Profit Efficiency Among Basmati Rice Producers in Pakistan Punjab

Abstract Farm‐specific profit inefficiency among Basmati rice producers was estimated from a variable‐coefficient profit frontier. The mean level of inefficiency at farm resources and price levels was 28%, with a wide range (5%–87%). Average loss of profit was Rs 1,222 per hectare. Socioeconomic factors related to profit loss were the farm household's education, nonagricultural employment, and a credit constraint. Institutional determinants of profit loss were a water constraint and the late application of fertilizer. Punjab‐wide benefits of increasing farmer's profit efficiency are large; a 25% reduction in profit loss among Basmati rice producers may generate over Rs 240 million in extra profits each rice season.