The Pakistan Development Review 49 : 1 (Spring 2010) pp. 57–72 Environmental Efficiency Analysis of Basmati Rice Production in Punjab, Pakistan: Implications for Sustainable Agricultural Development ABEDULLAH, SHAHZAD KOUSER and KHALID MUSHTAQ * The intensive use of chemicals worked as a catalyst to shift the production frontier but the most critical factor of maintaining a clean environment was totally ignored. The present study attempts to estimate the environmental efficiency of rice production by employing the translog stochastic production frontier approach. The data are collected from five major Basmati rice growing districts (Gujranwala, Sheikupura, Sialkot, Hafizabad, and Jhang) of Punjab in 2006. Chemical weedicides and nitrogen are treated as environmentally detrimental inputs. The mean technical efficiency index is sufficiently high (89 percent) but the environmental efficiency index of chemical weedicides alone is 14 percent while the joint environmental efficiency index of chemical weedicides and nitrogen is 24 percent implying that joint environmental efficiency is higher than chemical weedicide alone. It indicates that substantial reduction (86 percent) in chemical weedicide use is possible with higher level of productivity. Moreover, it is likely to contribute a considerable decrease in environmental pollution which is expected to enhance the performance of agriculture labour. The reduction in chemical weedicides will save Rs 297 per acre and Rs 1307.3 million over all from the rice crop in Punjab, improving the profitability of rice growing farmers by the same proportion. Empirical analysis indicates that reduction in environmental pollution together with higher level of profitability in rice production is achievable. JEL classification: N5, O13 Keywords: Rice Production, Environmental Efficiency, Weedicide, Fertiliser (NPK), Stochastic Translog Frontier 1. INTRODUCTION Rice is one of the most important food crops that augment and earn foreign exchange for the national economy.. It contributes more than two million tonnes to our food requirements and is a major source of employment and income generation in the rice growing areas of the farm land. Rice is the third largest crop in terms of area sown, after wheat and cotton. It was cultivated on over 2.9 million hectares in 2008. Accounting for 5.9 percent of the total value added in agriculture and about 1.3 percent to GDP [Pakistan (2009a)] its importance in the national economy is obvious. Pakistan has two major rice- Abedullah <abedullah@yahoo.com> is Assistant Professor, Department of Environmental and Resource Economics, University of Agriculture, Faisalabad. Shahzad Kousar <shahzad_k_2005@yahoo.com> is Lecturer, Department of Environmental and Resource Economics, University of Agriculture, Faisalabad. Khalid Mushtaq <khalidmushtaq69@yahoo.com> is Assistant Professor, Department of Agricultural Economics, University of Agriculture, Faisalabad.