Of National Saffron Mission

Econometric Approach to Efficiency Analysis of Saffron Cultivation in Kashmir Valley

Dr. Imtiyaz ul Haq/Asif Tariq
Srinagar, Publish Date: Oct 23 2018 10:49PM | Updated Date: Oct 23 2018 10:49PM
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This article is based on the major findings of UGC funded major research project titled, “Allocative and Technical Efficiency of Saffron Cultivation in Kashmir Valley”. The estimation of efficiency and its determinants are based on the survey results pertaining to the agricultural year 2016. While the economic efficiency is a product of allocative and technical efficiency, in this article I am sharing some important results related only to the technical efficiency aspect of saffron cultivation in district Pulwama, excluding district Budgam. 

The technical inefficiency in the common language is defined as the inability of a farmer to achieve maximum possible output with the help of given inputs and technology. Thus the estimation of technical efficiency actually requires measurement of the gap between the observed output and the obtainable maximum output. The central issue here is only how to estimate the maximum attainable output. In fact the bench mark for this is set on the basis of performance of the best practicing farmers in the line of activity working under the similar conditions. Once this is done the gap becomes measurable and the efficiency estimates of the individual farmers could be generated. 

What causes this deviation? The variation of actual output from the potential output is attributed to two types of factors. These factors could be exogenous which are beyond the control of farmer like vagaries of weather, pests, diseases, fire, strikes and so many. The other factors causing a farmer to be technically inefficient are those which are actually well under the control of a farmer and are related to farm and farmer characteristics like experience, education, knowledge, ability to maintain extension contacts, location of a farm, farm fragmentation levels, size of household etc. The next challenge in the estimation procedure is to decompose the joint effect of these two types of factors so that we come up with the estimate of technical efficiency/inefficiency associated with the factors under the control of farmer and can be addressed with little or no cost through policy intervention or following better management practices.

Computer programme specially designed by an Australian economist Tim Coelli for conducting such type of analysis was employed to get the results. This programme allows the estimation procedure based on the stochastic frontier production function which eliminates the effect on inefficiency due to external shocks, not under the control of a farmer, and statistical noise that may arise due to inadvertent omission of relevant variables, data measurement errors and errors in model specification. As such this type of analysis is preferred over mathematical technique to efficiency analysis through Data Envelopment Analysis.  

This type of analysis also is useful in the sense as it allows us to take a decision whether to continue with the existing technology or switch over to a new technology. It has been argued if inefficiencies are large and widespread, then eliminating the inefficiencies may prove to be less expensive as compared to replacing it with a new technology. This is not, however, to discredit the work done by the scientists in the labs in developing the new technologies. Under such circumstances, replacing the existing technology with the new one may be desirable but not feasible. 

Major Findings

After discarding many observations in whose case the information was either incomplete or not satisfactory a sample of 390 households was selected comprising 30 households from 13 saffron growing circles of district Pulwama.  On the basis of this sample the farmers were classified into 315 marginal farmers (less than 1 hectare), 58 small farms (1-2 hectares) and 17 semi-medium farms (2-4 hectares).

The yield per hectare was estimated at 1.09 kg per hectare for the year 2016. This estimation is close to the official record of the Financial Commissioner Revenue, which stands at 1.43 kg per hectare for the same year but for the Kashmir division as a whole. While as according to the records of the Directorate of Agriculture the yield per hectare is reported as 4.42 kg per hectare for the same year. 

The average efficiency of the farmers was estimated as 59 percent ranging between a low of 14 per cent and a high of 93 per cent. Thus providing the evidence that majority of the farmers were operating below the potential level of output due to technical inefficiency. As such with the optimal combination of the present input levels and the existing technology there is scope for increasing the level of output by at least 41 per cent without incurring any additional cost. 

In other words this means that average farmer is 41 per cent inefficient as compared to the average best practicing farmer and this variation is due to the difference in certain socioeconomic and farm characteristics between them. Alternatively it means that if the average farmer performance is to be raised to the level of the most efficient farmer performance we need to know the nature of relationship of efficiency with the farm and farmer attributes. Some of these attributes may be positively influencing the efficiency while some others may be impacting efficiency negatively. The underlying point here is that the efficiency of a farmer is related to the ability of a farmer to make rational decisions regarding the choice of input combination which depends upon the behavior of the farmer determined by his personal qualities and the characteristics of the landholdings under his possession. Following results were obtained that merit attention:

The age deemed to be a proxy variable for experience was found to be a positive contributor to efficiency up to the point when a farmer entered into the range of 50-60 years and thereafter the efficiency of the farmer actually had a tendency to decline. This result is well supported by the theory as well and is an indication of diminishing returns to human capital. Education of the farmer, measured in terms of years of formal schooling, had a profound positive impact on efficiency with a clear pattern. Extension contact and efficiency were also positively related. It may be noted that the average age of the farmer was found as 56 years with an education of 6 years of schooling in our sample indicating that saffron farming is characterized by old aged farmers with low level of education. It was found that 52 per cent of the farmers who maintained contacts with the extension agencies were relatively more efficient as compared to their counterparts. Similarly in case of those households who had more adult farm workers the efficiency levels were found higher in their case. This calls for a case of strong government intervention in terms of farming appropriate policy for human resource development towards making a better use of technology for improving in efficiency.

The study also confirmed that larger the distance of a farm from villages and roads the more efficient they tend to be.  Although, far away located farms are difficult to manage efficiently but at the same time technical efficiency is expected to decline due to proximity of the farms to the roads and dwellings owing to the sensitivity of this crop to pollutants and contaminants emanating out of human activities – anthropogenic effect. A surprising and unexpected positive relation, although statistically insignificant and hence nothing can be said with confidence, was found between land fragmentation and efficiency. Some other attributes also found positively related with efficiency of a farmer were income of the household, farmer specialization and many other demographic characteristics which cannot be discussed due to lack of space.  Various efficiency retarding factors were identified also but the two surprising results are worth mentioning. It was observed that those farmers who had availed some kind of financial assistance were technically less efficient as compared to their counterparts. This can happen in an environment where farmers are spending the funds not for the purpose for which they are actually obtained. Secondly, it was also found that those farmers who had proportionately higher percentage of land under saffron were also less efficient.

The direct implication of which are that such farmers might attempt to diversify their resources by allocating their land between different crops to ward-off themselves from the risks associated with inappropriate climatic conditions affecting the saffron crop adversely. However, there is a caveat to it, due to legal restrictions preventing the conversion of saffron land into any other activity and as such it has resulted into a fundamental structural problem and the appropriateness of such policy is debatable. Any such policy that acts as a barrier to exit an inefficient  farming system, in fact, has lead to the serious supply side shocks like abandonment of farming practice and lack of effort- a major cause for declining acreage and productivity of the saffron crop.


The analysis indicates existence of wide variations in technical efficiency among the farmers. And, even though it is possible to increase overall saffron production by more than 40 per cent without incurring any additional cost through efficient use of existing technology, it cannot be regarded as major breakthrough as the productivity already is very low hovering around 1 kg. per hectare. In other words it implies that with the best and efficient use of the technology available at present we may be able to increase the overall productivity of saffron to around 1.5 kg per hectare. This is by no standards comparable to the countries like Spain and Iran where the productivity ranges between 4 – 6 kg per hectare. However, since irrigation is a vital component in any agricultural operation and saffron cultivation is mainly rain fed, installation of drip irrigation facilities can go a long way in improving the productivity. Any biological package provided to farmers without proper irrigation facility is likely to prove counterproductive should have been in the minds of those associated with the “Mission”.

 (The authors are working currently in the Economics Department, Central University of Kashmir.)



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