Bangladesh J. Agric. Econs XXX, 1 (2007) 95-108

Research Note TECHNICAL EFFICIENCY OF THE HATCHERY OPERATORS IN FISH SEED

PRODUCTION FARMS IN BANGLADESH

M. A. Islam R. K. Talukder

M. A. Khan

ABSTRACT

This siudti- is concerned with the estimation of technical efficiency of the hatchery operators producing fish seed Using 56 samples comprising 15 from Jessore, 10 from Chandpur, 16 from Bogra, and 15 from Siymensingh districts, the study has used frontier 4.1 Package to estimate the technical efficiency of the hatchery operators. A Cobb-Douglas type production function with nine quantitative variables namely. pond area, human labour, feed, fertilizer, number of brood fish, number of times brood used in a year, fuel electricity and hormone dose given to female brood and a dummy for stochastic frontier and a linear technical inefficiency function with 4 variables: Age, Education, Experience and Training received by the hatchery operator were estimated. Several hypotheses tests were performed using Log-likelihood Ratio Test. The mean technical efficiency of the hatchery operators was 60 percent. Technical efficiency were not found to be skewed towards higher or lower scores. rather concentrated in the 30'h, 40`", 60"' and 90°i percentiles. Hypothesis of existence of inefficiency effect was rejected establishing that significant inefficiency exists. More than one third of the seed production potential remains unutilized. Utilizing the unexploited production potential of the fish seed producers rather than establishing new farms and hatcheries appears to be the pertinent policy. Training of the farm hatchery operators can help achieve the unexploited potential.

I. INTRODUCTION The fisheries sector plays a very vital role in providing employment, animal protein,

earning foreign currency and reducing poverty in Bangladesh. Fisheries sector alone contributes 5.90 % of the total export earning (BBS, 2006) and this sector also contributes 4.73% to the Gross Domestic Product (GDP) (Bangladesh Economic Review 2007). About 12 million people are directly or indirectly involved in this sector. Labor employment in this sector has been increasing approximately by 3.5% annually. Fish production has been increased to 23.29 lac metric tons in 2006-07, which was 17.81 lac metric tons in 2000-2001 (Bangladesh Economic Review 2007). During 1980's about 95% fish spawn used to be collected from natural sources; currently more than 98% spawn produced in the hatcheries. More than 4 lac beneficiaries (unemployed youth, landless people, farmers, fishermen, and destitute women) have been received training, 2003-2004. In 2004-2005 the highest ever export earning of Taka 2572 crore was obtained through export of 633,378 metric tons of

The authors are respectively Scientific Officer, Agricultural Economics Division, BRRI, Gazipur-1701; Professor, Department of Agricultural Economics; and Assistant Professor, Department of Agricultural Finance, Bangladesh Agricultural University, Mymensingh.

96 The Bangladesh Journal of Agricultural Economics shrimp and fish products. Various steps have been taken by the Department of Fisheries and other public and private organizations for alleviation of poverty, employment generation, and export earning through boosting fish and shrimp production. The issue of poverty reduction has also been addressed in the form of management of inland fisheries through community participation, infrastructure development, human resource development, sanctuary establishment and need based technology dissemination. (DoF, 2005).

Fish catches and productions are not keeping pace with the growing demand. There is a

great shortage of fish production in this country and this situation is gradually aggravating day-by-day due to rapid growth of population. This situation requires the improvement of natural fish habitats and production of aquaculture. Availability of better quality of fish seed is essential to the establishment of aquaculture industry. To meet the increasing demand of pure fish seed in the private sector, the Department of Fisheries (DoF) has strengthened the existing public sector fish seed multiplication centers and encouraged the establishment of private sector fish hatcheries. The Department of Fisheries established 112 Fish Seed Multiplication Farms (FSMFs) covering almost all the districts of Bangladesh. On the other hand, more than 700 private hatcheries have currently been developed in different areas of the country.

Without getting high yielding species and quality fish seeds in time, fish culture in inland

water bodies cannot be ensured and fish production will continue to suffer. The supply of fish seed does not depend only on the collection of spawn from the hatcheries and the natural sources, but it also depends on the survivability of spawn during the process of rearing the same as fingerlings in the nursery ponds. Now-a-days, it appears that fish seed production technology has been transferred to the private enterprises. With the increasing demand for quality fish seed for aquaculture practices, the participation of private sector in this business becomes substantial.

For production of fish spawn/seed, healthy brood and its management is very essential. In

Bangladesh, with the expansion of hatcheries, availability of big sized and healthy brood fish increasingly becoming scarce as open water fisheries are depleting fast. There is a tendency to use small and unhealthy brood which is contributing to the availability of poor quality fry and fingerling. The poor quality is interpreted in terms of high mortality, low growth, disease susceptibility, all contributing to lesser production and hence availability of table fish in the country. Technical inefficiency of the concerned operators in the production of seed poses another problem. Thus mere increase in the number of FSMFs, hatcheries and hatching facilities may not assure increased supply of quality fish seed, the operators must be able to explore the fullest production potential.

Investigations on fish culture have been done by various researchers (Islam et al. 1997; Dey et., al. 2000; Khan, 2002, Alam, 2005, Islam, 2006). Of these investigations carp polyculture received priorities as this is the most widely practiced fish culture technology in Bangladesh. A good number of socio-economic investigations have also been made on fish culture technologies (Islam and Dewan, 1987, 1988; Miah, 2000; Malek, 1997; Khan, 1996, Rahman, 1995). Investigation on technical efficiency of the fish farmers in general and fish hatcheries in particular received less attention from the researchers. This study aims at

Technical Efficiency of the Hatchery Operators 97

investigating into the aspects of technical efficiency of the hatchery operators of the FSMFs so that level of inefficiency. if any, can be identified along with its implications for fish seed as well as table fish production in the country. Thus this study is expected to provide meaningful insights into the level of technical efficiency of the hatchery operators along with identification of factors affecting efficiency.

This paper is organized into five sections. Following introduction, the second section highlights chronological development of FSMFs and fish seed production. Section three addresses the methods of collection of data, and analytical techniques and construction of empirical model for estimation of technical efficiency. Results and discussion of the study are then presented in section four. Finally, concluding comments and policy implications of the study have been presented in section five. II. DEVELOPMENT OF FISH SEED MULTIPLICATION FARMS AND SEED

PRODUCTION The major input in culture fishery is the quality seed, and the expansion and development

of aquaculture production depend mainly on the availability of seed. The sources of fish seed in Bangladesh are spawn collected from rivers and those produced in government and private hatcheries. But natural breeding grounds are beset with many problems: (i) undesirable predator fish seed may come along with expected fish seed; (ii) infected and bad quality seed may come which may seriously affect the scientific fish culture. Moreover, wild seed is collected and handled in a crude and unscientific method-which leads to a large-scale mortality during transportation from collection centers to nursery ponds and also in the nursery ponds after release. Thus, though large quantities of fish seeds are collected from rivers. affecting natural recruitment to riverine fisheries and riverine fish production, its contribution to aquaculture is not commensurate with the efforts.

In order to get rid of the problems, hatching facilities have been enlarged to supply sufficient quality fish seed needed for fresh water and brackish water aquaculture development. The government of Bangladesh has given great emphasis on large scale hatchling production, nursery and rearing of selected fast growing aquatic carp fingerlings. Besides carps, seed production of Magur, Koi, Puti etc., has also been encouraged.

Fish hatchery is mainly a facility for hatching fish seeds. It constitutes an important component of a fish farm. A fish farm may comprise a nursery and/or rearing and/or stock ponds. A few years ago rivers were the main sources of carp seed. In recent times, however, consequent upon the development of the technique of induced breeding of carps, the connotation of a hatchery has been enlarged to include facilities for producing spawn, fingerlings suitable for stocking and growing in ponds.

A fishery establishment may have only a hatchery or only nursery or rearing or stock ponds or both hatchery and stock ponds. The magnitude of operation of each type is highly variable, varying from just a few spawning to large scale commercial operations in both the section of fish farm.

98 The Bangladesh Journal of Agricultural Economics During the 1970s the public sector of the country began producing quality fish seed

through artificial breeding techniques for fish farms by establishing a number of fish hatcheries. During the middle 1980s basic training in fish breeding and hatchery operation and management was undertaken, initially by the Department of Fisheries (DoF), and later by the BFRI. The private sector was instrumental in building a good number of hatcheries. During 1993 the public and private sectors established 102 and 256 hatcheries, respectively. The number rapidly increased during the last ten years to 756 with the private sector predominating in the development of fish hatcheries in the country.

With the success in production of fish seed through induced breeding and the increasing demand for quality fish seed for aquaculture practices, the Government of Bangladesh established a number of hatcheries in public sector in different parts of the country. Presently, fish seed is collected from rivers and also produced in the private and public hatcheries. The species mainly cultured in fresh water are: Rui, Catla, Mrigal, Silver Carp, Grass Carp, Mirror Carp, Thai Puti, Carpio, Kalibasu, Bighead Carp, Magur, and Koi. Spawn is collected during the monsoon season from the rivers: The Halda, the Jumana, the Padma, the Brahmaputra and thseir tributaries.

Around 8.8 billion seeds are collected annually from these rivers. Collection of seed from natural waters has currently been declining in the country. As against an estimated collection of 24 billion seed during 1983, the seed collected during 1987 was only one third of 1983 collection (Islam, 1989). It can be seen from Table 1 that natural seed collection drastically declined by 2004. But in the private sector, fish seed production is increasing day by day. Now-a-days more than 98 percent spawn requirement are met from induced breeding (DoF, 2004) (Table 1).

In recent years, there has been a phenomenal growth in the number of hatcheries, especially in the private sector. In 1982, there were only 3 private hatcheries in Bangladesh. The number increased to 40 by 1985 and 214 by 1987, producing 2.75 billion spawn annually, the rate of annual increment being 170 percent.

Table 1. Spawn/hatchling production of carp

Spawning hatching (kg) Artificial source Year

Natural source Public Private

1993 5069 3263 45,701 1994 5871 3180 69,355 1995 9145 3272 97,204 1996 2399 3616 112,595 1997 2824 3888 137,042 1998 3059 4014 162,781 1999 2245 4112 180,551 2000 2683 3994 262,859 2001 1872 3663 214,682 2002 1975 3229 276,481 2003 1044 3902 297,781 2004 1577 4802 345,227

Source: DOF (2004)

Technical Efficiency of the Hatchery Operators 99

At present, as many as 756 private hatcheries have been developed. The annual production of spawn from this sector amounted to around 345,227 kg in 2003-2004. It can also be noted here that the number of shrimp hatchery is 62 in Bangladesh (DoF, 2004). In addition to the huge number of hatcheries in private sector, there are 112 hatcheries in the public sector. The annual production of spawn from the public sector hatcheries is around 584 million

There is no actual figure as to what amount of fish seed is needed annually for culturing in stocking ponds and other possible areas in the country. But it has been observed that the demand for fish seed is very high during stocking period and both demand and price of fish seed have gradually been increasing for the last couple of years (Islam and Dewan, 1987).

III. DATA AND ANALYTICAL TECHNIQUE Data A reasonable size of sample which can at least satisfy the objectives set for the study was

taken into account. During the research period, a total of 168 private fish seed hatcheries were found in the study areas. For the present study, a set of 56 sample hatcheries were taken into account- It is to be noted that the scope of this research was confined with farms keeping hatcheries with brood ponds. A sample of 56 were randomly selected taking 15 from Jessore, 10 from Chandpur, 16 from Bogra, and 15 from Mymensingh district. A systematic sampling technique was followed in which one out of every three hatcheries was selected as sample.

Hatchery operation is such an enterprise that the owners have to be involved for a specific period of the year to produce spawn. Production season for fish seed from March-April and continues till September-October every year. Data used in the present study covered the period from March-April to September-October, 2005. However, the survey for collection of data was conducted during November-December, 2005.

Keeping in view the objectives of the study, a preliminary survey schedule was designed for collecting data from the selected hatcheries. The questionnaire was made to accommodate information on inventory of brood fish of the farms, detailed information, such as age and average body weight of the brood fish and their productive life, quantities of inputs used and their costs, cost of tools and equipment, miscellaneous cost, production and return for spawn, and problems faced and suggestions made by the fish seed farmers. Data were collected from primary sources, and it was accomplished by direct interview with the hatchery owners.

Analytical Technique

Technical efficiency refers to the ability of a firm to produce maximum possible output with a minimum quantity of inputs, using a given set of technology. A technically efficient firm will operate on its frontier production function. Given the relationship of inputs in a particular production function, the firm is technically efficient if it produces on its outer bound production function to obtain the maximum possible output, which is feasible under the current technology.

102 The Bangladesh Journal of Agricultural Economics

Z2 = Owner operator education (Years of Schooling); Z3 = Owner operator experience (Years); Z4 = Owner operator training (dummy, 1= trained; 0 otherwise)

Where, V; refer random variables assumed to be independently and identically distributed with mean 0 and variance oz, and independent of Us; and the Us are non-negative random variables associated with technical inefficiency. /7; and bl are unknown parameters to be estimated.

IV. RESULTS AND DISCUSSION

Table 2 displays the summary statistics of the variables used in the production frontier and inefficiency functions. It is to be mentioned here that the dummy variable (training for the inefficiency function) is not shown in the table. Spawn (fish seed), as used in this study, refers to fry produced by the operators and sold to the nursurer to raise it up to the fingerling stage. The weight of fry was taken into consideration. The mean of the seed (fry) was 1375 kg per farm per year ranging from a minimum of 53 kg to a maximum of 6100 kg with a standard deviation of ± 1212 kg. Pond area refers actually to the total water area of all the ponds under the disposal of the fish seed farms. The mean of the water area used for raising brood is 529 decimal ranging between 25 and 2350 decimals with a standard deviation of ± 494 decimal.

Labor refers to actual man-days of effort applied during the year in the production of seed including the family labor. The average labor man-days applied was 1499. Feed comprises rice bran, oilcake, maize, wheat bran and fish meal. The specific proportion of the different items of feed were 45.04 percent for rice bran, 38.05 percent for oilcake, 2.85 percent for maize, 8.57 percent for wheat bran and 5.76 percent for fish meal. The average quantity of feed applied per year was 17551 kg, ranging between a minimum of 362 kg and maximum of 58725 kg. Table 2. Summary statistics of the variables used in the models

Variables Mean Std. deviation

Minimum Maximum

Spawn (kg/farm/yr) 1375 1212 53 6100 Pond surface area (decimal) 529 494 25 2350 Labour (man-day/yr) 1499 1069 120 5760 Feed (kg/farmlyr) 17551 14077 362 58725 Fertilizer(kg/farm/yr) 4072 4883.71 0 25000 Brood fish (no./farm/yr) 3403 2767.65 140 11850 Number of times brood used in a year 2.79 0.49 1.5 4 Hormone used per farm (gm) 28.89 20.25 5 100 Fuel used (Liter/ farm) 1594 1401 0 6100 Electricity ( Cost/ farm) 19343 27796 0 150000 Age (Years) 45 9.87 25 68 Education (year of schooling) 9.59 3.12 5 25 Experience in spawn production (years)

10.51 5.82 0 23

Source: Filed Survey, 2005

104 The Bangladesh Journal of Agricultural Economics

The farmers used over doses of hormone to the brood to the extent that spawn production was adversely affected. Since the production frontier is of Cobb-Douglas type, its parameters had interpretation similar to elasticities of production. The effects of feed, fertilizer, number of brood, number of times brood used in a year, fuel and electricity were positive and statistically highly significant. On the other hand, two (experience and training) out of four explanatory variables of the inefficiency function were significant but the training had unexpected positive sign. This may be attributed to the fact that most of the training received by the farmers were not related to the hatchery operation, but to fish culture.

The positive sign of coefficient of age of the owner operators indicated that as the operators age increase, the inefficiency increase. It means that, young operators are more efficient than the old operators. Education has effect on inefficiency in spawn production but it is not significant. The variance parameters are also found to be highly statistically significant.

Hypotheses Tests

Results of the hypotheses tests are presented in Table 4. Two relevant null hypotheses tests namely, existence of inefficiency effect and existence of the explanatory variables effects in the inefficiency function were conducted first. In addition, tests concerning the effect of each of the variables in the inefficiency functions were also conducted. The format for the null hypothesis: non-existence of the inefficiency effect is y= 8„= 81= 82= 83= 84= 0. The test statistics was calculated to be 19.9, suggesting that the null hypothesis was rejected. The rejection of the null hypothesis supported the existence of inefficiency effect on the spawn production of the sampled hatchery operators. This implies that the traditional average response function is not an adequate representation for spawn production, given the stochastic frontier and inefficiency models defined in equations (1) and (2). The y(gamma) parameter, shown in Table 3, was very close to one and highly significant, suggesting the existence of technical inefficiency effect in the stochastic frontier model. The traditional production function, with no technical inefficiency effects, was not an adequate representation of the data. The hypothesis relating to whether technical inefficiency effects had the same truncated normal distribution was tested imposing 81= S2= 83= 84= 0. The test statistics was found to be 15.34, which was much higher than the critical value supporting the rejection of the null hypothesis. It can therefore be concluded that the inefficiency effects were significantly influenced by age, education, experience and training of the operators. Only one test concerning the effect of hormone applied to male and female brood on the production of spawn was conducted for the production frontier. The hypothesis tested was (37 =0 i.e., hormone applied to male and female brood had no effect on the production of spawn. The test statistics was found to be 5.24 which is highly significant at 1% level supporting the fact that the hormone dose applied to male and female brood significantly influenced the production of spawn. Therefore, it can be concluded that this dose has to be appropriate if the production of spawn is to be promoted. Proper investigation on this must be made so that proper doses of hormone are given to male and female brood to maximize the production of spawn for seed production.

Technical Efficiency of the Hatchery Operators 107 technical efficiency, thus these need to be made effective for the hatchery/FSMF operators especially those working in the area of induced breeding. Skills of these people need to be developed through training of hatchery management and practical demonstration. Of course the proper physical infrastructure needs to be established alongside. Since the overall technical efficiency level is even less than two-third, there is no justification at present to further develop seed production technology. What is needed more is the development of skill of the technicians and operator of the FSMFs / hatcheries to enable them to achieve full potential of the fish seed production. Government should oversee the existing skills of the people behind the hatcheries and FSMFs, make an inventory of the training needs and infrastructures qualities and assist accordingly for training of the people. Quality of existing infrastructure including broods being used for induced breeding should also be improved.

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