Assessing Technical Efficiency of Cooperative Vis-à-Vis Private Dairy Plants in Andhra Pradesh, India: A Stochastic Frontier Analysis

Abstract

This study aims to determine the levels of production efficiencies and their determinants across India’s private and cooperative structures. Stochastic frontier modelling of a panel data sample comprising 14 plants (7 cooperatives and 7 private) in Andhra Pradesh for six years from 2013 to 2019 was considered. The production inefficiencies obtained are then modelled based on the ownership status and percentage of female employment to identify if these affect the variations in the scores. The results observed the presence of production inefficiencies under both structures, but the production efficiency was observed to rise over the period, that is, reducing inefficiencies. The results revealed a marginal but significant efficiency advantage of the cooperative plants over the private plants. The mean technical efficiency of all the firms was observed at 0.69, that of the cooperatives at 0.72 for and that of the private dairies at 0.66. This implies that the average efficiencies can be improved by 0.31 using the existing resources. The cooperative ownership of the plant and greater female employment rate was found to enhance production efficiency. The results can significantly impact policy design for both the state government and private entities. The observed advantage of cooperative ownership and greater female employment rates in enhancing production efficiency could guide policy decisions related to ownership structures and workforce diversity. JEL Codes: C5, C880, Q1, L2