Efficiency of Cereal Production and Determinants of Cost Inefficiency in Natural Disaster-Prone Regions of Odisha (India)

Abstract

Coastal districts in Odisha are one of the most vulnerable regions in India to climate
related natural disasters like cyclones and floods. They are some of the thickly populated zones of the state with agriculture as primary occupation for most rural households. The paper studies the technical efficiency of cereal production across the farm households and examines the factors contributing to inefficiency in the production process. It attempts to check the role of exogenous shocks like cyclones and floods in defining the observed cost inefficiency of the rural farmers. In doing so a cost efficiency approach is adopted and stochastic frontier analysis is carried out using primary household data. Based on the empirical analysis, and subject to the assumptions and the usual limitations of data, the findings suggest: (i) inputs like use of farm machinery and fertilizer significantly contribute to enhancement in farm output, (ii) most farmers operate at average levels of cost efficiency, and (iii) incidence of disaster events significantly contributes to cost inefficiency. From a policy perspective, the thrust should be on increasing the farm mechanisation and reducing the exposure to extreme events supplemented with efforts to augment the penetration risk diversification and 
reduction schemes