Environmental Efficiency Analysis of Basmati Rice Production in Punjab, Pakistan: Implications for Sustainable Agricultural Development

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1 The Pakstan Development Revew 49 : 1 (Sprng 010) pp Envronmental Effcency Analyss of Basmat Rce Producton n Punjab, Pakstan: Implcatons for Sustanable Agrcultural Development ABEDULLAH, SHAHZAD KOUSER and KHALID MUSHTAQ * The ntensve use of chemcals worked as a catalyst to shft the producton fronter but the most crtcal factor of mantanng a clean envronment was totally gnored. The present study attempts to estmate the envronmental effcency of rce producton by employng the translog stochastc producton fronter approach. The data are collected from fve major Basmat rce growng dstrcts (Gujranwala, Shekupura, Salkot, Hafzabad, and Jhang) of Punjab n 006. Chemcal weedcdes and ntrogen are treated as envronmentally detrmental nputs. The mean techncal effcency ndex s suffcently hgh (89 percent) but the envronmental effcency ndex of chemcal weedcdes alone s 14 percent whle the jont envronmental effcency ndex of chemcal weedcdes and ntrogen s 4 percent mplyng that jont envronmental effcency s hgher than chemcal weedcde alone. It ndcates that substantal reducton (86 percent) n chemcal weedcde use s possble wth hgher level of productvty. Moreover, t s lkely to contrbute a consderable decrease n envronmental polluton whch s expected to enhance the performance of agrculture labour. The reducton n chemcal weedcdes wll save Rs 97 per acre and Rs mllon over all from the rce crop n Punjab, mprovng the proftablty of rce growng farmers by the same proporton. Emprcal analyss ndcates that reducton n envronmental polluton together wth hgher level of proftablty n rce producton s achevable. JEL classfcaton: N5, O13 Keywords: Rce Producton, Envronmental Effcency, Weedcde, Fertlser (NPK), Stochastc Translog Fronter 1. INTRODUCTION Rce s one of the most mportant food crops that augment and earn foregn exchange for the natonal economy.. It contrbutes more than two mllon tonnes to our food requrements and s a major source of employment and ncome generaton n the rce growng areas of the farm land. Rce s the thrd largest crop n terms of area sown, after wheat and cotton. It was cultvated on over.9 mllon hectares n 008. Accountng for 5.9 percent of the total value added n agrculture and about 1.3 percent to GDP [Pakstan (009a)] ts mportance n the natonal economy s obvous. Pakstan has two major rce- Abedullah <abedullah@yahoo.com> s Assstant Professor, Department of Envronmental and Resource Economcs, Unversty of Agrculture, Fasalabad. Shahzad Kousar <shahzad_k_005@yahoo.com> s Lecturer, Department of Envronmental and Resource Economcs, Unversty of Agrculture, Fasalabad. Khald Mushtaq <khaldmushtaq69@yahoo.com> s Assstant Professor, Department of Agrcultural Economcs, Unversty of Agrculture, Fasalabad.

2 58 Abedullah, Kouser, and Mushtaq producng provnces, Punjab and Sndh. Both provnces account for more than 88 percent of total rce producton. Punjab, due to ts agro-clmatc and sol condtons has assumed the poston of a major centre of Basmat rce producton, accountng for nearly all the Basmat rce the country produces. It s well documented that the use of fertlser and pestcdes (nsectcdes, weedcdes and herbcdes) n agrculture has ncreased manfolds snce the ntroducton of the so-called green revoluton. The ntensve use of nputs has worked as a catalyst to shft the producton fronter of almost all gran crops to feed the growng populaton but the most crtcal factor of mantanng a clean envronment has been totally gnored. Pestcdes play an mportant role n rasng agrcultural yelds n developng countres. They offer the most attractve low cost method of ncreasng output per hectare of land and gve the farmer a hgh economc return for hs labour and nvestment. The use of pestcdes has consderably ncreased n developng countres however ts advantages seem to have not been fully exploted [Nguyen, et al. (003)]. It s observed that the quantty of agrochemcals used n the agrcultural system of Pakstan has ncreased more than four tmes just n seventeen years.e., from 1990 to 007. The total quantty of agrochemcals consumed ncreased from 013 tonnes n 1990 to 9465 tonnes n 007 and n value terms, the consumpton ncreased from 5536 mllon Rupees to mllon Rupees for the same perod [Pakstan (009b)]. The negatve mpact of these agrochemcals on human productvty, envronment and ground water qualty has been neglected n the past, posng a grave threat to the sustanablty of agrculture producton system. The ncreasng awareness about the role clean envronment plays n human productvty has ntensfed the demand to elmnate or mnmse the negatve externaltes of dfferent producton systems. Lke any other producton system, agrculture also generates postve and negatve externaltes. The challenge for scentsts s to mnmse or elmnate the negatve externaltes to sustan the clean envronment for future generatons whle ncreasng the productvty level through modern technologes or reducng envronmental polluton by sustanng productvty levels wth the gven set of technologes. Fertlser, pestcdes, weedcdes and herbcdes are the major nputs that cause envronmental and ground water polluton n agrculture sector. These nputs could be re-allocated n a way that envronmental polluton was sgnfcantly reduced by keepng output levels wthn a gven framework of producton technologes and avalable resources. A sgnfcant body of lterature exsts dealng wth the techncal and allocatve effcency n dfferent crops and n dfferent regons [Good, et al. (1993); Ahmed and Bravo-Ureta (1996); Wlson, et al. (1998); Wadud (1999); Wang and Schmdt (00); Larson and Plessman (00); Vllano (005); Abedullah, et al. (007)] but lttle work has been done to estmate the envronmental effcency of agro-chemcals (weedcde, pestcde, herbcde and fertlser) n agrcultural producton system [Renhard, et al. (1999); Zhang and D-ue (005) and Wu (007)] whch s expected to play an mportant role n the reducton of envronmental polluton. Accordng to our knowledge there s no study n respect of Pakstan that deals wth envronmental effcency. The present study hopefully would fll ths gap. The objectve of the present study s to estmate the envronmental effcency of chemcal weedcdes and fertlser n rce producton by employng a stochastc producton fronter approach.

3 Envronmental Effcency 59 The scheme of the paper s as follows. The next secton presents the conceptual framework and delneates the emprcal model wth varable specfcaton to explan the estmaton procedure of techncal and envronmental effcency. Ths secton also explans the selecton of sample and the data collecton procedure. Emprcal results are presented and mplcatons are derved n the subsequent secton. Secton 4 dscusses the lmtaton of data. The summary and concluson s presented n the last secton.. METHODOLOGY AND DATA COLLECTION PROCEDURE The methodology s defned n two steps: conceptual framework and emprcal model. The conceptual framework dscusses general procedure adopted to estmate the techncal and envronmental effcency whle the emprcal model explans the detals of producton functon specfcaton and mathematcal manpulaton employed to estmate envronmental effcency. The last part of ths secton explans the data collecton procedure used for emprcal analyss..1. Conceptual Framework There are two man approaches (wth a number of sub-optons under each) to measure techncal effcency (TE). These nclude, stochastc fronter (parametrc approach) and data envelop analyss (DEA), also named as non-parametrc approach. These two methods have a range of strengths and weaknesses whch may nfluence the choce of methods, n partcular wth regard to applcaton and constrants. The advantages and dsadvantages of each approach have been dscussed by Coell (1996), Coell and Perelman (1999). The present study s employng a stochastc fronter producton approach ntroduced by Agner, et al. (1977); and Meeusen and van den Broeck (1977), later on followed by a number of studes. Followng ther specfcaton, the stochastc producton fronter can be wrtten as, y F( x, ) e 1,, N (1) where, y s output for the -th farm, x s a vector of k nputs, s a vector of k unknown parameters, s an error term. The stochastc fronter s also called composed error model, because t postulates that the error term s decomposed nto two components: a stochastc random error component and a techncal neffcency component as follow, v u () where, v s a symmetrcal two sded normally dstrbuted random error that captures the stochastc effects beyond the farmer s control (e.g., adverse weather, natural dsasters and what the farmer mght call hs luck )., measurement errors, and other statstcal nose. It s assumed to be ndependently and dentcally dstrbuted, N. Thus, v allows the fronter to vary across farms, or over tme for the same farm, and therefore the fronter s stochastc. The term u s one sded (u 0) effcency component that captures the techncal effcency of the -th farmer. The varance parameters of the model are parametersed as: 0 v u s v u; and 0 1 (3) s

4 60 Abedullah, Kouser, and Mushtaq The parameter γ must le between 0 and 1. The maxmum lkelhood estmaton of Equaton (1) provdes consstent estmators for, γ, and s parameters. Hence, Equaton (1) and () provde estmates for v and u after replacng, s and γ by ther estmates. Multplyng by e v both sdes of Equaton (1) and replacng s wth maxmum lkelhood estmates, yelds stochastc producton fronter as: y u v y e F( x, ) e (4) where, y s the observed output of the -th farm adjusted for the statstcal random nose captured by v [Bravo-Ureta and Reger (1991)]. All other varables are as explaned earler and s the vector of parameters estmated by the maxmum lkelhood estmaton technque. The techncal effcency (TE) relatve to the stochastc producton fronter s captured by the one-sded error components u 0,.e. TE e u y F ( x, v ) e (5) The techncal effcency ndex n Equaton (5) can be defned as the rato of the observed to maxmum feasble output whch s estmated by employng the tradtonal stochastc producton fronter approach whle accordng to Renhard, et al. (000, 00) the envronmental effcency ndex can be defned as the rato of mnmum feasble to the observed use of an envronmentally detrmental nput, gven technology and the observed levels of output and conventonal nputs. Pttman (1983) was the frst to consder envronmental effects as undesrable outputs whle estmatng the Törnqvst ndex of productvty change. However, undesrable outputs cannot be prced n the markets because markets do not exst for such products; hence the modelng of undesrable products s feasble only f the undesrable outputs can be valued by ther shadow prces. The author used econometrc technques to estmate shadow prces of demand for bochemcal oxygen generated n the process of convertng wood pulp to paper for thrty Mchgan and Wsconsn mlls, but t s observed that shadow prces are constant across all the observaton. Followng Pttman (1983), Fare, et al. (1989) and Fare, et al. (1993) also modeled envronmental effects as undesrable outputs. All these studes nclude envronmental effects n the output vector, and then to obtan nclusve measures of techncal effcency, and occasonally, productvty change, ncorporate the generaton of one or more envronmental effects as by-products of producton process [Renhard, et al. (1999)]. However, Pttman (1981) s the frst who modeled polluton as an nput n the producton functon and later hs approach s refned and modfed by Haynes, et al. (1993), Haynes, et al. (1994), Hetemäk (1996), Boggs (1997) and Renhard, et al. (1999). These semnal works have consdered envronmental effects as a conventonal nput rather than as an undesrable output whch dstngushed ther study from the earler lterature. Recently ths approach has been adopted by Renhard, et al. (00), Zhang and ue (005) and Wu (007). Followng the later group of studes we also ncorporated envronmental effects (weedcde and fertlser) as a conventonal nput n the producton process. Dfferent

5 Envronmental Effcency 61 studes have used dfferent varables as envronmental determnant accordng to ther objectves and avalablty of data. We consder weedcdes and fertlser as envronmentally detrmental n rce producton however snce pestcdes are beng used only by a small number of farmers (less than 15 percent) and on an average ts mpact on the producton process s not expected to be sgnfcant. Followng Renhard, et al. (1999) we estmated techncal and envronmental effcency separately. The mathematcal representaton of envronmental effcency can be wrtten as: EE = mn { : F (, Z) > Y } < 1 (6) where, F(, Z) s the new producton fronter and (, Z) є R + (a set of postve real numbers) whle and Z are, respectvely a vector of conventonal and envronmentally detrmental nput and Y є R + s yeld estmated by employng maxmum lkelhood estmaton technque as defned earler n Equaton 1. To obtan the envronmental effcency ndex, a new fronter producton functon as defned n Equaton 6 could be developed by replacng the observed envronmentally detrmental nput vector Z wth Z and settng u =0, representng a functon at full techncal effcency. The envronmental effcency s explaned by employng the defnton of Renhard, et al. (000); Renhard et al. (00) as EE = Z/Z and then by takng natural logarthm on both sdes of the equaton, t can be wrtten wth more detal as below: 1 EE= Z Z = (ФZ/Z) = Ф (7) Where, EE s the logarthm of envronmental effcency and t s equal to the logarthm of new fronter functon wth u =0 mnus the orgnal fronter functon when u 0... Emprcal Model There s only one output n our case and therefore, as dscussed by Wu (007) we estmate a stochastc producton fronter rather than a stochastc dstance functon to relate the envronmental performance of ndvdual farms to the best of envronmentfrendly farmng. To mnmse the msspecfcaton of model we have used a stochastc translog producton fronter and under the assumpton of one envronmentally detrmental varable 7 (whch s represented by Z due to envronmentally detrmental varable), the translog producton fronter s defned as below: Y = Z Z Z Z Z Z Z Z 6 u (8) 1 Accordng to Renhard, et al. (00) and Renhard, et al. (000) the envronmental effcency s the rato of mnmum feasblty to an observed nput whch s envronmentally detrmental.

6 6 Abedullah, Kouser, and Mushtaq Where represents the natural logarthm, Y s the yeld n maunds per acre, 1 s tractor hours used for land preparaton, s amount of seed n kg, 3 s the number of rrgatons, 4 s the amount of labour n hours per acre, 5 s per acre actve nutrent of Phosphorus and Potash (PK) n kg, 6 s per acre actve nutrents of ntrogen (N) n kg, and Z s the cost of chemcal weedcde n Rupees per acre and t s also consdered as the envronmentally detrmental varable. The Equaton (8) can be estmated by employng Fronter Verson 4.1 developed by Coell (1994). The new stochastc fronter functon as dscussed above n emprcal framework can be obtaned by replacng Z wth Z n Equaton (8) n such a way that techncal neffcency of each farmer approaches to zero (.e., u =0) that exsts n the orgnal fronter functon (Equaton 8). It should be noted that Ф s envronmental effcency ndex. Hence, the new translog functon can be wrtten as, Y = Z Z Z Z Z Z Z Z v (9) By subtractng Equaton (8) from Equaton (9) and wth lttle mathematcal manpulaton the result can be wrtten as: Z Z (10) 5 6 Z Z Z u By employng the result of Equaton (7) n Equaton (10) t can be modfed as follow: EE (11) Z EE u Now Equaton (11) can be solved for EE by usng the quadratc equaton formula as below: EE Z Z 77U (1) The envronmental effcency EE from Equaton (1) can be estmated just by takng the exponent of ths equaton.e In the quadratc formula there are both postve and negatve (±) outsde the under- root term but we took only postve because u = 0 only f we wll consder the postve sgn outsde the under-root term.

7 EE Z Envronmental Effcency 63 EE exp Z (13) It should be noted that Φ s the envronmental effcency ndex as dscussed earler. In case of two envronmentally detrmental varables (actve nutrents of ntrogen and cost of chemcal weedcde) the descrpton for EE as descrbed n Equaton (1) s changed as follow: EE u (14) In case of translog producton functon the elastctes are not the coeffcent of producton functon as n case of Cobb-Douglas. However, the elastcty of output wth respect to dfferent nputs n case of translog producton functon can be estmated by takng dervatve of Equaton (8) wth respect to logarthm of any specfc nput as shown below: Y 1 Y 1 Y It should be noted that 7 has been represented by Z n Equaton 8 and the above equaton can be wrtten n more general form as follow: Y Y Y 7 j S j j j j 1 j (15) where, stands for the number of explanatory varables. The cross elastcty of substtuton for nput factor j and k can be wrtten by followng the formula developed by Ferguson (1969) as follow: H jk jk S j S 1 k (16) A postve elastcty of substtuton mples that two nput factors j and k are complementary whle a negatve elastcty of substtuton ndcates a compettve relatonshp between two nputs..3. Data Collecton Procedure Analyss s carred out by usng prmary data on nput-output quanttes and prces from 500 farm households belongngs to fve major basmat rce growng dstrcts n terms of producton Gujranwala, Shekupura, Salkot, Hafzabad, and Jhang of

8 64 Abedullah, Kouser, and Mushtaq Punjab Provnce [Pakstan (005)]. From each of these dstrcts 100 farmers are selected by choosng 5 from each tehsl. Four teshls from each dstrct (because most of the dstrcts n our sample have four or less than four tehsls) and vllages from each teshl are randomly selected. From the frst vllage n each teshl 1 farmers and from the second vllage 13 farmers are randomly selected, n order to make 5 from each teshl. The number of vllages n each tehsl ncreased accordngly where dstrcts have less than four tehsls n order to mantan the sample of 100 farmers from each dstrct. A well structured and feld pre-tested comprehensve ntervewng schedule s used for the collecton of detaled nformaton on varous aspects of rce farmers n 006. The mean value of nputs and output are reported n Table 1. Only ffteen percent farmers n our sample are usng pestcdes and that s why t s not reported n the table and nether t s consdered as an envronmentally detrmental varable. Table1 Summary Statstcs of the Sample Varables Mean Medan Maxmum Mnmum Std. Dev Yeld (Mounds/Acre) Tractor (Hours) Seed (Kg) No. of Irrgatons Labour (Hours) Nutrents of PK (Kg) Nutrents of N (Kg) Weedcde Cost (Rs) RESULTS AND DISCUSSIONS The results of Maxmum Lkelhood Estmates (MLE) for translog producton functon are reported n Table whch can be used to test the null hypothess that no techncal neffcency exsts n rce producton. It should be noted that the values of loglkelhood functon for the stochastc fronter model and the OLS ft are calculated to be and 9., respectvely and reported n Table. Ths mples that the generalsed lkelhood-rato statstc for testng the absence of techncal neffcency effect from the fronter s calculated to be LR = *( ) = whch s estmated by the Fronter 4.1 and reported as the LR test of the one sded error. The value of lkelhoodrato exceeds the crtcal value of obtaned from Table 1 of Kodde and Palm (1986) for the degree of freedom equal to 5 at fve percent level of sgnfcance. It should be noted that degree of freedom s equal to the number of restrcton n null hypothess. The log lkelhood rato test ndcates that techncal neffcency exsts n the data set and therefore, null hypothess of no techncal neffcency n rce producton s rejected.

9 Envronmental Effcency 65 Table Coeffcents of Translog Producton Functon wth Maxmum Lkelhood Estmaton (MLE) Technque Parameters Coeffcents t-rato Parameters Coeffcents t-rato B B B B B B B B B B B B B B B B B B B B B B B B B B B B B B B B B sgma-squared B gamma B Log Lkelhood 37.4 B The parameters of translog stochastc fronter producton are reported n Table. These results of producton functon are employed to estmate the elastctes of output wth respect to dfferent nputs as explaned n Equaton 14 and summary statstc of these output elastctes are reported n Table 3. The output elastctes of tractor hours (used n land preparaton) and rrgaton are negatve, whle that of seed, labour, PK (actve nutrents of phosphorus and potash), N (actve nutrents of ntrogen) and cost of Table 3 Output Elastcty of Translog Functon Varables Mean Medan Maxmum Mnmum Std. Dev Tractor (Hours)= Seed (Kg)= No. of Irrgatons= Labor (Hours)= Nutrents of PK (Kg)= Nutrents of N (Kg)= Weedcde Cost=

10 66 Abedullah, Kouser, and Mushtaq weedcde are postve. The elastcty of tractor hour s negatve but t s not clear why t s so. The coeffcent of tractor hour s 0.09 wth negatve sgn and t mples that by ncreasng one percent of tractor hours, the yeld declnes by 9 percent. In order to explan ts negatve sgn, more specfc sol related nformaton s requred whch s mssng n our data set. The elastcty of seed s postve n rce producton. Rce s a water ntensve crop and t requres hgh quanttes of water compared to other crops. Such a large quantty of water s not avalable from rrgated sources and therefore, farmers depend more on ground water n rce producton areas. The qualty of ground water s poor n the rce zone areas and the negatve elastcty of number of rrgatons s due to poor ground water qualty. But f we had nformaton on the dstrbuton of number of rrgatons from canal water and ground water, t would have made our statement more relable. However, the negatve elastcty coeffcent for rrgaton reflects wasteful rrgaton practces and expendtures as well as posng envronmental problems. It also emphasses the need for farmers educaton n crop rrgaton, need for testng the qualty of tubewell water and ts sutablty for rrgaton. The use of unft tubewell water may be posng an envronmental problem as well. The elastcty of labour and actve nutrents of PK and actve nutrents of N are postve whch are 8, 9 and 3 percent respectvely and these results are accordng to pror expectatons. It mples that f labour, actve nutrents of PK, and actve nutrents of N are ncreased by 100 percent then output wll ncrease by 8, 9 and 3 percent, respectvely, mplyng that the contrbuton of labour s hgher than the jont contrbuton of fertlser PK and N nutrents. Rce s a labour ntensve crop and that s why elastcty of labour s hghest and postve followed by actve nutrents of ntrogen. The elastcty of weedcde s also postve mplyng that f the cost of weedcde ncreases by 100 percent then t contrbutes to ncrease n yeld by 7 percent. The cross elastctes of substtuton are estmated by employng Equaton 15 and results are reported n Table 4. The negatve value of cross elastctes of substtuton ndcates a compettve relatonshp whle the postve value reflects the complementary relatonshp between the two nputs. It s observed that tractor hours and seed, tractor hours and labour, seed and labour, seed and actve nutrent of PK, number of rrgatons and actve nutrents of N, and actve nutrents of phosphorus and potash PK and actve nutrents of ntrogen N all have compettve relatonshp, whle all others have complementary relatonshp. Compettve relatonshp between two nputs ndcates that declne n one nput can be compensated wth the other, mplyng that nputs are substtutable n the producton process. Complementary relatonshp mples that output can be rased by ncreasng both the nputs smultaneously. The techncal effcency of rce producton n Pakstan Punjab s estmated by employng Equaton 8 and results are summarsed n Table 5. The results ndcate that techncal effcency of rce producton s reasonably hgh rangng from 0.59 to 0.97 wth an average value of Ths mples that rce producton could be ncreased up to 11 percent from the gven set of resources, just by usng the avalable resources more effcently. It s observed that 6 percent farmers are techncally more than 90 percent effcent and only 1 percent farmers are techncally less than 80 percent effcent, mplyng that dstrbuton of farmers s skewed towards hgh techncal effcency, and that s why average techncal effcency s reasonably hgh.

11 Envronmental Effcency 67 Table 4 Cross Elastctes of Substtuton Mean Medan Maxmum Mnmum Std. Dev Table 5 Techncal Effcency Estmates Value Count Percent Cumulatve Count Cumulatve Percent [0.6, 0.69] [0.7, 0.79] [0.8, 0.89] [0.9, 1] Total As dscussed earler we have assumed the cost of chemcal weedcde and actve nutrents of ntrogen (N) as envronmentally detrmental varables. The envronmental effcency of chemcal weedcde s estmated by employng Equaton 1 and 13 and results are reported n Table 6. The mean envronmental effcency of chemcal weedcde n our sample group s only 0.14, rangng from 0.00 to 0.73, mplyng that envronmental effcency s consderably less than techncal effcency. Our fndng reveals that the average level of rce output can be sustaned or even ncreased by reducng 86 percent of chemcal weedcde use. Such substantal reductons n chemcal weedcde use wll not only ncrease proftablty of rce producton by decreasng cost of Rs 96.7 per acre but t s also expected to sgnfcantly contrbute n the mprovement of

12 68 Abedullah, Kouser, and Mushtaq Table 6 Envronmental Effcency Estmates for Weedcde Only Value Count Percent Cumulatve Count Cumulatve Percent [0.0, 0.09] [0.1, 0.19] [0., 0.9] [0.3, 0.39] [0.4, 0.49] [0.5, 0.59] [0.6, 0.69] [0.7, 0.79] Total envronmental qualty. 3 The sgnfcant reducton n envronmental polluton s expected to ncrease the productvty of other resources such as land and labour. Rce was grown on 4.4 mllon acres of land n Punjab n 006 [Pakstan (006)]. Hence, Rs mllon can be saved each year from the reducton n use of chemcal weedcde n Punjab wth hgher level of output. From the frequency dstrbuton of envronmental effcency, t s observed that 93 percent farmers have less than 50 percent envronmental effcency and remanng 7 percent farmers fall n the range of 50 to 80 percent category of envronmental effcency. There s no farmer n our sample who has more than 80 percent envronmental effcency of chemcal weedcde use. The dstrbuton of jont envronmental effcency of chemcal weedcde and actve nutrents of ntrogen N s depcted n Table 7. It s observed that average jont envronmental effcency s almost double (0.4) the average envronmental effcency of weedcde alone (0.14). The hgher envronmental effcency score of two detrmental varables mght be due to more effcent and judcal use of ntrogen n rce producton. The hgher envronmental effcency of ntrogen use leads to mprovement n the jont effect of two detrmental varables but stll substantal scope exsts to mprove envronmental effcency that can be explored. It appears there s a lot of wasteful expendture n the use of these chemcals whch needs to be economsed. It s obvous that the use of fertlsers has assumed great mportance n farm producton and perhaps s the prncpal component of the out of pocket expendtures n the producton of rce. Our results revealed that a large amount of ntrogen could also be saved wth mprovement n envronmental condtons and hgher level of output. 3 Rs 60 = $1.

13 Envronmental Effcency 69 Table 7 Envronmental Effcency Estmates for Weedcde and Fertlser Value Count Percent Cumulatve Count Cumulatve Percent [ ] [ ] [0.-0.9] [ ] [0.4, 0.49] [0.5, 0.59] Total LIMITATION OF DATA It should be noted that prmarly ths data was collected for another study and at the tme of data collecton the focus was not on envronmental effcency. Ths would mean that mportant nformaton that a study on envronmental effcency would requre was not obtaned. Especally, n order to justfy the negatve sgn of the elastcty of rrgaton we should have had more detaled nformaton on sources of rrgaton whch s mssng n our case. Smlarly, we do not have detaled nformaton on sol characterstcs of the farms whch s agan requred to justfy the negatve sgn of the elastcty of tractor hours used for land preparaton. Hence, future researchers should be mndful of these weaknesses whle organsng ther study. 5. SUMMARY AND CONCLUSION The present emprcal study s based on a sample data of 500 rce farmers collected from fve major rce growng dstrcts n Punjab. Frst of all, we tested the presence of techncal neffcency n our data set and we rejected the null hypothess of no techncal neffcency n our sample data. The output elastcty of tractor hours and rrgaton s negatve, whle the output elastcty of seed, labour and actve nutrents of PK and actve nutrents of N, and weedcde cost s found to be postve. The cross elastctes of substtuton for dfferent nputs are also estmated n order to observe the nature of relatonshp between dfferent nputs n the producton process. On an average techncal effcency s found to be 89 percent n our sample farmers. Envronmental effcency s estmated by assumng a sngle (chemcal weedcde) and two envronmentally detrmental varables (chemcal weedcde and actve nutrents of ntrogen) n major rce producton dstrcts of Punjab. The envronmental effcency of chemcal weedcde s found to be 14 percent only. It suggests that a substantal mprovement n resource allocaton can be made by reducng 86 percent of chemcal weedcde n rce producton wth hgher level of output. It could help to mprove the proftablty of Rs 96.8 per acre n rce producton that totals to an expected savng of Rs from the reducton n the use of chemcal weedcdes. Moreover, t s lkely to allevate the problem of envronmental polluton by sustanng the productvty of the agrculture system. Moreover, t s expected to ncrease the productvty of agrcultural labour. The jont envronmental effcency of two detrmental varables (chemcal weedcde and actve nutrent of ntrogen) s 4 percent whch s almost 71 percent hgher

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