Examining the persistent and transient technical efficiency of the Indian fertilizer industry

Mohd Shadab Danish and Pranith Kumar Roy

Applied Economics, 2025, vol. 57, issue 36, 5552-5566

Abstract: This study examines the persistent and transient technical efficiency of the Indian fertilizer industry using the Stochastic Frontier Analysis (SFA) model developed by Kumbhakar et al. (2014). The firm-level data is obtained from the Centre for Monitoring Indian Economy (CMIE) for the time frame spanning from 2009 to 2019. The results demonstrate a potential scope to enhance technical efficiency, with an average increase of up to 20%. It varies across firms where state-owned enterprises (SOEs) can achieve maximum improvement through continuous efforts to enhance efficiency by restructuring operations. Similarly, leveraging advanced technology and management practices can elevate efficiency by 20% by minimizing transient inefficiency. The result from Tobit regression suggests that private firms (individual and part of conglomerate) are more technically efficient than SOEs. The firms’ age, financial performance, and R&D are positively related to persistent and transient TE. Meanwhile, the size and embodied technology are positive and significant in influencing persistent TE. Private firms with R&D or embodied technology activities have no extra premium of higher TE against the R&D activity of SOEs. It underscores that the effectiveness of innovative activity varies across ownership of the firms due to differences in structure and functioning.

Date: 2025
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DOI: 10.1080/00036846.2024.2364939

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