Current Science

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The objective of this study is to estimate technical efficiency of farm machinery manufacturers in Central India. The statistical test for the presence of technical inefficiency has been performed using stochastic frontier production model. Data envelopment analysis (DEA) has been used to identify existing returns to scale in farm machinery manufacturing units. The slacks-based DEA has been used to estimate input excess and output shortfall in the manufacturing system. Results indicate that out of the total variation, 69% was due to technical inefficiency in the manufacturing system, whereas 31% was due to stochastic errors. The estimated radius of stability was varied from 0 to 1.74 and the classification (efficient and inefficient manufacturers) was found robust against data alteration within the estimated radius of stability. The results showed that a manufacturer has to increase annual turnover by INR 40.7 million to become efficient.

Keywords

Data Envelopment Analysis, Farm Machinery, Frontier Intervention, Manufacturers, Technical Efficiency.
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