Indian Journal of Economics and Development

Open Access Open Access  Restricted Access Subscription Access

Technical Efficiency, Subsidy and Financial Performance: A Case Study of BVFCL, Namrup


Affiliations
1 Department of Economics, Dibrugarh University, Dibrugarh, Assam – 786004, India
 

Objective: Brahmaputra Valley Fertilizer Corporation Limited (BVFCL) is situated in Namrup, Assam in India. The objective of the study is to analyse the performance of the unit both in terms of production and financial terms. Thus, efficiency of the unit in using its inputs and financial performance is reported here.

Methods: The study is based on secondary data collected from the annual reports of BVFCL from 2003-2013. Output is measured in terms of gross value added and it is deflated by WPI. Capital is calculated using perpetual inventory method and labour is the total number of employees during that period. Time series framework has been used for making the analysis. Cobb Douglas Production Function has been estimated for stochastic production function. In deterministic frontier any shortfall in observed output from maximum output is attributed to technical inefficiency, but in reality it is affected by random factors also; so stochastic production function has been used as it considers all factors.

Findings: In the production function only labour variable is significant, indicating overuse of labour. The technical efficiency of the unit is on a declining trend. Subsidy is positively correlated with amount of production and cost of production. BVFCL is the only fertilizer unit in entire North Eastern Region (NER), the declining efficiency of the unit is due to age old technology used. The financial performance of the unit does not show any better picture since over the time the subsidy burden is rising. The increase in production has been accompanied by increased cost of production and subsidy as the unit fails to use modern methods and technology.

Application: The study reflects that the use advance methods of production will improve efficiency and productivity of the unit, which in turn will help to meet the increase subsidy burden.


Keywords

Time Series, Stochastic Production Function, Technical efficiency and Financial Performance.
User
Notifications

  • J. Hazarika, H. Saikia. An econometric study on nature of the returns to scale in two major industries of Assam. Assam Economic Journal. 2003; 16, 123 – 128.

  • H. Saikia. An econometric study on various problems of production functions with special reference to some industrial products of Assam. PhD thesis, Dibrugarh University. 2004.

  • V.P. Sharma, H. Thaker. Demand for fertilizer in India: determinants and outlook for 2020. IIM Research and Publications. 2011; 1-32.

  • M. Khan, A. Sajjad. Linkages of liquidity and profitability: evidence from fertilizer sector of Pakistan. American Journal of Scientific Research. 2012; 72, 142-148.

  • S.P. Shetty, K, Deveraj. Performance of fertilizer industry in India. Excel International Journal of Multidisciplinary Management Studies. 2012; 2(3), 233-249.

  • B. Goldar. Unit size and economic efficiency in small scale washing soap industry in India. Artha Vijnana. 1985; 27(1), 21-40.

  • T.A. Bhavani. Technical efficiency in Indian modern small sector: an application of frontier production function. Indian Economic Review. 1991; 26(2), 149-66.

  • K.V. Ramaswamy. Technical efficiency in modern small industry in India. Ph.D. Dissertation, Department of Economics, University of Delhi. 1990.

  • Tariq Mahmood, Musleh-ud Din, Ejaz Ghani. Technical efficiency of Pakistan’s manufacturing sector: stochastic frontier and data envelopment analysis. Pakistan Development Review. 2007; 46(1), 1–18.

  • D.N. Gujarati. Basic econometrics. 4th Edition. New York: McGraw-Hill. 2007; 1-1036.


Abstract Views: 262

PDF Views: 137




  • Technical Efficiency, Subsidy and Financial Performance: A Case Study of BVFCL, Namrup

Abstract Views: 262  |  PDF Views: 137

Authors

Priyanka Bharali
Department of Economics, Dibrugarh University, Dibrugarh, Assam – 786004, India
Deb Kumar Chakraborty
Department of Economics, Dibrugarh University, Dibrugarh, Assam – 786004, India

Abstract


Objective: Brahmaputra Valley Fertilizer Corporation Limited (BVFCL) is situated in Namrup, Assam in India. The objective of the study is to analyse the performance of the unit both in terms of production and financial terms. Thus, efficiency of the unit in using its inputs and financial performance is reported here.

Methods: The study is based on secondary data collected from the annual reports of BVFCL from 2003-2013. Output is measured in terms of gross value added and it is deflated by WPI. Capital is calculated using perpetual inventory method and labour is the total number of employees during that period. Time series framework has been used for making the analysis. Cobb Douglas Production Function has been estimated for stochastic production function. In deterministic frontier any shortfall in observed output from maximum output is attributed to technical inefficiency, but in reality it is affected by random factors also; so stochastic production function has been used as it considers all factors.

Findings: In the production function only labour variable is significant, indicating overuse of labour. The technical efficiency of the unit is on a declining trend. Subsidy is positively correlated with amount of production and cost of production. BVFCL is the only fertilizer unit in entire North Eastern Region (NER), the declining efficiency of the unit is due to age old technology used. The financial performance of the unit does not show any better picture since over the time the subsidy burden is rising. The increase in production has been accompanied by increased cost of production and subsidy as the unit fails to use modern methods and technology.

Application: The study reflects that the use advance methods of production will improve efficiency and productivity of the unit, which in turn will help to meet the increase subsidy burden.


Keywords


Time Series, Stochastic Production Function, Technical efficiency and Financial Performance.

References