Browsing by Author "Ranjan, K.R.H.M."

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    Economic Efficiency in the Tea Estate Sector: A Case Study from Dimbula Tea Region
    (Uva Wellassa University of Sri Lanka, 2020) Ranadewa, D.P.N.; Ranjan, K.R.H.M.; Somarathna, A.D.K.S.S.; Edirisinghe, J.C.
    Being the main agricultural export crop for around 150 years, tea contributes to the Sri Lankan economy in a significant manner. In the recent past, Sri Lanka’s tea production and exports show a declining trend. Making matters worse, the average price has fallen below the average cost of production causing low profits. Amidst these, the tea estate sector faces many additional challenges in the form of the high cost of production, scarcity of labor, and maintenance issues. However, despite having the aforementioned constraints, some estates perform well while others are not. Hence, this study aims to analyse variability in the economic efficiency and determinants of revenue using a stochastic revenue frontier. To estimate the revenue function, panel data were collected from seven tea estates in the Dimbula region, which were selected by the purposively based on the availability of data and the access for the required data. Green leaf amount, Net Sale Average (NSA), labor days, chemical cost, and fertilizer cost were extracted from estate monthly accounts from 2005 to 2018. To estimate the stochastic revenue frontier, Battese, and Coelli model (1988) was used to capture the firm specific time invariant inefficiency. Results showed a mature area extent, NSA and labor days has a positive significant impact on revenue. The largest impact on revenue is given by the increase in extent as expected. A 1% increase in extent increases revenue by 1.4%. Similarly, a 1% increase in NSA can increase the revenue by 0.76% and a similar increase in labor can increase the revenue by 0.07%. Selected tea estates in the Dimbula region have a mean efficiency of 84%, which implies that still efficiency can be improved by 16% on average. Even though the mean is 84%, the maximum is 96.92% and the minimum is 68% showing that the inefficiency range is 31.97% to 3.08%. Therefore, it is clear that some estates have not achieved even the mean level of efficiency and a considerable amount of potential revenue is lost due to inefficiency. Keywords: Economic efficiency, Revenue function, Stochastic frontier, Tea estate sector
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    Effect of Non-Tariff Measures on Sri Lankan Tea Trade: A Bayesian Inference
    (Uva Wellassa University of Sri Lanka, 2020) Ranjan, K.R.H.M.; Edirisinghe, J.C.
    Non-tariff measures such as food safety standards on agricultural trade have become an emerging barrier throughout the world. The objective of this paper is to assess the impact of Sanitary and Phytosanitary measures for Sri Lankan tea exports by stipulating Maximum Residual Levels (MRLs) for the pesticide Endosulfan that is mostly used for tea production all over the world. Bayesian analysis was used in this study to estimate the gravity equation for the tea exports from Sri Lanka using a Multilevel Mixed Model. Panel data from 2003 to 2017 for fourteen prime destinations of Ceylon tea were considered for this study. The results show that the MRL of pesticide imposed by importing countries has significantly affected Sri Lanka′s tea exports. One percent decrease in the MRL on Endosulfan can result in a 0.67% (approximately USD 10,138,488.77 in 2017) decrease in Sri Lanka's tea exports and one percent increase in the tariff rate leads to a 0.03% percent decrease in the value of Sri Lankan tea exports. By comparison with the tariff effect, the MRL is associated with a bit higher trade effect for Sri Lankan tea exports. Policy implication such as large variations among countries and increasingly tighter restrictions from developed countries on food safety standards leads to great challenges in exporting food products like tea. Thus, these outcomes recommend that the negative impact of MRLs is found to outweigh the impact of import tariffs, highlighting the greater role that non-tariff measures play on Sri Lankan tea exports. Therefore, there is an urgent need for regulatory policies to uplift Sri Lankan tea exports. Keywords: Bayesian analysis, Gravity model, Maximum residual level, Non-tariff measures, Tea exports
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    Variability of Technical Efficiency in High Grown Tea Estates – A Bayesian Approach
    (Uva Wellassa University of Sri Lanka, 2020) Madushan, Y.W.C.; Ranjan, K.R.H.M.; Somarathna, A.D.K.S.S.; Edirisinghe, J.C.
    This study was carried out to identify the technical efficiency levels of the high grown tea estates in Sri Lanka. Data were collected from tea estates in the Nanuoya region in Dimbula planting District covering seven tea estates. Monthly data on green leaf production, revenue extent of the estate, labour costs, agrochemical costs, and fertilizer costs were extracted from monthly accounts and progress reports from the year 2005 to 2018 to form a panel data set. To estimate efficiency, stochastic frontier production functions of Cobb Douglas and Translog forms employed. Two distributional assumptions were made on the distribution of the firm specific inefficiency term as exponential and half-normal. Econometric estimation used a Bayesian framework with a non-informative Jeffrey’s before estimate the posterior distribution. Results indicated that the Cobb-Douglas stochastic frontier with an exponentially distributed inefficiency term with random effect was the best fit. Technical efficiency was estimated for each tea estate assuming the time variation of efficiency cannot be seen in the sample estates. Results further indicated that there is a positive and significant impact on the monthly green leaf production by the revenue extent, labour, agrochemical, and fertilizer costs. The average technical efficiency level estimated was 86.9% and the minimum level is 66.2%. This shows that on average, in the high grown tea estates, a 13.1% increase in the production can be obtained without increasing the cost of production. Further, the highest impact on the green leaf production comes from the extent and therefore, estates should consider utilizing the abandoned tea lands to increase the production. Besides, it is prudent for the estates to look into the reasons for inefficiency and correct them so that they can increase their profitability in these hard times that most estates are running at a loss. Keywords: Bayesian analysis, Stochastic frontier analysis, Tea estates, Technical efficiency