish species. Production costs such as electricity bill, labor cost, fingerling price, and feed cost may vary from country to country.

Profitability index

The profitability index considers the time value of money and analysis of all cash flow of entire life. It also ascertains the exact rate of return of the investment. Table 6 shows the profitability index that was 0.68 and 1.11 for Pabda and Shing, respectively. Based on the profitability index result, a decision can be made. If the profitability index ratio gives a value greater than 1, then the project will be economically viable; on the other hand, a PI value less than one indicates economic unsustainability. The profitability index (PI) is also well known as benefit–cost ratio. So, farming Pabda will not be economically viable, but production of Shing in RAS will be economically feasible. PI value was 1.24 in Ali’s (2012) study which was conducted on Tilapia farming. But the study of Mohammad et al. (2018) on goldfish found 0.71 PI which was less than one for 10 tonnes capacity fish tank.

Net present value

NPV is the net result of adding the present value of cash inflows to the present value of cash outflows; a 10% discount rate yields a negative net present value of −79,25,859.51 BDT from Pabda production; this negative NPV specifies that the investment would be strongly rejected by the majority of potential investors. A positive NPV was found from Shing production, and it was about 75,74,166.31 BDT after the 16-year projection period (Table 6). This positive NPV specifies that the investment is economically feasible. Ngoc et al. (2016) found NPV USD 539,000 (45,232,880 BDT) for medium farm (1–3 ha size) and USD 916,000 (76,870,720 BDT) for large farm (>3 ha size) for pangus fish. De Ionno et al. (2006) study found USD −707,546 (−59,377,260.3 BDT) for 20 tonne per annum (TPA), USD −167,651 (−14,069,271.9 BDT) for 50 TPA, and USD 522,200 (43,823,024 BDT) for 100 TPA as NPV for 10-year projection period by farming Murray cod fish species. Mohammad et al. (2018) found NPV −25,556 RS (USD −344.34 or −30,186.66 BDT) from ten tonnes tank-sized fish farm. In most of the cases, NPV was negative that matched with the NPV of Pabda production.

Internal rate of return value

The rate of return is the speed that money comes back to the investor. The application of a 10% discount rate produced an IRR of 4% and 16% for Pabda and Shing farming, respectively, over 16 years of project useful life (Table 6). IRR value less than the discount rate indicates the ineffectiveness of a project. So, Shing farming will be profitable in this system. De Ionno et al. (2006) and Mohammad et al. (2018), in their study, found a lower IRR than the discount rate that supports the IRR value of Pabda production. On the contrary, Ali’s (2012) study found 34% IRR value by farming Tilapia (the assumed discount rate was 10%). This value matches with the IRR value of Shing farming.

Payback period

The estimated payback period was 15 years and 4 months for Pabda production and 6 years and 2 months for Shing production (Table 6). Ali (2012) found 3.79 years (3 years, 10 months) as a payback period by culturing Tilapia in RAS over 10 years of project useful life. Ali’s (2012) study gives contradictory results with this present study. This may be due to differences in species, fish market price, operating cost, etc. De Ionno et al. (2006) study found no payback period from 20 tonnes per annum production. They also found 6 years, 8 months and 5 years, 4 months for 50 tonnes per annum and 100 tonnes per annum, respectively, as payback period by culturing Murray cod in RAS technology (both was for the hypothetical facility). The payback period by Shing culture matches with the payback period of Murray cod production of 50 tonnes per annum. Mohammed et al. (2018) found 12.54 years as a payback period for 10 m3of tanks by culturing goldfish.

Discounted payback period

Based on the calculated result, the discounted payback period was not attained from Pabda production within the 16 years of project useful life. In contrast, 10 years and 1 month (Table 6) discounted payback period was achieved by Shing farming under RAS. To make a decision on the economic feasibility of a project, discounted payback period result is more reliable than the payback period result, as discounted payback period uses the present value of future cash flow at a specific discount rate. The discounted payback period was also not achieved in De Ionno et al. (2006) study for 20 tonnes per annum and 50 tonnes per annum facility of RAS by farming Murray cod.

Breakeven analysis

The calculated breakeven analysis by using the value of fixed cost and variable cost of both Pabda and Shing farming shows that breakeven units were 1031.81 kg and 802.29 kg for Pabda and Shing, respectively. Besides, the breakeven price was 309,541.90 BDT for Pabda and 228,652.77 BDT for Shing (Table 6; Fig. 4). According to O’Rourke (1996), the breakeven volume for intensive Tilapia production was 22,326 kg and USD 93,528 (7,848,869.76 BDT). In a study on a commercial scale (1814.369 tonnes) of tilapia production in RAS, the breakeven cost per kg of tilapia was estimated to be USD 2.46 (equivalent to 239.85 BDT); the estimations were based on fixed and variable costs eliminating initial investment cost (NCRAC 2002). Appiah-Kubi (2012) observed that the breakeven yield was 1990.26 kg and the price was 73 NOK (USD 8.32 or 650.94 BDT per kg). These results are in sharp contrast to the results found in this study, which had a breakeven unit of 1031.81 kg and 802.29 kg and a breakeven price of 309,541.90 BDT and 228,652.77 BDT for Pabda and Shing, respectively.

Fig. 4
figure 4

Simple breakeven quantity analysis based on variables of fixed cost and variable cost required for Pabda (a) and Shing (b) production

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Sensitivity analysis

The results of sensitivity analysis have been summarized in Table 7 for the Pabda production in Agro3 Fish Hatchery and Culture Farm. A ±20% degree of variation was used to analyze the initial investment, fingerling purchase cost, electricity bill, feed cost, and fish production. To observe the effects of fish market price, ±20 BDT was used as the degree of variation. The results of sensitivity analysis of key variables such as initial investment, feed cost, fish production, and fish market price notify that these key variables have an effect on improving the viability of the profitability for Pabda culture under RAS. NPV results were always negative, and IRR value was always lower than the discount rate of 20% for every variable at ±20% degree of variation. The profitability index value was always lower than one from Pabda farming, which always means income cash flow was lower than outcome cash flow. NPV value is a great indicator of economic viability analysis. If the production level increases to 40% of the present value (11,558.4 kg per annum instead of 8,256 kg per annum), then the project will be feasible by farming Pabda (Fig. 5). Mohammad et al. (2018) found negative NPV for the rearing tank of 5 m3 and 10 m3 capacity, which means economic infeasibility; on the contrary, they found positive for NPV for the rearing tank of higher capacity which indicates feasibility (Mohammad et al. 2018). Therefore, the present study found Pabda production in RAS as economically infeasible.

Table 7 Summary of sensitivity analysis result based on different variables of different degrees of variation for Pabda and Shing fish production in RAS
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Fig. 5
figure 5

NPV valuation at different fish production levels of Pabda fish to find out the production amount, where this project will be feasible for Pabda farming

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In contrast to Pabda production, Shing production under RAS highlights economic viability. Initial investment, fish production, and fish market price affect most of the economic feasibility of Shing culture by RAS technology. Always positive NPV value was found for all sensitivities without a 20% decrease in fish production. If fish production decreases by 20%, then a negative NPV value (−5,78,956.97) will be found and the IRR value will be equal to the discount rate. Although the payback period results in 9.44 years, no discounted payback period was found (in case of 20% decrease of fish production) for 16 years projected of RAS fish farm. So among all variables, fish production plays a key factor as economic viability indicator. This project (Shing production under RAS) is sensitive to a 20% drop in fish production.

The sensitivity analysis demonstrates the profitability in both pessimistic and optimistic situations under different scenarios. The results of sensitivity analysis exposed that a decrease in the cost of initial investment and production cost such as fingerling purchase (for Shing production), electricity bill (for Shing production), and feed (for Pabda production) formed marginal effects on effectiveness. Higher fish production and higher market price of fish affect the profitability of Pabda and Shing farming. These outcomes support the prior results highlighted in Appiah-Kubi (2012) and Losordo and Westerman (1994). Appiah-Kubi (2012) and De Ionno et al. (2006) conducted a sensitivity analysis on labor cost variable because it was one of the principle parameters of production cost. In this study, labor cost was not shown in the sensitivity analysis because the cost of labor has less impact on the profit margins in Bangladesh perspectives.

Conclusions

The study was accompanied to check the economic feasibility of RAS using farm data for the first time in Bangladesh and provided with instructive facts concerning the economic feasibility of the RAS system. This study outcome can be used by the private farm sector and young entrepreneurs who are interested in culture fish in the RAS facility. This study also allows potential investors to realize the subsequent risks and failures to start a commercial RAS farm. In this study, both values of NPV and IRR were calculated and the value of the NPV method was used as preferred criteria than IRR for making decisions to accept/reject the investment. Supporting the attained result, it can be concluded that RAS is economically profitable for Shing production compared to Pabda production in the perspective of Bangladesh. Fish market price, production, cost of fingerlings, feed, and initial investment are the crucial parameters that determine the profitability of RAS. This study suggests that by increasing the production capacity of the farm, i.e., increasing the volume of culture tanks, increasing the farm gate price of the fish, i.e., large size fish can be sold at a higher price, online supply chain could be promoted for a better price, and minimizing the initial investment of RAS facilities, greatest profitability can be succeeded from fish farming by using RAS technology. The present study was conducted based on only one farm; therefore, an in-depth future study should be conducted to find out the standard way to reduce the cost of operation and initial investment.