Technical efficiency of sawmill units in Manipur, India: a parametric approach

Purpose - The study focuses on assessing the technical efficiency of sawmill units in Manipur, a region heavily dependent on the timber-based industry for household and construction needs. It aims to evaluate these units’ performance, exploring the factors contributing to efficiency and inefficiency. The research intends to offer policy recommendations to improve technical efficiency and productivity within the industry. Design/methodology/approach - Primary data was collected through a survey of sawmill units in Manipur using structured questionnaires. Due to the illegal and informal operation of most sawmills, the total population size of the sawmill units in the state is unknown. The snowball sampling method is used to cover maximum units spread across fourteen districts of the state out of the total 16 districts, nine hill districts and five valley districts. The survey managed to cover 161 units, including units operating in clusters. The study employs stochastic frontier analysis (SFA) to estimate technical efficiency scores using log volume, labor, capital, installed capacity and land size variables. Elasticities of inputs and returns to scale were also calculated to evaluate input contributions and scalability. Findings - The study finds that the sawmill has a mean technical efficiency of 0.91, with significant differences between hill and valley districts. Labor is the only variable found to be statistically insignificant in determining efficiency. A negative relationship exists between installed capacity and output, indicating machinery inefficiencies due to the prevalent use of outdated and circular saws. The likelihood ratio test indicates technical inefficiency and shows that owners’ experience can enhance efficiency. Input elasticities show that improving log inputs and installed capacity could significantly boost productivity. A return to scale (RTS) of 1.369 highlights substantial growth potential in Manipur’s sawmill sector. Originality/value - The study helps understand the technical efficiency of sawmill industries in Manipur. By closely examining the operations of sawmills, the research aims to provide valuable insights for policymakers, enabling them to develop effective regulations that promote sustainable resource use while recognizing the crucial role sawmills play in supporting the local economy. Additionally, this work contributes to the expanding literature on technical efficiency within resource-dependent sectors, particularly in regions like Manipur, which face unique socioeconomic and environmental challenges.