Efficiency of Community-based Salt Production in Indramayu District

Abstract

Indramayu is one of salt production center in West Java with character of having higher rainfall. Some problems faced by Indramayu, such as low farm gate price and fluctuating production level. These problems have caused farmers do not get any profit or having business inefficiency and higher business cost. The aims of the research carried out are (1) to identify the production factors that affecting the salt production, (2) to analyse the resources of efficient production techniques, (3) to analyse the economic and allocation efficency level of of salt production in Indramayu. Data was collected from 100 farmers, divided into 3 groups based on tenurial ownership (selected by multistage sampling technique and analysed using statistic inferencial) with production function Cobb-Douglas stochastic-frontier and cost function. The probability of OLS resulted RTS which salt production in increasing return to scale area where RTS of cash-rent farmers 2.670, share-rent farmers 1.350 and farmers owner-tenant 1.153. Farm size is the most responsive production factor to increase the production level. Technical and allocation inefficiency affected the salt production as described by estimation of gamma which significant in each of farmer’s type. The parameter of gamma shows 80.1%, 99% of output variances of salt business among the cash-rent farmers, share-rent and owner-tenant farmers is the difference in technical efficiency. The result of research also showed that increasing of farm size, income and access of capital loan in labour-farmer, significantly causing the efficiency increasement. The use of additives could also increase the efficiency of self-own farmers. The average of technical efficinecy is 68% in scale of 0.7 and the rest is under this scale. The allocation efficiency level is only 5% out of total samples which is dominated by farmers owner-tenant. With optimalisation test of production input through ratio of product marginal value of cost (in output price Rp. 450/kg), showed that the land and human resource factor is more than 1 which means it is needed to add farm size and human resources quality. The phenomena of high technical efficiency and low allocation and economic efficiency is the characters of agribusiness which still has problem in high price production input and low output price. By reducing the level of fuel for providing the sea water, it is able to increase the allocation efficiency of salt production. The farmers could do substitution by using the low cost technology of sea water supplier. The policy of extensification of salt-farm is one of strategies to increase the salt production and the intensification policy is improvement of infrastructures and technologies that could increase the production quantities with the available land