| Abstract: | The study aims at determining the level of technical efficiency of the food and non-food
Agro-processing industries over time using stochastic frontier production function model.
All the parameters of the frontier function and the inefficiency model have been estimated
simultaneously using Maximum likelihood estimation. The study considered 55food
processing and 25 non-food agro-processing industries for the period of 2014/15-
2018/19(annex 2 and 3). The cob Douglas functional form with maximum likelihood
estimation better explains the production behavior of food producing as well as non-food
agro-processing industries. It shows that there is technical efficiency difference among
industries in the sector. The mean technical efficiency of food Agro-processing was 0.53
while that of non-food industries was also 0.42, showing an increasing trend in both
industries. Poor quality of raw materials, poor linkage between private and state farms and
poor technology are the main constraint of the sector. Food agro-processing industries,
slightly speaking, have better efficiency and scale of operation as compared to non-food
agro-processing industries mainly attributed to the linkage between raw material producing
firms with food producing industries. External constraints including lack of modern
marketing skill, financial resources and lack of sufficient professional food technologist
contribute more to the low level of development of the sector. In order to effectively utilize
agricultural resource and benefit from this sector, efforts have to be made in improving
linkage between farms with food and noon food agro-processing companies, working to
scale up the production of best quality of raw materials, infrastructure development,
technical and skill development and availability of updated marketing information system.
The creation of conductive business environment enhances the productivity of the subsector. |
