The core objective of the research is to measure economic efficiency of milk production and to explore profitability of dairy farming in different Tehsils of district Sargodha. The study projected the factor disturbing the milk production and farmers efficiency. Primary data of 75 dairy farmers is collected from three different Tehsils of Sargodha district, during 2016. Non-parametric Data Envelopment Analysis (DEA) technique is applied to assess economic efficiency scores. Economic efficiency

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... cores are regressed on certain farmer's characteristics to identify the sources of inefficiency using Tobit regression. The mean economic efficiency is 0.35. Technical and allocative efficiency of overall dairy farmers are 0.89 and 0.40 respectively. Outcome of Tobit regression revealed that dairy farmers with reference to age, education, operational area and herd size has positive and significant impact on economic efficiency but the farmer's family size has negative impact on economic efficiency of dairy farmers. Distance from pakka road is insignificant with reference to the efficiency of farmer. Herd size, green fodder cost, dry fodder cost, labour cost and number of milk animal have positive impact on income of the farmer while shed cost and disease treatment cost have negative impact on income of the farmer. Return to scale describes the investment condition of dairy farming as in this study is1.46, representing increasing returns to scale.