Assessing the efficiency of smallholder sugarcane production: The case of Faisalabad, Pakistan

Declining water tables and shrinking irrigation supply are two major challenges for agricultural production that increase production costs of high delta crops in Pakistan. Crop producers may tackle these threats by optimizing the use of available resources. To devise policies for improved resource use and cost reduction, assessing current efficiency levels and their determinants can provide useful information. This research assessed the technical, allocative, and groundwater-irrigation efficiency of smallholder sugarcane farms in Faisalabad, Pakistan using primary data for 56 tubewell solo owners, 37 tubewell shareholders, and 47 water buyers and applying the data envelopment analysis technique. The factor affecting the allocative efficiency were explored using the tobit regression. We found that the groundwater-irrigation efficiency ranged from 92% for the solo owners, 92% for shareholders, and to 83% for water buyers. On average, technical efficiency at sugarcane farms was more than 90%. Solo owners, shareholders, and water buyers achieved only 40%, 28%, and 37% of allocative efficiency, respectively. By improving the allocative efficiency through optimal allocation of inputs, farms can considerably decrease their costs for a given output level. The allocative efficiency was negatively associated with farmers’ age, farm size, tubewell depth, discharge rate and salinity in groundwater. Our findings imply that sugarcane farms can substantially reduce their production costs by installing smaller tubewells that match their crop irrigation requirement and groundwater depth. Further, improving the allocative efficiency of relatively large sugarcane farms, monitoring and regulating groundwater extraction to prevent further increase in groundwater and irrigation and soil management practices to reduce salinity can improve the efficiency.