Factors Affecting Cost Efficiencies of Rice Production of Indian States: A Stochastic Frontier Approach

In this paper we have tried to estimate cost inefficiencies of rice production for twelve major rice producing states of India using farm level data at two points of time namely 2000 and 2013 using stochastic frontier cost function. After that we have tried to determine the determinants of cost inefficiencies. Our main objective is to examine whether there exists any relationship between cost inefficiencies and farm size. Further it has been checked whether the relationship is linear or non-linear. The study will enable us to know the factors affecting the cost inefficiencies at state level so that states can undertake proper measures to increase cost efficiency in rice production. Most important observation in this paper is that there exists non-linear relationship between cost inefficiency and farm size. Cost inefficiency is first increasing with the increase of farm size then it is decreasing. The cost inefficiency depends negatively on proportion of family labour, mechanisation, type of seed used, etc. The analysis will enable us to know the determinants of cost inefficiency and will guide various states to adopt suitable policies thereafter.