Browsing by Author "Somarathna, A.D.K.S.S."

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    Climate, Technology and Variations in Profit in Tea Production: A Study on Nuwara Eliya Tea Estates
    (Uva Wellassa University of Sri Lanka, 2019) Somarathna, A.D.K.S.S.; Edirisinghe, J.C.
    Tea is the major foreign income earning crop in Sri Lanka and its GDP contribution is 2% while the 65% of export agriculture revenue and 15% of foreign exchange earnings is also obtained through the tea industry. Also, about 20% of population depends directly or indirectly on the tea sector. The sustainability of this industry depends on its profitability and if not sufficiently profitable, these tea lands maybe converted to other uses in time to come. As predicted by climatologists, future weather is expected to be different from the present. Therefore, the main purposes of this study were to investigate the variability in profits among tea estates and to see weather, climate and technology influence this variation [risk]. This study was carried out in Nuwara-Eliya district because, it is the largest tea producing district in Sri Lanka as well as Nuwara-Eliya teas have high foreign demand. Nuwara-Eliya district consists with two tea growing regions which are Dimbula and Nuwara-Eliya; therefore, when selecting the sample variation of the agro ecology was considered. Data collection followed a stratified random sampling procedure. Twenty-three year’s production and climatic data were collected from thirtyfive estates were used in the analysis. Variance of the error term of the estimated profit function was assumed to be related to risk. Annual total rainfall, annual maximum and minimum average temperature were taken as the climatic variable while technology change was represented by a time trend variable. According to the result of this study, all weather variables showed ‘U’ shaped relationship with the variance. According the results the minimum variability in profit is obtained when the optimum annual rainfall is around 2000 mm, the annual maximum average temperature was 21 °C and the annual minimum temperature was 12.25 °C. Therefore, estate sector needs adaptation strategies for weather as well as possible changes in the climate that is bound to happen.
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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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    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