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ECONOMIC ANALYSIS OF INPUT TREND IN COTTON PRODUCTION PROCESS IN PAKISTAN: METHODOLOGY

ECONOMIC ANALYSIS OF INPUT TREND IN COTTON PRODUCTION PROCESS IN PAKISTAN: METHODOLOGYThe data required for doing cost-benefit analysis have been collected from different organizations of Pakistan. These institutions include Punjab Economic Research Institute (PERI) Lahore, Cotton Research Institute Multan and Apcom, Islamabad. These organizations overtime have prepared cost of production of cotton. After collecting data, analysis is based on Cobb Douglas production function. The Multiple Linear regression has been used to study the impact of individual input on total return. The model functional form is:
Linear
Y = a + P1X1 + P2X2 + P3X3 + P4X4 +P5X5 + P6X6 + P7X7 +€
P’s are coefficient of the relevant input;
Where Y = Total income/revenue rupees per acreage.
X1= Cost of land preparation rupees per acreage X2= Cost of seed rupees per acreage X3= Cost of irrigation rupees per acreage X4= Cost of interculture rupees per acreage X5= Cost of the fertilizer used rupees per acreage X6= Cost of the plant protection rupees per acreage Bs=Coefficient of the variables € =error term a = constant
Cost-Benefit Analysis
The cost benefit has been calculated using following formula. Total benefit is termed as Net Return.
TC = Total Cost of production TR = Total revenue earned Net Return = TR-TC
Results and Discussion
The linear multiple regression models were used to access the impact of each input on total return. The variables included are seed, land preparation, fertilizer, interculture, irrigation and plant protection. The cost and return are taken in rupees. The R2 value of 0.97 indicates that about 96 percent variation in Total return is explained by independent variables included in the model. Estimated Model
TR = 1040.683 – 4.160*FERT + 2.186*IRRI + 21.606*ITCL – 3.588*LP + 1.206*PP + 19.271*SEED
The Impact/influence of independent variable on return is explained below:
Land preparation
Land preparation is one of the most important factors for achieving maximum return. The coefficient of land preparation is negative indicating that even 1 rupee invested on land preparation will decrease total revenue by 3.588 rupees. itat on
Seed
Seed is an important input in cotton production. The model result indicates that 1 rupee invested in seed will result an increase of 19.271 rupees in total return achieved from on acre of cotton. This investment in seed implies that further investment in seed mean to get better quality of seed resulting in higher production ultimately enhancing total return. The coefficient of seed (19.2) is positive and statistically significant at 1 % level showing that the farmers are using good quality and recommended variety and the quantity of seed.
Irrigation
Irrigation represents to apply water to the crop. Timely application of water is essential for enhancing crop growth. Irrigation water. If one rupee is invested in irrigation, the total return will increase by 2.18 rupees. Statistically it is significant at one percent level.
Fertilizer
Application of fertilizer is essential however according to the data available and analysis it is evident that farmers were spending maximum on fertilizer. Therefore the negative coefficient forbids to spend even one rupee otherwise the total revenue will decrease by rupees 4.16.