Economic Efficiency of Agriculture in Punjab: Evidence from Cost of Cultivation Survey

Abstract

Understanding the economic efficiency of agriculture production in Punjab is an interest of this study. The Cost of Cultivation Survey data set for the block period 2014–15 to 2016–17 has been used. Data envelopment analysis deterministic approach has been applied to measure production efficiency. The estimation showed that in the case of wheat, 73 per cent of tehsils and in the case of paddy, 77 per cent of tehsils in Punjab are found to be inefficient in crop production due to poor input utilisation (managerial inefficiency) and scale size (scale inefficiency). But the higher proportion of inefficiency is mainly attributed to the non-optimal scale of production as compared to pure technical allocation. The farmers can increase their production level on average by 7–17 per cent through improving farm efficiency. Findings showed that farmers are allocating their input resources in an exploitative manner due to which they failed to use an appropriate combination of inputs, which is necessary to achieve cost minimisation. These findings have important implications for agricultural development policy and are likely to offer some useful insights for the adequate use of scarce sources. JEL Codes: C33, C67, Q10, Q15