Working Paper: 396

Efficiency of Indian Fertilizer Firms: A Stochastic
Frontier Approach

Soumita Khan

 

Abstract

This paper examines the competitiveness of Indian fertilizer firms by computing their output oriented technical efficiency from 1993-94 to 2012-13, using the stochastic frontier approach. It reveals that the industry runs at 57 percent technical efficiency on an average and that there is scope for further improvement. The research also finds that the private sector fertilizer firms are more efficient than the public sector ones. In addition, it reveals that large and experienced firms are more efficient than small and new firms. This analysis concludes that the current level of R&D expenditure or imports do not improve the efficiency levels, especially in the short run. However, in the long run, R & D may play a crucial role in improving efficiency as in any manufacturing sector. The public firms can enter into technological collaborations with private firms to gain higher efficiency. The large number of technological collaborations noticed in this sector in recent times, therefore, is a welcome development.

 

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