Input Oriented Technical Efficiency Of Paddy Cultivation In Sri Lanka With Reference To Implications On Environment

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KEYWORDS: Keyword one, Keyword two, Keyword three, Keyword four, Keyword five. Proceeding of 17th Agricultural Research Symposium (2018) 1-5Dasanayaka et al. Your Title123

Introduction

Rice is the staple food of Sri Lanka. Department of Agriculture stated that, 45% of calorie requirement and 40% of total protein requirement of an average Sri Lankan provided by rice. Paddy cultivation covers about 34% of the cultivated lands in Sri Lanka and about 1. 8 million farm families engage in paddy cultivation. According to Department of Agriculture, 2. 7 million tons of rice produced in the country annually which is enough to fulfill 95% of the domestic rice requirement. Demand for rice is projected to increase 1. 1% per year. To meet this demand, rice production has to grow at a rate of 2. 9% per year (Department of Agriculture, 2018). In order to achieve this production target, increasing crop intensity and national average yield are the options available. Gap exists between the potential yield of cultivars and yield in the farmer's field. Reason for this yield gap may be crop management deficiencies resulting from socio-economic and institutional constraints (Dhanapala, 2000). Introduction of inorganic fertilizer, pesticide and weedicide were useful to increase agricultural productivity. Because of intensive use of these inputs cost of production increases and also causes severe environmental problems like pollution, biodiversity loss and changes in the ecosystem (Luh and Liao, 2001, Geiger et al. , 2010) indicated that due to agriculture intensification some species of wild plant and animal have declined and some became extinct and functioning of ecosystems changed regionally and nationally.

According to (Thanh Nguyen et al. , 2012) water pollution by nitrates and phosphates have been identified as a major environmental concern. (Chen et al. , 2007) have stated trace elements may be introduced into agricultural soils by cultivation practices such as fertilization, irrigation, pesticide application and organic waste disposal. (Chandrajith et al. , 2010)has stated that high level of trace elements in agricultural soils become a problem as they can enter the food chain or leach into groundwater causing serious health problems. According to (Wijewardena, 2005), significant use of higher amounts of chemical fertilizers for food crops with in country started in 1950s and was widespread by 1960. First fertilizer mixture of Nitrogen (N), Phosphorus (P) and Potassium (K) was used and later recommendation was changed by Department of Agriculture in 1990 with the introduction of straight fertilizer instead of fertilizer mixtures. With that farmers got the opportunity to make required adjustments in fertilizer usage to get optimum yield. For a crop, there's a recommended fertilizer amount. Sometimes farmers use more than that amount or less than that. Using less amount of fertilizer than the recommended amount can reduce yield. Using fertilizer more than recommended amount leads to numerous environmental problems. With the Green Revolution in 1962, Sri Lankan government introduced a price subsidy for fertilizer. The main idea of this program was to make available fertilizer for farmers at a lower price so that to maximize benefits from high yielding varieties (HYV). "Policymakers expected that low fertilizer prices would increase the adoption of HYVs, enhance land productivity, and reduce the cost of production, resulting in more profitable paddy farming" (Weerahewa, 2010)Hence, this research aims at understanding whether inputs used in paddy cultivation have been used efficiently and had they been overused. For this purpose, this research estimate an input-oriented technical inefficiency of thirteen paddy cultivating areas in Sri Lanka using the stochastic production frontier approach.

Materials And Methods

Data Collection

Data was collected from the cost of cultivation (COC) reports issued by Department of Agriculture from 2000 yala season to 2016/2017 maha season. These reports are published twice a year for Maha season and Yala season separately. Costs and quantities of various inputs are included in these reports. When selecting farmers, Three stage sampling procedure is adopted by the Department of Agriculture. At the first stage, representative districts are selected based on the distribution of cultivated extend under irrigation regimes irrigated and rainfed.

In the second stage, Agrarian service centers (ASC) which cover at least 51% of the total cultivated extent within the district are selected. Finally, a specified number of farmers are selected from identified Agrarian Service centers (ASC) for gathering data. Up to 2008, 50 farmers were randomly selected from identified ASCs. From 2009, 30 farmers are selected. Then district averages of input and output of paddy production are calculated and included in COC reports. Reports contain both dry zone and wet zone paddy production districts covering specific Agro-Ecological Zones (AEZ) in Sri Lanka. Different districts included in the reports are Ampara, Anuradhapura, Batticaloa, Hambantota, Polonnaruwa, Trincomalee, Kandy, Kurunegala, Kaluthara, Mathale, Mathara, Gampaha and Mannar. Cultivated extents of different districts were taken from Department of Senses and Statistic web site. Unit of observation was a District. An unbalanced panel of 406 observations units were used. The analysis was done using version 14 of the computer program "Stata". Analytical ModelKumbhakar and Tsionas, 2008 has define Input oriented technical inefficiency as the rate at which inputs are overused compared to the minimum amount of input needed for the production of a given level of output.

For measuring Technical inefficiency, stochastic frontier approach is used. Here, production function is useful when developing production relationship. It can be written as,, i = 1,…, n,

1. Here,Yi = output of the ith firm. Where, i=1,2,3,…Xi = inputs used in production. ηi = random variable which represents input-oriented technical inefficiency. νi = random variable which captures random noise in the production. Input oriented technical efficiency can be developed by taking natural logarithmic values.
2. For output-oriented technical efficiency equation can be written as,
3. Using approximation rewrite (3) as,
4. ui is the output-oriented technical inefficiency. Using (3) and (4), input-oriented technical inefficiency can be calculated by,
5. Battese and Corra, (1977), explains variance ratio parameter γ as variability of ui to the total variability
6. Where γ Lies between 0 and 1. If γ closer to zero, the difference between the yield of the district and the efficient yield is mainly due to statistical error. If γ closer to 1, the difference between farmers yield and the efficient yield is mainly due to technical inefficiency. Empirical ModelIn literature production relationships are expressed in several forms as Cobb- Douglas and translog functional form (Illukpitiya and Yanagida, 2004), (Kumbhakar and Tsionas, 2008), used Cobb-Douglas functional form to express production relationship while (Reinhard, 1999), (Nishimizu and Page, 1982) used translog form to express production technology. Cobb- Douglas functional form
7. Translog functional form
8. To test the functional form of the model, likelihood ratio test is performed. Also it is used to test the significance of the model (Madan et al, 2000). For this study on technical inefficiency of paddy cultivation in Sri Lanka, The yield of paddy (Yi) in different districts is taken as dependent variable. Independent variables used are,X1 = Extent of paddy cultivation (acres)X2 = Seed paddy usage (Kg)X3 = Labor (man Days)X4= Fertilizer Quantity (Kg)X5=Real Machinery cost (Rs)X6= Real weedicide cost (Rs)

Results And Discussion

Summary statistics related to variables used for the analysis are shown in the Table 1. According to that highest average yield reported from Ampara district while lowest average yield reported from Gampaha district. Maximum fertilizer usage, machinery and weedicide expenses were reported from Ampara district. Highest average cultivated extent and seed paddy usage can be seen in Batticolao district while highest labor usage is in Polonnaruwa district. In Gampaha district, lowest average cultivated extent, seed paddy usage, fertilizer usage and machinery expenses can be seen. Maximum average labor usage can be seen in Anuradhapura district. To test the hypothesis about time varying nature of inefficiency decay parameter estimates are considered.

Calculated decay parameter estimates for Cobb- Douglas and translog form are represented in table 2. In both functional forms theses estimated values are closer to zero. This implies that inefficiency of paddy cultivation in considered areas have not increased or decreased over the period of time. So, it is reasonable to use time invariant model to estimate inefficiency of paddy cultivation in these areas. In order to build the production relationship, both Cobb – Douglas and translog forms were used. According (Gunaratne and Thiruchelvam, 2002), significance of cross terms in translog form can be used to determine whether translog or Cobb – Douglas form suit to data. Table 3 shows maximum likelihood estimates (MLE) for the parameters for translog form. It shows that only few variables and cross terms significant in translog form. So, Cobb- Douglas form was selected to measure technical inefficiency. Table 4 represent maximum likelihood estimates (MLE) parameters for Cobb - Douglas form. Estimated maximum likelihood coefficients of extent, labour, fertilizer, weedicide cost and machinery cost shows significant impact on paddy yield. Seed quantity does not show significant impact on yield but in general without seeds yield cannot be taken. All the variables in estimated Cobb -Douglas production function shows positive coefficients. Positive coefficients shows that, * Significant at 5%increase in values of variables will increase paddy production. Estimated variance ratio value was 0. 72. It is closer to 1. This indicate that difference between farmers yield and the efficient yield mainly due to technical inefficiency. It shows that technical inefficiency effects were significant in the stochastic frontier model. Table 4 - maximum likelihood estimates (MLE) parameters for Cobb - Douglas form Significant at 5% Input oriented technical inefficiency values for each district mention in table 5. Input oriented technical efficiency varies from 6% to 72%. So, in Mannar input oriented technical efficiency has to increase by 6% to achieve full efficiency while in Batticaloa input oriented technical efficiency has to increase by 72% to reach full efficiency.