۱٫ Introduction

۲٫ A profile of the industry

۳٫ Literature review

۴٫ Data and methodology

۵٫ Results and discussions

۶٫ Conclusions and policy implications

Appendix

References

This paper applies MPI approach to measure technical change and productivity growth in 40 Indian sugar companies for the period 2004-05 to 2013-14. The empirical findings show that on an average, Indian sugar companies have registered a negative TFP growth rate of 0.7 percent per annum, though it varies considerably across years, indicating to the existence of sugar cycle. Decomposition of TFP growth into technical change and technical efficiency change reveals that the negative growth is only due to technological regress. The study suggests that apart from bringing the technical change, rationalization of sugarcane price policy is need of the hour.

Introduction

Sugar industry, with an annual production capacity of more than 25 million tons, is one of the largest agro-based industries of India. Over the period, this industry has been subjected to strict government controls, regulations and interventions. However, since 1993, the regulatory environment has been constantly easing. The Government of India constituted various committees (Mahajan Committee:1998; Tuteja Committee:2004; and Rangarajan Committee:2012) to de-license and de-regulate the industry. Based on their recommendations, the industry was delicensed in 1998 and gradually it has been partially de-regulated. Now, sugar mills are free to sell sugar in open market without any restriction and obligation to supply sugar at the subsidized rate for public distribution system. However, in spite of these policy changes, the industry still faces a number of regulations, including control over the supply and prices of sugarcane. Government of India fixes Fair and Remunerative Price (FRP) of sugarcane for the farmers every year on the recommendations of Commission for Agriculture Cost and Prices (CACP). Over and above it, some states, such as Uttar Pradesh, also announce State Advised Price (SAP), which is largely governed by politics rather than economics. Sale of molasses, a by-product of the industry, is also regulated. It is believed that a large number of regulations and controls, along with high order of politicization, have contributed large-scale inefficiency in the sugar industry (Datta et al., 2003). Furthermore, distorted production and trade policies of some industrialized countries, especially during the post-liberalized period, have made the sugar market more volatile, posing a big challenge to the competitiveness of the Indian sugar industry. The studies show that wide-spread interventions and controls in the sugar producing countries have created inefficient pattern of world production, consumption and trade of sugar (Borrell and Duncan, 1992; Devadoss and Kropf, 1996; Larson and Borrell, 2001; Oxfam, 2004). In this situation, the Indian sugar industry has to improve its global competitiveness.