Economic Efficiency of Sugarcane Crop In Khyber Pakhtunkhwa-Pakistan

Abstract

The study was carried out in three districts (Mardan, Charsadda and D.I. Khan) of Khyber Pakhtunkhwa with main aim to estimate per acre net return and economic efficiency of sugarcane crop. The multi-stage proportional allocation technique was used to arrive the sample size. Study is based on cross-sectional primary data that was collected from 303 sugarcane growers during crop season 2014-15 through a well- structured pre-tested interview schedule. Inputs such as land, labour days, seed rate, tractor hours, irrigation numbers, Urea, DAP, farmyard manure (FYM) and pesticides were taken as explanatory variables for sugarcane production while grower’s age, experience, education level, family size, off-farm income, farm to home distance, extension contacts and tenure status were considered independent variables for inefficiency model. To ascertain the level of efficiency (technical, allocative and economic efficiency) Cobb-Douglas type stochastic production and cost functions were estimated both by Ordinary Least Square (OLS) and Maximum Likelihood Estimations (MLE) techniques using STATA software. Descriptive statistics revealed that per acre average yield was noted high in district Mardan (25,390.09 Kg) followed by district Charsadda (24,566.78 Kg) and D.I. Khan (22,714 Kg), while in overall study area it was 24,420.73 kg acre-1. Similarly, calculated per acre net return was found high in district Mardan (Rs. 49, 179.45) followed by district Charsadda (Rs. 45,750.90) and D.I. Khan (Rs. 33, 173.65). In overall study area average net revenue was noted Rs. 38, 630.65 per acre. The estimated production function coefficients for land, labour days, seed rate, tractor hours, irrigation numbers and urea were found statistically significant which shows that these inputs significantly contribute in sugarcane production. It was also found that DAP, FYM and pesticides contribution is statistically insignificant. The reason lie in the fact that in the study area these inputs application is less than recommended levels. Considering determinants of technical efficiency the impact of respondents specific characteristics on technical inefficiency of sugarcane crop was found mix and different in three districts under study. Some factors confirm a prior expectation of its impact on productivity while numerous others do not. Grower’s age, experience and off-farm income were noted negatively correlated with technical inefficiency in overall study area. Derived cost elasticity estimates of maximum likelihood showed that all variables (observed yield, land rent and cost incurred on labour days, seed, tractor hours, irrigation, urea, DAP, FYM and pesticides) considered in stochastic cost function carry positive sign as expected and are significant at 5% level, which means that total cost of production increases with the increase in application of these inputs. Considering determinants of allocative efficiency, it was found that with increase in grower’s education, contacts with extension agents, off-farm income and family size, the level of allocative inefficiency decrease. In district D.I. Khan tenure status was also found negatively correlated with allocative inefficiency. Average technical efficiency scores were found 0.83, 0.78, 0.63 in district Mardan, Charsadda, D.I. Khan and 0.70 in overall study area respectively. The results indicate that in study area there exists potential for average grower’s to increase per acre yield up to 30% (7326.21 Kg) with existing level of inputs. Similarly, the average allocative efficiency was noted 0.63, 0.60, 0.44 for districts Charsadda, Mardan and D.I. Khan respectively. For overall pooled data average allocative efficiency was noted 0.57 having range from minimum 0.20 to maximum 0.91. According to study results average grower’s has the potential to reduce per acre cost by 37 % (Rs.30,587/-) in order to achieve allocative efficiency of most efficient fellow grower without decrease in output level. Economic efficiency mean level was found high in district Mardan (0.49) followed by district Charsadda (0.40) and D.I. Khan (0.28) respectively. Average economic efficiency level for combine pooled data was noted 0.41 which varied from minimum 0.14 to maximum 0.64. The results revealed that none of the growers has achieved economic efficiency of 100 % and there is room to increase productivity with existing level of inputs and expenditure level on average up to 35%. Strengthening formal education in long run, effective extension services at district level in short run, coordination among various stakeholders (Growers, Agricultural Research, Agricultural Extension and inputs suppliers) and sound fair price policies for output are the optional areas that need attention. Because of heterogeneity in terms of correlation between efficiency and respondents socioeconomic characteristics across districts, specific planning at district level is needed to advise growers for improvement in productivity and efficiency of sugarcane production.