Technical and Scale Efficiency Analysis of Cash Crops Production in Pakistan: An Application of Data Envelopment Analysis (DEA)

Abstract

The study has analyzed the technical efficiency of major cash crops' yield in Pakistanfrom 1948 till 2018. Cotton and sugarcane are the crops selected for analysis with an area ofthousand hectares. For carrying out the analysis, data is taken from the Ministry of Food andAgriculture (MINFA), Pakistan Bureau of Statistics, and economic surveys of Pakistan of differentyears. The technique employed in the study is the non-parametric Data Envelopment Analysis(DEA) technique. The result obtained after technical efficiency analysis reveal the suboptimal cashcrop yield in Pakistan throughout the analysis. The average technical efficiency of cotton andsugarcane crops from 1948 to 2018 are approximately 0.80 and 0.84 respectively. Furthermore,the result of scale efficiency analysis showed the monotonous performance of cash crops'production. The consistent variation in cotton and sugar cane crops' yield over the years reportedby the efficiency analysis, accounts for Constant Return to Scale (CRS) and Variable Return toScale (VRS) models, resulted in varying Return to Scale (RTS). The plausible reasons can beattributed to the Increasing Returns to Scale (IRS) or Decreasing Returns to Scale (DRS) in thecase of cotton and sugarcane production. An interesting finding is unveiled that out of 70 years,cotton and sugarcane crops achieved the optimal scale efficiencies for only one year. The bestpossible level of output of cotton and sugarcane crops in the future can be achieved by allocatinga lesser area under the cultivation of these crops in Pakistan. It is also imperative that farmers adoptand implement modern farm technologies. Increasing the area under crop production is not asolution, especially in the wake of alarming population growth and urbanization in Pakistan. Theformulation of policies encouraging farmers requires modern farm inputs to realize the optimalyield of cash crops in Pakistan. The government should educate the farmers regarding advancedfarming and efficient farm management techniques to help to augment the farm output withoutexpansion of the area for these crops