UNIVERSITY GRANTS COMMISSION

MINOR RESEARCH PROJECT

SUGAR INDUSTRY – PRODUCTIVITY TRENDS IN MAHARASHTRA

SATYASRI.M

SHANKAR NARAYAN COLLEGE OF ARTS AND COMMERCE, BHAYANDAR (E)

Sr.

No.

CONTENTS

PAGE NO.

1 PREFACE

2 INTRODUCTION

3 SUGAR INDUSTRY IN INDIA

4 SUGAR INDUSTRY IN MAHARASHTRA

a) LABOUR PRODUCTIVITY

b) CAPITAL PRODUCTIVITY

c) SUGARCANE PRODUCTIVITY

d) PRICE OF SUBSTITUTE GOODS

6 ANALYSES OF SUGAR PRODUCTIVITY

7 CONCLUSION

PREFACE

This study has been undertaken to observe the sugar productivity trends in Maharashtra.

Sugar industry in Maharashtra is a real contributor for agriculture sector as well as industrial

sector. It is interesting to know that the sugar industry in Maharashtra has a unique feature of

co-operative societies. They contributed for socio, economic and political development of

rural Maharashtra. With this historical background it is necessary to know the future of sugar

industry In Maharashtra at present condition. This research project has fulfilled this objective

with the study of productivity trends in relation to labour, capital and sugarcane.

During the completion of this project many people have contributed directly and indirectly. I

wish to take the names of them.

I am glad to express my heartfelt thanks to my Guide Dr. Surya Rao, Reader, Head of the

Department of Economics, PG courses, D.N.R. College, Bhimavaram.

I wish to thank our Chairman, S.N.Education Trust, Shri Rohidasji Patil for his interest in

academic development of the Staff.

I extend my sincere thanks to our Principal Dr.S.B.Singh for his kind co-operation to

complete this study.

I would like to thank my college Librarian Mr. S.Dongre and clerk Miss Anjali Shinde for

providing the timely assistance.

I wish to thank my colleague Dr.A.Rabbani and Mr. Sunil Dhapse

I wish to thank all the Librarians of various institutions like Pune University, Gokhale

Institute of Economics and Politics, V.S.I. Manjari (Bk), Pune, University of Mumbai, IGIDR

and S.N.College for the assistance during the time of collecting the data and information

about the study.

The work remains incomplete unless I thank the UGC for their financial assistance to

encourage the research attitude of academicians.

Last but not the least I wish to thank my mother, sisters and brother for the moral support in

all my activities.

SUGAR INDUSTRY- PRODUCTIVITY TRENDS IN MAHARASHTRA

Chapter I

Introduction

Objectives

Scope and Data Sources

Review of Literature

Chapter II

The productivity trends of sugar industry in India

a) Labour productivity

b) Capital Productivity

c) Sugarcane Productivity

Chapter III

Productivity trends in Maharashtra

1. Sugarcane Labour productivity

2. Capital Productivity

3. Sugarcane Productivity

Chapter IV

Analysis

Chapter V

Conclusion

Limitations and Suggestions

CHAPTER I

INTRODUCTION:

1.1 About the study and need for the study

1.2 Objectives, Scope, Data Sources

1.3 Definition and Measurement of Variables

a) labour productivity

b) capital productivity

c) sugarcane productivity

1.4 Methodology

1.5 Scheme of Analysis

1.6 Review of Literature

In this Chapter an introduction about the study, need for the study, objectives of the

study, scope, data sources and scheme of analysis are presented.

1.1 About the Study:

Sugar industry is one of the major traditional industries in India. The dictionary

meaning of sugar is ‘a sweet crystalline substance obtained from sugarcane and sugar beet’. It

is one of the most important consumer goods.

Sugar Industry is second largest agro-based industry in India. It ranks third largest

industry in terms of its contribution to the net value added by manufacturers. It employs 3.25

lakh workers directly and 45 million farmers of sugarcane cultivation indirectly. The total

installed sugar factories in India are 594 out of which 317 are in cooperative sector and 215

are in private sector and 62 are in public sector.

The major raw material required for the industry is sugarcane. Sugarcane forms 60 per

cent of the total cost of production. Therefore, the sugar industry is naturally located near to

the availability of sugarcane. Thus the location factor plays an important role in sugar

industry.

Sugar is an essential mass consuming commodity. The market for sugar is a seller’s

market unlike that of sugarcane. Sugar can be stored in order to gain from the price

fluctuations in the market. This has given scope for the manufacturers and traders to

mismanage the distribution and exploit cane growers and consumers for maximize their

profits. Thus the state intervention and control over the production and marketing of

sugarcane and sugar become necessary.

In comparison with other countries, one of the strangest features of India’s sugar

sector is the almost complete absence of large-scale, factory owned sugarcane growers. But

during 1930s there was a rise of vigorous new competitors from the South and West of India

organized on new lines as Co-operative factories owned by thousands of village cane

growers. The first co-operative factories started in 1933-35 in Andhra Pradesh at Etikoppaka,

Thummapala and Vuyyur.

In 1934 Saswad Mali community set up sugar factory in Maharashtra. But the real

growth of co-operative sugar factories started by the Pravara co-operative Sugar factory in

1950-51. At present there are 317 number of co-operative sugar factories out of 594 sugar

factories. Co-operative sugar factories contributed towards agriculture development as well

as industrial development in India.

There are two important by-products of sugar industry i.e. bagasse and molasses.

They are used in various products and major revenue streams to sugar industry. Ethnol is

manufactured from industrial alcohol which is produced by molasses. The other by-product

bagasse is used in co-generation of power.

Although Indian sugar industry occupies fourth rank as a producer in the world, its

contribution towards foreign trade is not significant. It is because of various problems faced

by the sugar industry. The major problems of sugar industry in India are;

1. Existence of a large number of sick units. These units are unable to run at

break-even points. A large number of Indian sugar factories are old and

outdated and of small capacities. The manufacturing losses are high.

2. Instability due to changing government controls, decontrols and partial control

policy in sugar industry. The executives are of the opinion that the frequent

changes in the government sugar policy are effecting the internal stability and

development planning programmes.3

3. The higher price for sugarcane i.e. S.M.P. and S.A.P. aggravated the cost of

production.ted.

4. A study of Reserve Bank of India points out declining trend in the profitability

of some 77 selected companies.

5. Competition from Gur and Khandasari is another major problem of sugar

industry in availing raw material- sugarcane.

1.2 Objectives of the study:

1. To study the productivity trends of sugar industry in Maharashtra for the period of

1991 onwards

2. To analyse the productivity in sugar industry in relation to

a. Labour Productivity

b. Capital Productivity

c. Sugar Cane Productivity

d. Price of substitute goods

3. To evaluate the prospectus of sugar productivity

4. To suggest necessary measures to improve productivity

Scope of the study: In this study the time period is selected from 1991 onwards to examine

the effects of policy changes in the industrial sector.

Data Source:- To analyse the trends in sugar industry in India and Maharashtra secondary

data is used as a main source.

1.3 Definition and Measurement of variables:-

In this study the traditional measures of productivity such as labour productivity, capital

productivity, sugar cane productivity are used to understand the productivity trends.

Labour productivity: it is measured by dividing the Gross Value Added (GVA) with number

of persons employed.

Capital productivity: it is measured by dividing the Gross Value Added (GVA) total output

with capital.

Sugarcane productivity: it is measured by yield in terms of Kg production of sugar per

hectare of area.

1.4 Methodology:

The study has compared the averages of capital, labour and sugarcane productivities with

output productivity in India as well as Maharashtra.

1.5 The scheme of Analysis:

In this study the topics are analysed as in the following manner

1. The chapter I consists with the introduction to the topic the sugar industry—

productivity trends in Maharashtra.

2. The chapter II studies the productivity trends in India in general and in Maharashtra

specific.

3. The chapter III deals the detailed study of trends in productivity of labour, capital and

sugarcane and the impact of prices of substitute goods.

4. Chapter IV examines the analysis of the sugar industry.

5. In the chapter V the conclusion, limitations and suggestions are discussed.

1.6 Review of Literature

Kirilyuk and Kirilyuk (1971)1 have indicated with empirical evidences the need to increase

production capacity of the factory from 900-1600 to 1700 tonnes per day in order to achieve

economies of scale further, the suggested the optimum campaign length of 110 to 115 days.(

“The production capacity of sugar factory and optimum length international”. Sugar Journal

February 1971, P.No.56)

Syed Ali (1990)2 studied cost and revenue structure, capacity utilization, technical efficiency

and performance of sugar industry in the thesis “An Analysis of the functioning of Nizam

Sugar factory-A case study of Amruthnagar Unit”. It has been observed that there is an

inverse relationship between scale of productions and cost per quintal. It is suggested that

sugarcane price should be realistic and high yielding and maturing verities should be used

instead of traditional verities.

Pagar Sudhakar Kashinath (2003)3 studied the transformation of rural economy due to sugar

cooperatives in the thesis “Socio economic effects of a Cooperative Sugar Factory: A case

study of Vasantdada Patil Sahakari Sakhar Karkhana Lts Vithewadi, taluka deola,

Nasik(1982-2001)2005. The study explained the changes in the rural economy with special

reference to agriculture, industry, trade and commerce, employment generation, infrastructure

development etc.

Nachiket Madhav Vechalekar (2004)4 studied the cost effectiveness of sugar industries in

the thesis “Assessment of Cost effectiveness of Sugar Cooperatives in Western Maharashtra

with special reference to by products, joints products and multi products”. This thesis studied

the cost structure of selected sugar factories under different conditions like including and

excluding by products. It has been observed that the conversion cost showed an increasing

trend in all the four years. The technical performance has been observed that there has been

constant improvement in the recovery percent of sugar in the last 5 years.

G.Subramanian (1982)5 studied the regional efficiency of the sugar industry by using Cobb-

Douglas production function for the period 1953-60 and 1961-69. The concept of efficiency

has three interpretations

i.e. technical, price and economic. It has been concluded that the tropical region is relatively

more efficient than the sub-tropical region and the stability with regard to efficiency remains

unaltered between that periods. (“Regional Efficiency in Indian Sugar Industry-A Production

Function Approach”, Margin, January-1982, Vol.14, No.2)

K.R.Dawar (1990)6 studied returns to scale and factor productivity in the cooperative Sugar

Industry in Punjab and Haryana. The span of 20 years (1963-64 to 1982-83) data has been

collected from original accounts of the mills. It has been observed that the sugar mill is said

to be operating at constant returns. In conclusion the Punjab in general has been better

performance than Haryana. (“Returns to Scale and Factor Productivity in the cooperative

sugar industry in Punjab and Haryana”- Indian Journal of Industrial Relations, Vol.26, NO.2,

October, 1990.)

R.M. Honavar (1992)7 studied the performance of the sugar industry in four southern states

Tamil Nadu, Karnataka, Andhra Pradesh and Kerala during 1970-71 to 1979-80. The growth

pattern has been analysed with the parameters like labour productivity, capacity utilization,

recovery, project behavior, growth in the profits, profits per tone of sugar. The study

concludes that The sugar economy of the four southern states has been subject to very sharp

fluctuations. The performance of the sugar industry in South India, as indicated by the

profitability ratios, has declined over the latter half of the 1970s,Trends in the performance of

the physical indicators such as productivity of labour and rate of capacity utilization diverged

significantly from that of value indicators such as net sales, gross value added and gross total

assets. Variations in physical efficiency thus did not appear to have any decisive influence on

the financial performance of the industry. (“The Structure, Growth and Performance of the

Sugar Industry in South India”-ICSSR Research Abstracts Quarterly, Vol.XXI, No.1&2, Jan-

June 1992.)

Dr.T.S.Devaraja (2008)8 studied the cost of production of sugarcane into sugar in Karnataka

during 1990-91to 2004-05. The internal and external influencing factors of this industry with

a view to know the cost of production of sugarcane into sugar have been discussed. To study

this sugar factories from private, public and cooperative sectors have been selected. In this

study it has been observed that the cost of sugarcane is around 60% to 70% of the total cost.

The study observed that the quantum of loss in selling per quintal is highest in public sector

sugar factory in comparison to private and cooperative sector. Sugarcane price paid by

private sector factory is higher in comparison to public and cooperative sector. Fixed and

other costs are also highest in public sector as compared to cooperative and private sector. It

is concluded in this paper that the availability of sufficient quantity of qualitative sugarcane is

an important requisite for the factory to be economically viable. (“Cost of Production of

Sugar from Sugarcane in Karnataka—A Comparative Analysis Approach”-COOPRATIVE

SUGAR, Vol.39, No.6, pp15 to 22)

Bohhade Shivaji N. examined the SWOT analysis of sugar factories in the article “SWOT

Analysis of Sugar Factories in Maharashtra” (Co-operative Sugar, March 2007; Vol.38,

No.7).The comparison of strengths, weaknesses, opportunities and threats of sugar factories

were analysed as ;

Strengths: co-operative form of organization, Support of sugarcane growers Support of the

central and state governments, Easy availability of sugarcane, Availability of cheap labour

and Availability of supervisory and technical staff.

Weaknesses: Insufficient supply and low productivity of sugarcane, Lack of professional

management, Lack of training facilities to employees, Political interference, Over

employment, Outdated technology, Under- utilization of capacity, Over burden of stock of

sugar as compared to the world, High rate of interest on bank borrowings, Lack of research

and development activities, Inadequate irrigation facilities and poor water management,

Inadequate farm credit, Non-availability of high yield varieties and Inadequate attention to

the ratoon crop.

Opportunities: Establishment of by-product complexes, Increase in sugar consumption in

India, Increase in sugar productivity, Package from Governments, Alternative crop like beet,

Development of sugar complexes, Concentration on research and development, Adoption of

drip irrigation system and Computerisation of sugar factories.

Threats: Changing policy of the Governments, Shortage of sugarcane, Entrance of private and

foreign competitors, Competition with other sugar factories and substitute industry, Attack of

white woolly aphids, insects, diseases and weeds.

L.D. Deodhar (1950)10 studied labour in the sugar industry in 1950 with reference to Bombay

Deccan in his thesis “Labour in the Sugar Industry of Bombay Deccan”. In this thesis he has

considered the problems of the labourers working in the sugar industry, their standard of

living and welfare.

N.G.Bapat (1968)11 worked on the economic development of Ahmednagar district and given

the history of sugar factories in the district. But there was no reference in related to impact of

sugar factories on rural economy.

N.S. Jain (1976)12 worked on Theur Cooperative Sugar Factory of Haveli taluka in Poona

district under “Regional Economic Planning in a Sugar Factory Area”. The study analysed

the proper demarcation of functions between the sugar factories and other local planning

agencies. The study also examined the propriety of entrusting particular planning functions to

an organization like a cooperative sugar factory.

G.B. Andhale (1972)13 studied the impact of sugar factory on the lives of the producer

shareholders of the factory with special reference to Sangamner Bhag Sahakari Sakhar

Karkhana under “A Study of impact of Cooperative Sugar Factory on the lives of Farmers

with a special reference to Sangamner Bhag Sahakari Sakhar Karkhana”.

V. Malyadri (1975)14 analysed certain aspects of socio-economic impact of sugar

cooperatives in general. The study focused on social aspirations and social accountability of

economic organization. It also observed that a sense of consciousness among people at all the

levels has been developed due to the cooperative sugar factories.

Mahajan 15 Committee has been appointed by the government of India to study the

development and growth of the sugar industry in India vis-à-vis other sugar producing

countries, and suggest modifications, amendments and repeal of existing laws and controls

for healthy growth of sugar industry. The important recommendations are complete decontrol

of sugar price, supply of sugar through PDS may be discontinued when complete decontrol

becomes effective, continuation of statutory minimum price for sugarcane, existing policy for

licensing of new sugar mills may continue with modifications, no new license for khandasari

units should be allowed within the reserved sugar mill area, strengthening the research and

development for sugarcane cultivation and sugar industry.

-----------------------------------------------------

CHAPTER II

THE PRODUCTIVITY TRENDS IN INDIA

In this Chapter the Sugar Industry productivity trends in India were analyzed in terms of

labour productivity, capital productivity, sugarcane productivity and the impact of substitute

goods prices. These topics have been covered under the following sections

1.1 Growth and development of Sugar Industry in India

1.2 The concept of productivity

1.3 Trends in labour productivity in sugar industry in India

1.4 Trends in capital productivity of Sugar Industry in India

1.5 Sugarcane productivity trends of sugar industry in India

1.6 The impact of prices of substitute goods

1.7 Summary

1.1 Growth and development of sugar industry

India is the fourth major sugar producer in the world, with 22% share of the world’s sugar

production. It is second largest agro-based industry in India. It ranks third largest industry in

terms of its contribution to the net value added by manufacturers. It employs 3.25lakh

workers directly and 45 million farmers of sugarcane cultivation indirectly. Sugarcane

production accounts for 3% of total cultivated area and contributes 7.5% of the gross value of

agricultural production. It is also an important source of excise duty for the Central

Government. The growth and development of sugar industry has under gone various

conditions which has been explained with the following aspects

a) The growth of number of sugar factories

b) Sugar production and consumption trends

c) State wise production in India

d) India: Cane Acreage, Cane Yield, Sugar Production, Recovery

There were only 29 sugar factories in 1931 in India. They have been grown into 159

by 1950-51. The growth of number of factories has been shown in the following table 1.

Table 1 the growth of number of sugar factories in India

Year Number of Factories

1950-51 138

1955-56 143

1960-61 174

1965-66 200

1970-71 216

1973-74 229

1978-79 299

1980-81 314

1985-86 399

1990-91 385

1994-95 417

1995-96 415

1999-2000 423

2000-01 437

2001-02 433

2002-03 453

2003-04 422

2004-05 397

2005-06 450

2006-07 501

2007-08 508

Source: ISMA

At present there are 508 sugar factories with average capacity tons crushed per day of

2700 and with total installed capacity of 19.2 million tones and 500 factories were in

operation. There is a continuous rise in production and consumption of sugar since 1950-51.

The growth trends of production and consumption of sugar have been shown in the following

table 2.

Table 2. Sugar production and consumption

(million tones)

Year Production Consumption

1950-51 1.1 0.8

1955-56 1.6 1.2

1960-61 3.0 2.0

1965-66 3.5 2.7

1970-71 3.7 4.0

1975-76 4.2 3.6

1980-81 5.1 4.9

1981-82 8.4 5.6

1985-86 70.16 83.53

1986-87 85.01 87.75

1987-88 91.10 93.33

1988-89 87.52 99.19

1989-90 109.88 102.83

1990-91 120.46 107.15

1991-92 134.04 112.25

1992-93 106.09 120.05

1993-94 98.33 111.29

1994-95 146.43 119.74

1995-96 164.51 131.27

1996-97 129.05 138.66

1997-98 128.52 148.39

1998-99 155.41 150.35

1999-2000 182.00 154.19

2000-01 185.11 160.77

2001-02 185.29 178.47

2002-03 201.00 185.00

2003-04 135.46 175.00

2004-05 126.91 167.07

2005-06 192.67 189.45

2006-07 283.64 201.60

2007-08 263.57 217.96

The trends in consumption and production of sugar during 1950-51 to 2007-08 reveal

that there are violent fluctuations in them. The growth in consumption shows continuous rise,

where as the growth in production is fluctuating.

The contribution of various states in the sugar production in India has been shown in

the following table.

Table 3. State wise Sugar Production in India (1000 Tonnes)

State 2003-04 2004-05 2005-06 2006-07 2007-08

Andhra Pradesh 886 982 1236 1680 1335

Bihar 274 253 422 451 336

Chattisgarh 17 10 18 24 38

Gujarat 1066 797 1168 1425 1366

Haryana 582 400 409 652 599

Karnataka 1116 1040 1943 2662 2900

Goa 10 8 11 19 15

Madhya Pradesh 93 72 94 180 174

Maharashtra 3175 2217 5197 9100 9075

Punjab 390 315 338 486 534

Rajasthan 9 4 6 7 6

Tamil Nadu 941 1126 2170 2599 2192

U.P. Central 1452 1601 1778 2908 2473

U.P. East 1399 1601 2093 2823 2414

U.P. West 1701 1835 1913 2744 2432

Others-Orissa, West Bengal 41 49 45 69 68

All India 13546 12691 19267 28364 26357

Source: Sugar India Year Book 2009.

Given transport facilities and access to markets, the economic size of a sugar unit is

necessarily dependent upon the availability of cane in the region. This concentration is

substantiated from observation of the trend of sizes established in different regions of this

country in relation to availability of cane. Comparatively the size of the sugar mills in U.P.,

Bihar and Maharashtra where continuous availability of cane is assured, is observed to be

larger. The following table4 shows the trends in Cane acreage, Cane Yield, Sugar Production

and Sugar Recovery during 1989-90 to 2007-08. It has been observed that there was an

overall increase in all the parameters of sugar industry during this period.

Table 4. India: Cane Acreage, Cane Yield, Sugar Production, Sugar Recovery

Year Cane Acrege

(1000 Hect.)

Yield of Cane

(per Hect./M.T.)

Sugar

Production

(1000 M.T.)

Recovery

(Sugar %

Cane)

1989-90 3439 65.6 10990 9.89

1990-91 3686 65.4 12047 9.84

1991-92 3844 66.1 13405 10.01

1992-93 3572 63.8 10609 10.30

1993-94 3422 67.1 9833 10.00

1994-95 3867 71.3 14643 9.92

1995-96 4147 67.8 16453 9.42

1996-97 4174 66.5 12905 9.90

1997-98 3930 71.1 12852 9.95

1998-99 4055 71.2 15539 9.86

1999-2000 4220 70.9 18200 10.20

2000-01 4316 68.6 18511 10.48

2001-02 4411 67.4 18528 10.27

2002-03 4520 63.6 20145 10.36

2004-04 3938 59.4 13546 10.22

2004-05 3662 64.8 12690 10.17

2005-06 4201 66.9 19267 10.21

2006-07 5151 69.0 28367 10.16

2007-08 5043 67.5 26357 10.55

Source: Sugar India Year Book 2009

Location of sugar industry in India

Sugar industry is an agro based industry. The major raw material required for the

industry is sugarcane. Sugarcane forms 60 per cent of the total cost of production. Therefore,

the sugar industry is naturally located near to the availability of sugarcane. It is also essential

because the sucrose content of the sugarcane begins to decrease soon after the cane is cut. In

the words of Dr.Mehta, “ the location pattern of the sugar industry is greatly influenced by

the character of local distribution of sugarcane within the country and since such distribution

depends entirely on physical and geographical factors, nature plays a dominant role in

determining the location of sugar industry”.

Sugarcane grows both tropical and subtropical regions. In India, Andhra Pradesh,

Tamil Nadu, Karnataka, Kerala and Maharashtra come under tropical regions where as Uttar

Pradesh, Bihar, Punjab, Haryana, West Bengal, Rajasthan, Orissa and Madhya Pradesh come

under sub regions. It has been observed a location shift in the sugar industry from subtropical

region to tropical region during the process of development.

The sucrose content in the sugarcane grown in the tropical regions is greater than in

sub-tropical regions and the development of cane in the South is mainly responsible for

bringing about location changes in the industry. Further the completion of various irrigation

projects like the Irwin canal in Mysore (Karnataka), Nizamsagar and Tungbhadra projects in

A.P., Cauvery and Mettur and Periyar irrigation projects in Madras have led to the sugar

industry’s development in Southern states.

State intervention and sugar price policy

Sugar is an essential, mass consuming commodity. The market for sugar is a seller’s

market unlike that of sugarcane. Sugar can be stored in order to gain from the price

fluctuations in the market. This has given scope for the manufacturers and traders to

mismanage the distribution and exploit cane growers and consumers for maximize their

profits. Thus the State intervention and control over the production and marketing of

sugarcane and sugar become necessary from time to time to curb the market imperfections

like hoarding, black marketing, regulating price rise and ensuring equitable distribution of

sugar to the consumer apart from ensuring a fair price for the cane grower and sugar

manufacturer.

The sugar industry was granted tariff protection by the Government under the Sugar

Industry (Protection) Act of 1932. Within five years of granting such protection the industry

showed a magnificent development and its production reached a stage of surplus and created

problems of price decline and marketing. In 1937 “Indian Sugar Syndicate Ltd” was

established by the sugar mills owners with a membership of 92 sugar factories. However, due

to failure on the part of its member factories to adhere to the norms fixed, the Syndicate could

not succeed in regulating the prices and marketing of sugar.

Government intervention under these circumstances became inevitable to protect the

interests of various groups like farmers, producers and consumers. Thus the statutory control

on price and distribution of sugar was imposed for the first time in the country through the

promulgation of the “Sugar Control Order” in 1942.

However the Control Orders created certain favorable conditions to the industry.

During the first three years of the imposition of control i.e. from 1941-42 to 1943-44 the area

under cultivation increased from 29.44 lakh acres to 35.20 lakh acres recording 22% increase.

Similarly, the sugarcane and sugar output increased from 379 lakh tones to 579 lakh tones

and 7.63 lakh tones to 12.2 lakh tones recording a growth rate of 37 per cent respectively.

The partial control policy was introduced in 1950 which has shown a positive impact

on area under sugarcane cultivation, cane output and sugar output which were 32, 24 and 56

per cent respectively. However the frequent policy changes of the government created

instability in sugarcane production as well as sugar production.

The changes in sugar control policies were shown in the following table 5.

Table 5. Sugar policy in India

Year Policy Levy % Free sale %

Minimum

cane price

(Rs./QTL)

Linked to

basic

recovery

1980-81 Partial control 65 35 13.00 8.5

1981-82 Partial control 65 35 13.00 8.5

1982-83 Partial control 65 35 13.00 8.5

1983-84 Partial control 65 35 13.50 8.5

1984-85 Partial control 65 35 14.00 8.5

1985-86 Partial control 55 45 16.50 8.5

1986-87 Partial control 50 50 17.00 8.5

1987-88 Partial control 50 50 18.50 8.5

1988-89 Partial control 45 55 19.50 8.5

1989-90 Partial control 45 55 22.00 8.5

1990-91 Partial control 45 55 23.00 8.5

1991-92 Partial control 45 55 26.00 8.5

1992-93 Partial control 40 60 31.00 8.5

1993-94 Partial control 40 60 34.50 8.5

1994-95 Partial control 40 60 39.10 8.5

1995-96 Partial control 40 60 42.50 8.5

1996-97 Partial control 40 60 45.90 8.5

1997-98 Partial control 40 60 48.45 8.5

1998-99 Partial control 40 60 52.70 8.5

1999-2000

(from 1-1-2000 to

30-9-2000)

Partial control 30 70 59.50 8.5

2000-2001

(1-10-2000 to

31-1-2001)

Partial control 30 70

2000-01(1-2-2001 Partial control 15 85

to 30-9-2001)

2001-02 (1-10-

2001 to 28-2-

2002)

Partial control 15 85

2001-02 (1-3-

2002 to 30-9-

2002)

Partial control 10 90

2002-03 Partial control 10 90 69.50 8.5

2003-04 Partial control 10 90 73.00 8.5

2004-05 Partial control 10 90 74.50 8.5

2005-06 Partial control 10 90 79.50 9.0

2006-07 Partial control 10 90 80.25 9.0

2007-08 Partial control 10 90 81.18 9.0

2008-09 Partial control 10 90 81.18 9.0

Source : Sugar India Year Book,2009.

Finally the intervention of State in the Sugar Industry Policy has been criticized due to

lack of practicality and more political oriented.

Sugar co-operatives

In recent years co-operative sugar factories have begun to play an increasing role in

the total sugar production in the country. Thus, co-operative sugar factories have taken a

strong hold on sugar industry and this has resulted in great benefit to sugarcane growers who

are shareholders and members of the co-operative sugar factories.

The process of development of co-operatives in sugar industry

This industry first grew on a large-scale during the 1930s and 1940s in northern and

especially northeastern India (Bihar and eastern U.P.). Although the cane itself was grown

cheaply by the villagers, the transaction costs in getting a regular supply delivered to the mills

were quite considerable.

Many of the private mill owners have responded, over the last few decades, by

neglecting to reinvest in new equipment. Their plants have become obsolete and even less

able to cope with the demands of the cane growers and the Government. The roots of these

problems are set the awkward cane supply relationship between the factories, the cane

growers and the co-operative supply unions with their underlying conflict of class interest.

Meanwhile, the old established sugar interests of northern India have been faced with

the rise of vigorous new competitors to the South and West. These competitors are organized

on new lines as co-operatives not as co-operative cane supply unions, but as co-operative

factories, with each factory owned by thousands of village cane growers.

The first co-operative factory was organized in 1950 in Western India, in the state of

Maharashtra. It was a success and by 1960 there were 14 such factories in the State; by 1970

there were 30 and by 1980 the number was 60. Maharashtra produces more sugar than any

other State, more than 35 per cent of India’s total white sugar. Almost 90 per cent of the

sugar produced in Maharashtra comes from the co-operatives, the rest from a few private

factories which were established in the 1930s. The co-operative sugar factories of

Maharashtra are successful because they have resolved the longstanding problem of the

Indian Sugar Industry, which was cane supply. As on 30.09.2003 the State wise number of

installed sugar factories has been shown in the following table 6.

Table 6. State wise Total Number of Installed Sugar Factories (2006-07)

States Public Private Co-operative Total

Punjab - 7 16 23

Haryana - 3 12 15

Rajasthan 1 1 1 3

Uttar Pradesh 33 93 28 154

Uttaranchal 2 4 4 10

Madhya Pradesh 2 5 5 12

Chattisgarh - - 1 1

Gujarat - 1 22 23

Maharashtra - 28 165 193

Bihar 15 13 - 28

Assam - 1 2 3

Orissa - 4 4 8

West Bengal 1 1 - 2

Andhra Pradesh 1 27 15 43

Karnataka 3 29 23 55

Tamil Nadu 3 21 16 40

Pondicherry - 1 1 2

Kerala - 1 1 2

Goa - - 1 1

Nagaland 1 - - 1

All India Total 62 240 370 619

Source: Sugar India Year Book, 2009.

With the above data it is clear that in total installed sugar mills till 2006-07 around

60 per cent are in co-operative sector. It explains the domination of co-operative sector in

sugar industry in India.

Role of By-Products in Sugar Industry

There are two important by-products of sugar industry i.e. bagasse and molasses.

These two are major revenue streams which are available to sugar industry. They are used in

various products.

Molasses: it is used for alcohol, fertilizers, cattle feed etc. Almost 90 per cent of the

molasses is utilized for production of industrial alcohol, which can be further processed to

manufacture ethanol. The balance 10 per cent is used for cattle feed and other purposes.

Every tonne of molasses can generate around 230 ltrs of industrial alcohol.

As on April 2004 data there are around 300 distillery units in the country with a

capacity of around 3 bn. Litres of alcohol. However only 50 per cent of these units are

operating and producing around 1.5 b.litres of alcohol from molasses. This is because of the

lower realizations of industrial alcohol. The Molasses production at all India level has been

increased 5905000 tonnes to 11302000 tonnes during 2003-04 to 2007-08.

The Government has recently made 5 per cent blending of ethanol with petrol

compulsory across the country. This is expected to result in a huge demand for ethanol and

provide a positive trigger for the sugar companies as ethanol is manufactured from industrial

alcohol. At 5 per cent blending the demand for ethanol is expected to be 500 mn.litres. Hence

this will result in significant demand for industrial alcohol as well and improve the overall

capacity utilization.

Bagasse : is the residual of sugarcane, is the other major by-product of the sugar

industry. Generally the process of sugar making generates around 33 per cent of bagasse.

Hence one tonne of sugarcane would generate around 330k.g. of bagasse. It is used for

production of paper and for generation of steam, which is utilized for co-generation of power.

Every tonne of bagasse can generate around 345 kwh of power.

Thus these two major revenue streams are available for the sugar industry, which improves

profitability of sugar industry.

Problems of Sugar Industry

The sugar industry plays an important role in the development of agriculture sector as

well as industrial sector. Although Indian sugar industry occupies fourth rank as a producer in

the world, its contribution towards foreign trade (export) is not significant. It is because of

various problems faced by the sugar industry.

1. Sick units: one of the major problems of the industry is the existence of a large number

of sick units. They are unable to run at break-even points. The reason is use of out dated

machine resulting in inefficiency and high cost of structure.

2. Government policy: the sugar economy is highly controlled by the Government policy.

The sugar industry is unstable with changing Government policy of controls, decontrols

and partial controls. One side the sugarcane price is fixed by the Central Government as

Statutory Minimum Price(SAM) and State Advised Price(SAP) fixed by each State over

and above the SMP. On the other hand sugar mills have to supply the levy quota at prices

fixed much lower than the market prices (the levy sugar is allotted to State/UT

Governments for distribution through the Public Distribution System). Prices of levy

sugar are fixed zone wise on the basis of SMP of sugarcane conversion costs as

recommended by the Bureau of Industrial Costs and Prices. There is no price control on

free sale of sugar but market supply is regulated by the Government by fixing monthly

release quotas to maintain price stability. Export quotas are also determined by the

Government and handled by designated export agency. The whole scheme of sugar

controls is not in the interest of the industry or the economy.

3. Higher prices for cane: The sugar mills have to pay much higher prices for the purchase

of cane that what is SMP and SAP. The factories in eastern U.P. and Bihar had to pay

about 50 per cent more than the SMP and SAP. This aggravates the cost of production of

sugar.

4. Profitability: A study of finances of 77 sugar factories for the period of 1965-66 to

1970-71 made by the Reserve Bank of India, points out declining trend in the profitability

of these companies. Their sales which showed a rise of 13.3 per cent in 1966-67, rose

only by 8.5 per cent and 0.4 per cent during 1969-70 and 1970-71, respectively. But the

rate of dividend was maintained. As a result, the sugar industry has been deprived of self-

financing by ploughing back profits which is most natural and healthy source of funds

from internal accruals for its expansion programmes.

5. Competition from Gur and Khandasari: In India, 10 tonnes of sugar are obtained from

100 tones of cane but in case of khandasari only 7 tonnes of sugar are derived. Thus there

is a net loss to the country by the use of cane but in case of khandasari and gur. The

recovery content of gur is only 5 per cent. The gur factories deprive the community by 25

to 40 per cent of sucrose when they divert the cane required by sugar mills. While the

price of sugarcane supplied to the factories is fixed by the Government, there is no price

fixation for sugarcane used for gur. The result is that production of gur often increases at

the cost of sugar. Thus the price fixation policy is not fair enough while distribution of

sugarcane among sugar, gur and khandasari is considered. Thus it would be much more

desirable to chalk out a combined allocation policy of sugarcane for these three close

substitutes at the same price.

1.2 Productivity:

Productivity is an important measurement for performance of a firm, industry, sector

etc. Productivity has been recognized as an important aspect in the process of economic

development.” In the process of economic growth production and productivity are two

significant aspects. Production is the amount of absolute flow of product during a given

period, productivity is the measure of the efficiency in production of factors, inputs and factor

input services” - Brahmananda, P.R., Productivity in the Indian Economy – Raising inputs for

falling outputs. Himalaya Publishing House, 1982, p-3.

Measurement of Productivity:

Productivity measures can be broadly classified into two categories; partial factor and

total factor productivity measures.

Partial factor productivity:

Partial factor productivity is the average productivity of a particular input in question,

such as labour, capital, raw materials and fuels. In other words while studying the partial

factor productivity, the relationship between output and only one input is considered at a

time, ignoring the role played by other inputs in the production process.

Marginal productivities: marginal productivity of a particular factor input indicates

“the change in contribution to output” made by that factor input per unit change in input

level. Marginal productivity of a factor input is variable over time and it varies directly with

the corresponding variation in output-input ratio.

Total factor productivity:

“The measure of total productivity compares output to a weighted combination of

inputs usually labour and capital.This measure however, does not take into account some

factors such as managerial ability, degree of competition and to the extent it cannot be

considered as a true index of total factor productivity and hence the term multi factor

productivity may perhaps be a better one”—Krishna, K.L., “Total factor productivity:

concepts and measurement”, Productivity, Vol.x.No.4,1970, p-701.

The total factor productivity is also identified with other names such as “technical

change” and “The Residual”. From time to time various researchers have developed different

approaches to measure technical change. However most of the empirical studies are based on

either the Kenrick’s arithmetic index or the Solow’s geometric index.

In this analysis the trends in partial factor productivity are analysed with the help of

labour productivity, capital productivity and the raw material (sugar cane) productivity.

1.3 The trends in labour productivity:

Labour productivity is defined as a ratio between output and corresponding labour input.

Output is measured in physical units or in monetary terms while labour input can be

measured in terms of number of workers or number of man-hours. In this analysis the labour

productivity is measured by output (Gross Value Added) with labour input as number of

persons employed.

Table 7. Trends in Labour Productivity

Year GVA No. of persons

employed

Labour

productivity Growth rate

1995-96 312851 257944 1.21286 --------

1996-97 255525 272233 0.93862 -29.21

1997-98 394310 236019 1.6706 43.81

1998-99 461874 307374 1.50264 -11.31

1999-2000 481526 322099 1.49496 -0.513

2000-01 547629 317421 1.72524 13.34

2001-02 542078 293996 1.84382 6.43

2002-03 473886 295760 1.60226 -15.07

2003-04 389738 274465 1.41999 -12.83

2004-05 501747 244608 2.05122 30.77

Source ASI

In the above table the labour productivity in sugar industry was measured for the period

1995-96 to 2004-05. The number of persons employed is defined as all persons employed

directly or through any agency whether for wages or not and engaged in any manufacturing

process or in any other kind of work incidental to or connected with the manufacturing

process or the subject of manufacturing process. Labour engaged in the repair and

maintenance or production of fixed assets for factory’s own use or labour employed for

generating electricity or producing coal, gas etc. are included.

Gross Value Added is derived by the difference of total outputs and total inputs. The

labour productivity for the above period is derived by dividing the GVA with Number of

persons employed. The growth rate of labour productivity is derived for the above period.

The average growth rate of labour productivity is derived as 2.82411111.

The data for ten years i.e. from 1995-96 to 2004-05 was taken into account.

1.4 The trends in capital productivity:

The capital productivity is defined as value added per rupee of capital and thus can be the

ratio of output (Gross Value Added) to capital. The data for ten years from 1995-96 to 2004-

05 was considered.

Table 8. Trends in Capital Productivity

Year GVA (Rs.lakh) Capital Capital

productivity Growth rate

1995-96 312851 530941 0.58924 ---------------

1996-97 255525 643178 0.39728 -48.31857

1997-98 394310 692404 0.56948 30.238112

1998-99 461874 836012 0.55247 -3.0789

1999-2000 481526 867008 0.55539 0.525757

2000-01 547629 1118384 0.48966 48.966

2001-02 542078 1104274 0.49089 0.250565

2002-03 473886 1267183 0.37397 -31.26454

2003-04 389738 1282466 0.303897 -23.05814

2004-05 501747 1315117 0.38152 20.345722

Source: ASI

The capital productivity is measured by the ratio of Gross Fixed Capital and Gross Value

Added. Fixed capital is defined as the depreciated value of fixed assets owned by the factory

as on the closing day of the accounting year. The average capital productivity is derived as

0.4703797.

Sugarcane Productivity:

It is measured as the yield (KG/Ha) by considering the area under sugarcane cultivation (‘000

Ha) to production of sugarcane (‘000 tns)

Table 9. Sugar cane Yield

Year Area (‘000 ha) Production (‘000 tns) Yield (kg/ha)

1995-96 4147.4 281100.0 67777

1996-97 4174.1 277560.0 66496

1997-98 3929.8 279541.4 71130

1998-99 4075.6 288720.0 70840

1999-2000 4224.9 299320.0 70847

2000-01 4315.7 295956.2 68577

2001-02 4410.0 297208 67394

2002-03 4520.3 287383.2 63576

2003-04 4023.0 233861.0 58131

2004-05 3760 237088.0 63055

The productivity of sugar cane is derived with GVA/sugarcane production. The trends are as

follows

Table 10. Sugarcane productivity trends in India

Year Sugarcane productivity Growth rate of sugarcane

productivity

1995-96 1.11295 --------

1996-97 0.92061 -20.89267

1997-98 1.4105603 34.73446

1998-99 1.599729 11.825047

1999-2000 1.608733 0.559695

2000-01 2.05909624 21.871889

1001-02 1.82390111 -12.89517

2002-03 1.64897019 -10.60844

2003-04 1.666536 1.054031

2004-05 2.11629015 21.252008

The average sugarcane productivity is 1.5967376. The growth rates are also derived which

reflects progressive nature except certain years. The average of growth rates of sugarcane

productivity is 5.21119844. When it is compared with individual years of the above

mentioned period, it can be concluded that growth rates of individual years are higher than

average for majority years. Thus it is clear that the influence of sugarcane is more than any

other factor of production.

Table 11. Trends in partial factor productivity:

Year Labour

productivity

Capital

productivity

Sugarcane

productivity

1995-96 1.21286 0.58924 1.11295

1996-97 0.93862 0.39728 0.92061

1997-98 1.6706 0.56948 1.4105603

1998-99 1.50264 0.55247 1.599729

1999-2000 1.49496 0.55539 1.608733

2000-01 1.72524 0.48966 2.05909624

2001-02 1.84382 0.49089 1.82390111

2002-03 1.60226 0.37397 1.64897019

2003-04 1.41999 0.303897 1.666536

2004-05 2.05122 0.38152 2.11629015

The trends in labour productivity, capital productivity and sugarcane productivity have been

shown in the above table.

Productivity of labour increased from 1.21286 in 1995-96 to 2.05122 in 2004-05. The

growth rates of labour productivity fluctuated between -29.2 to 30.77 during the same period.

Productivity of capital is observed that it was declined from 0.58924 in 1995-96 to 0.38152 in

2004-05. The average capital productivity for the period 1995-96 to 2004-05 is 0.4703797.

The sugarcane productivity trends were observed that there is an increase in sugarcane

productivity for the period 1995-96 to 2004-05 from 1.1125 to 2.11629015. The average

sugarcane productivity is 1.5967376.

Table 12. Trends in Growth rates of labour, capital and sugarcane productivity:

Year Growth rate Labour

productivity

Growth rate of

capital productivity

Growth rate of

sugarcane

productivity

1995-96 ------------- --------------- --------

1996-97 -29.21 -48.31857 -20.89267

1997-98 43.81 30.238112 34.73446

1998-99 -11.31 -3.0789 11.825047

1999-2000 -0.513 0.525757 0.559695

2000-01 13.34 48.966 21.871889

2001-02 6.43 0.250565 -12.89517

2002-03 -15.07 -31.26454 -10.60844

2003-04 -12.83 -23.05814 1.054031

2004-05 30.77 20.345722 21.252008

During the period 1995-96 and 2004-05, the growth rates of labour productivity,

capital productivity and sugarcane productivity were shown in the above table. It is observed

that the growth rates of three variables -- labour, capital and sugarcane -- were started with

negative i.e -29.21, -48.32 and -20.9 respectively. In 2004-05 these variables have shown a

positive growth rates such as 30.8, 20.3 and 21.25 respectively. Even though there are

fluctuations in the middle years the positive growth rate trends in 2004-05 is remarkable.

1.6 The impact of substitute goods:

The substitute goods like Gur and Khandasari play an important role in sugar industry. As

these three goods share the common raw material- sugarcane, the price of sugar is affected by

the price of gur and khandasari. Due to the competition, the substitute goods also effect the

availability of sugarcane for sugar factories. However the consumption of sugar is

progressively increased from 21.23 lakh tones in 1960-61 to 173.35 lakh tones in 2002-03.

The consumption of gur and khandasari decreased from 66.87 lakh tones in 1960-61 to 56.94

in 2002-03. The trends in consumption of sugar, gur and khandasari were shown in the

following table.

Table 13. Trends in consumption of sugar, gur and khandasari.

Year Consumption of sugar (lakh

tones)

Consumption of gur and

khandasari (lakh tones)

1960-61 21.13 66.87

1970-71 40.25 74.37

1980-81 49.80 85.22

1990-91 107.15 90.71

2000-01 162.00 88.09

2001-02 181.88 99.77

2002-03 173.35 56.94

Source: Maharashtra State Co-operative Sugar Factories Federation Ltd., Statistical Dairy 2009

1.8 Summary:

In this chapter the sugar industry in India was discussed in detail i.e. from historical

background of sugar industry in India to productivity trends of sugar industry in recent

period. It is observed that inspite of various problems the the sugar industry has shown a

remarkable growth within a short span. Three important variable factors i.e labour, capital

and sugarcane are examined in this study. The productivity trends and growth rates of

productivities of labour, capital and sugarcane for the period of 1994-95 to 2004-05 were

derived on the basis of secondary data. The observations are as follows;

Productivity of labour increased from 1.21286 in 1995-96 to 2.05122 in 2004-05. The

growth rates of labour productivity fluctuated between -29.2 to 30.77 during the same period.

Productivity of capital is observed that it was declined from 0.58924 in 1995-96 to

0.38152 in 2004-05. The average capital productivity for the period 1995-96 to 2004-05 is

0.4703797.

The sugarcane productivity trends were observed that there is an increase in sugarcane

productivity for the period 1995-96 to 2004-05 from 1.1125 to 2.11629015. The average

sugarcane productivity is 1.5967376.

The growth rates of three variables -- labour, capital and sugarcane -- were started

with negative i.e -29.21, -48.32 and -20.9 respectively in the year 1994-95.

In 2004-05 these variables have shown a positive growth rates such as 30.8, 20.3 and

21.25 respectively. Even though there are fluctuations in the middle years the positive growth

rate trends in 2004-05 is remarkable.

The study reveals that the production of sugar in terms of GVA was Rs312851 lakh in

1994-95 increased to Rs.501747 lakh in 2004-05. However there are variations in GVA from

1994-95 to 2004-05. It is concluded that these variations are due to variations in labour,

capital and sugarcane productivity. The trends in growth rates of labour, capital and

sugarcane also conform that the variations in sugar production are due to highly varying

labour, capital and sugarcane productivities.

Other important factor that influences sugar production is substitute goods prices. Gur

and khandasari are two important substitute goods of sugar. Sugar cane is the common raw

material for sugar, gur and kahandasari. This arises competition among these three products

for availing sugarcane. Consequently the price of sugarcane and the price of sugar are

influenced by this competition. However in recent years the demand for gur and khandasari is

comparatively reduced with sugar. Thus it is observed that the impact of substitute goods is

lessened.

---------------------------------------------------

CHAPTER - III

Sugar Industry in Maharashtra

In this chapter the productivity trends of Maharashtra were analysed in relation to

labour, capital and sugarcane productivity and also with substitute goods prices. The study

has been taken place under the following sub sections.

1.1 Development of sugar industry in Maharashtra

1.2 Labour productivity of sugar industry in Maharashtra

1.3 Capital productivity of sugar industry in Maharashtra

1.4 Sugarcane productivity of sugar industry in Maharashtra

1.5 Impact of substitute goods

1.6 Summary

1.1 DEVELOPMENT OF SUGAR INDUSTRY IN MAHARASHTRA

Maharashtra is the second largest state in both area and population in India. It is

sharing the boundaries with Gujarat in the northwest, Madhya Pradesh in the north, Andhra

Pradesh in the south east and Karnataka and Goa in the south and Arabian Sea in the west. It

has about 720 k.m. long and 800 k.m. wide coastal belt enriched with paddy fields and

coconut gardens. Historically Maharashtra falls into three regions viz.. Western Maharashtra,

Vidharbha and Marathwada. The Sahyaddris or the Western Ghats are the mountain range

existed parallel to the coastal stip of Konkan. To the east of Sahyadri there is a vast plateau.

This plateau is fertile with great rivers like Godavari, Bhima and Krishna. It provides

excellent crops like cotton, oil seeds and Sugarcane.

Economy of Maharashtra

Maharashtra’s Gross State Domestic Product was estimated at Rs.3,39,425 crore in

2005-06 at 1999-2000 constant prices. The Net State Domestic Product for the year 2005-06

is Rs.3,86,241 crore and the per capita state income is Rs.37,081.The state economy is

growing at an impressive pace having registered a growth rate of 9.2 per cent in 2005-06 and

the industrial growth rate is of 9 per cent. The sectoral composition of state income is as

follows.

Table 14. Sectoral composition of state income

Sector 1960-61 1993-94 2003-04 2004-05

Primary sector 34 % 21.22% 13.44% 12.84%

Secondary sector 26% 31.16% 25.75% 25.93%

Tertiary sector 40% 47.62% 60.81% 61.23%

Source Economic Survey of Maharashtra 2005-06

The sectoral composition explicate the ever increasing share of tertiary sector, almost

all constant share of secondary sector and diminishing share of primary sector. Even though

the primary sector share is decreasing, 55 per cent of population still depended on this sector

and about 58 per cent of the state population resides in rural areas. The per capita annual

income of the people in the state whose subsistence is primarily on agriculture and allied

activities is approximately Rs.7,900 as against the per capita state income of Rs.32,600 which

shows wide imbalance in the income levels of the people engaged in agriculture and non-

agriculture activities.

Historical background of Sugar Industry in Maharashtra:

Maharashtra is located climatically the world’s most ideal tropical belt between15 and

230atitude north and south of equator. It was a late starter in sugarcane cultivation compared

not only to other countries/areas located in this belt but compared even to other areas in India

such as Uttar Pradesh and Bihar.

The first sugar factory in Maharashtra was established in 1919 in private sector which

was started by the British Company at Haregaon, in Ahmednagar district. The

Walchandnagar Industries Ltd established their Walchandnagar Sugar farm in the year 1930.

The Tariff Commission appointed by the Government of India recommended the

production protection for a period of 14 years to the sugar industry. The Government of India

adopted a favorable policy and provided incentive to the industry.( Ref: Bapat, N.G.,

Economic Development of Ahmednagar Dt. 1880-1960, Progressive Corporation Pvt Ltd.,

Bombay, 1973 p-132). It created a support to the growth of sugar industry in Maharashtra. By

the end of Second World War 12 sugar factories opened in private sector.

The Co-operative Credit Societies Act 1904 was passed in 1904. In 1925 the Bombay

Province Co-operative Societies Act was passed. In 1931 protection was granted to the sugar

industry. All India Rural Credit Survey Committee under the chairmanship of Shri Gorwala

was appointed by the Government of India, in 1951 to develop the co-operative credit

structure in this country. Major recommendations of this committee were accepted by the

Government of India. This approach of the GoI was very much responsible for the

development of sugar industry in co-operative sector after independence.

The growth of sugar industry in Maharashtra was rapid, due to the climatic conditions

as well as cultivation methods of farmers in Maharashtra is attributed to the co-operative

sector. In the words of Maharashtra Economic Development Council “the vast smiling green

fields of sugarcane which are seen in Maharashtra today were the success of this co-operative

sugar factory created tremendous upsurge amongst the sugarcane growers of the state to

organize more and more co-operative sugar factories. The co-operative sugar factories in the

state have brought about a change in the crop pattern and through the introduction of better

varieties of cane have succeeded in improving substantially the cane yields in their areas and

can proudly claim to have obtained the highest recovery among all sugar factories co-

operative or joint stock. Along with the technological achievements, they have also infused

on the atmosphere other powerful social and economic forces, so that the co-operative sugar

factories in the state have today came to be regarded as effective spring boards for achieving

rural development “.(Ref: Shrishrimal, W.C., The Mechanism of Determining cane price in

co-operative sugar factories in Maharashtra, The Maharashtra co-operative Quarterly,

Vol.No.4 April,1967, p89). Due to the origin of co-operative sector in sugar industry and the

support of Government policy there are 172 factories in Maharashtra in 2007-08 out of 516

total factories in India. It is major producer of sugar with 9075000 tones out of total

26357000 tons in India during 2007-08.

Role of Cooperatives in Maharashtra Sugar Industry:

The sugar industry in Maharashtra is one of the major agro-based industries in

Maharashtra. It is major producer of sugar in India. The prime foundation for the

development of sugar industry in Maharashtra is Co-operative sector. The Cooperative

Societies Act was enacted in 1904. During 1933-35 the cooperative movement started in

sugar sector in Andhra Pradesh with cooperative sugar factories at Etikoppaka, Thummapala

and Vuyyru. However due to initial management problems the Thummapala and Vuyyru had

been sold to private enterprises. In 1959 the Thummapala was returned as Anakapalle

Cooperative Agricultural and Industrial Society Ltd.

During 1930’s the cooperative idea was also being developed in Maharashtra. In the

Saswad village near Pune the Mali community used canal irrigation for cane production and

converted their cane into gur. As the price of gur started falling down and as the State

Government was encouraging establishment of sugar mills by leasing out land near Neera

canal area for 30 years lease, the Saswad Mali community decided to set up their own sugar

factory in 1934. But due to some reasons it had been registered under Companies Act rather

than Cooperatives Act. The real growth of the sugar industry has been taken place after

independence, 1947. In 1948 the Government of India has passed the 1948 Industrial

Resolution Policy under which the industrial development takes place on the development of

Cooperative Sector. Thus the Government of India started giving preference to Cooperative

Sector in licensing of sugar factories. This policy was continued till 1998.

Due to this preferential policy of the Government there was a squirt in the

establishment of the sugar factories, especially in the Cooperative Sector in Maharashtra. The

Cooperative Sugar Industry in Maharashtra was a trend setter for all the cooperatives in India.

The first cooperative sugar factory set-up in Maharashtra was the Pravara Cooperative Sugar

Factory at Loni in Ahmednagar district. Under the leadership of Padmasree Dr.Vikhe Patil

and guidance of Prof.G.R.Gadgil, Dr. Vailkunthbhai Mehta and help of Maharashtra State

Cooperative Bank the Pravara Cooperative Society has been registered and Pravara

Cooperative Sugar Factory with a capacity of 500 TCD in 1950-51. In spite of the shortage

of irrigation facilities, the society was successful in increasing sugarcane production as well

as the prosperity of farmers.

The growth of Co-operative sector of sugar industry in Maharashtra has been shown

with reference to

a) Installed Sugar Factories and Capacity

b) Sugar Factories under Production, Sugarcane Area, Sugarcane Production

c) Sugar Production in the following tables.

a) Table 15. 1. Maharashtra State Installed Sugar Factories and Capacity

Installed sugar factories Installed cane crushing

capacity

Sr.No. Sugar Year Co-operatives Total Number

Co-

operatives

(M.T.)

Total (M.T.)

1. 1979-1980 60 70 91032

2. 1980-81 67 78 115382 131030

3. 1981-82 67 78 121082 136150

4. 1982-1983 67 78 121082 136750

5. 1983-84 67 78 121082 137350

6. 1984-85 77 88 131932 147600

7. 1985-86 82 92 140180 155848

8. 1986-87 78 97 150566 164348

9. 1987-88 90 100 159066 173748

10. 1988-89 91 101 161216 174998

11. 1989-90 92 101 171066 183332

12. 1990-91 93 101 191450 183332

13. 1991-92 94 101 194200 202716

14. 1992-93 100 106 215136 222302

15. 1993-94 104 109 229920 235836

16. 1994-95 105 110 237900 243816

17. 1995-96 107 112 245166 252566

18. 1996-97 112 117 261000 268000

19. 1997-98 117 121 275000 284000

20. 1998-99 125 128 229600 302000

21. 1999-2000 129 133 315100 322400

22. 2000-01 134 143 340400 354900

23. 2001-02 147 160 370860 390460

24. 2002-03 163 178 409366 430716

25. 2003-04 166 184 419800 445650

26. 2004-05 166 185 419800 448900

27. 2005-06 166 186 419800 450000

28. 2006-07 165 188 426800 457650

29. 2007-08 165 193 436000 466950

b) Table 16. 2. Maharashtra State-Sugar Factories under Production Sugarcane

Area, Sugarcane Production

Sugar Factories under

production

Sr.No. Sugar Year Co-operatives Total

Area under

Sugarcane

(M.T.)

Sugarcane

Production

(M.T.)

1. 1979-80 60 70 5.49 198.19

2. 1980-81 67 77 2.56 235.91

3. 1981-82 67 78 2.97 287.80

4. 1982-83 67 78 3.26 313.60

5. 1983-84 67 78 2.94 265.49

6. 1984-85 77 87 2.92 263.67

7. 1985-86 80 88 2.65 237.06

8. 1986-87 84 91 2.80 240.91

9. 1987-88 85 90 2.92 249.84

10. 1988-89 90 95 3.14 255.00

11. 1989-90 92 96 3.83 340.08

12. 1990-91 93 97 4.44 384.16

13. 1991-92 94 99 4.53 361.12

14. 1992-93 95 99 4.03 309.23

15. 1993-94 94 97 3.44 272.99

16. 1994-95 104 107 6.12 442.60

17. 1995-96 106 109 5.27 441.94

18. 1996-97 105 117 4.67 382.38

19. 1997-98 92 95 4.60 381.74

20. 1998-99 116 119 5.30 471.51

21. 1999-2000 123 133 5.90 531.40

22. 2000-01 128 137 5.95 495.69

23. 2001-02 122 135 5.78 451.40

24. 2002-03 144 159 5.73 426.17

25. 2003-04 119 135 4.43 256.68

26. 2004-05 84 101 3.24 204.75

27. 2005-06 121 142 6.24 670.00

28. 2006-07 141 163 10.17 834.00

29. 2007-08 145 173 12.56 888.00

30. 2008-09 (estimate) 165 193 7.87 529.00

c) Table 17. 3. Maharashtra State-Sugar Production

Sr.No. Sugar Year Sugarcane Crushed

(LakhM.T.)

SugarProduction (Lakh

M.T.)

Co-operatives Total Co-operatives Total

1. 1979-80 118.27 131.50 12.60 13.94

2. 1980-81 169.51 188.83 18.77 20.85

3. 1981-82 250.88 282.92 26.87 30.26

4. 1982-83 245.67 276.25 26.96 30.25

5. 1983-84 161.70 179.04 18.03 19.93

6. 1984-85 190.64 208.54 21.21 23.11

7. 1985-86 196.71 213.19 22.10 23.89

8. 1986-87 206.31 217.52 22.70 23.88

9. 1987-88 248.10 258.28 26.91 27.95

10. 1988-89 230.40 238.03 25.50 26.29

11. 1989-90 355.23 366.38 38.08 39.23

12. 1990-91 373.31 382.82 40.10 41.13

13. 1991-92 365.18 376.59 40.91 42.13

14. 1992-93 292.10 297.20 33.06 33.60

15. 1993-94 242.25 246.66 26.98 27.45

16. 1994-95 450.51 459.97 49.23 50.24

17. 1995-96 502.41 515.13 52.66 53.97

18. 1996-97 302.31 310.17 33.60 34.45

19. 1997-98 336.42 345.81 37.47 38.47

20. 1998-99 468.12 479.41 52.17 53.40

21. 1999-2000 570.41 570.41 65.00 65.00

22. 2000-01 556.82 576.55 64.76 67.05

23. 2001-02 459.61 483.06 53.42 56.12

24. 2002-03 505.74 534.73 58.95 62.21

25. 2003-04 272.18 290.76 29.75 31.74

26. 2004-05 180.69 194.28 20.87 22.33

27. 2005-06 414.96 445.79 48.59 51.97

28. 2006-07 732.28 798.38 83.53 90.95

29. 2007-08 690.01 761.92 82.12 90.59

The above mentioned data reveals that Co-operatives in Sugar Industry of

Maharashtra playing a crucial role in the development of sugar industry in the state. Along

with economic development, Co-operatives have also contributed for the overall development

of rural areas by taking up various social, educational and cultural activities. This is a unique

feature of Sugar Co-operatives in comparison to other Co-operatives in India. Pravara

Cooperative Sugar Factory, Kisan factory are some of the examples in this category.

Contribution of sugar cooperatives in various fields:

It is well known fact that the cooperatives have contributed for the economic progress of

member farmers. But their contribution for various social, educational and cultural activities

is remarkable.

Development schemes and infrastructure:

Sugar cooperatives in Maharashtra have undertaken various development schemes according

to the needs of the society. In different areas different activities have been undertaken. For

example, in Satara, Sangli, and Kolhaput districts the lift-irrigation schemes for the benefit of

their cane growers. In groundnut producing districts, they helped in setting up oil processing

cooperatives and solvent extraction plants. In cotton growing areas, they helped establish

cooperative ginning and pressing units. Some factories have established pulp and paper mills;

others have started distilleries and chemical plants; others have set up printing presses, cattle

feed plants, and cooperative banks.

The innovative schemes have been followed like Kisan factory along with Sanjivani

and Ganesh set up a cooperative distillery to manufacture industrial alcohol from molasses.

It has also selected twelve dry villages in its area for irrigation projects. The farmers

in these areas have been encouraged to form cooperative lift irrigation societies to avail water

from canal to their fields. So far Kisan factory has contributed over Rs. 2,00,000 for the

development of irrigation facilities in the dry areas. In the same manner the Pravara factory

had provided 55 percolation tanks, 40 lift irrigation schemes and other irrigation facilities.

The Shetkari factory contributed to 46 lift irrigation schemes. The Panchagang factory

invested about Rs30 million in lift irrigation. The Rahuri factory spent about Rs. 2.6 million

for the lift irrigation. The Olegao factory, undertook the construction of barrages on a nearby

river in order to provide irrigation water.

They have also undertaken various programmes like intensive cultivation, animal

husbandry centers, dairy development project , veterinary centers, cooperative societies for

milk producers, milk chilling plants, post, telegraph and telephone facilities, institute which

trains sugar technologies and conducts research in the engineering, manufacturing and other

technical aspects of the industry etc and many more. The Maharashtra sugar cooperatives

have jointly set up a sugar research institute in the state. The sugar cooperatives in

Maharashtra have also jointly set up a cooperative heavy engineering corporation to

manufacture machinery for sugar factories.

Social welfare:

The Maharashtra sugar cooperatives have also made their place in providing social

welfare programmes especially in the fields of education and health. The Kisan factory has

taken the initiative to start both primary and secondary school for the employees as well as

the village children. Sanjivani and Ganesh along with Kisan factory started two colleges. The

Pravara factory is sponsoring 12 primary and secondary schools, a girl’s high school and a

college. Many other cooperatives are also sponsoring various educational projects.

The Kisan has also set up a health centre on the factory site with qualified medical

staff, equipment and medicines. The Pravara factory has gone further, creating a medical trust

of Rs. 5 million, and establishing a hospital with 150 beds. They have also supported

financially like construction of houses for landless labourers. Many other programmes have

been started to benefit the lower castes.

Emergency Relief and Other activities:

The cooperatives have played a significant role to organise many relief activities

during emergency and natural calamities. In 1971-72 drought conditions the Kisan

shareholders contributed Rs.1,50,000 for the drought relief fund. In this manner the

cooperatives have contributed financial assistance to the Government in conducting relief

works.

Thus the sugar cooperatives achieved a remarkable development of the sugar industry

and also fulfilled social responsibilities. It has been rightly analysed by D.M. Attwood and

B.S. Baviskar( in their article Why Do Some Co-operatives Work But Not Others?( EPW Vol

XXIII no 26) ) that “no government department would have been able to plan and execute all

these activities within such a short period.”

The growth of sugar industry in comparison with rest of India is shown in the

following table

Maharashtra Rest of India

No. of sugar factories 186(32.9%) 380(67.1%)

No. of cooperative sugar factories 165(52.4%) 150(47.6%)

Sugar production 22.33 lakh tones 104.67 lakh tones

Sugar production in

Cooperative factories 20.87(44.9%) 25.66(55.1%)

No. of sugar factories and sugar production in Maharashtra and Rest of India in 2002-03

Maharashtra Rest of India

No. of total sugar factories 156(34.4%) 297(65.6%)

No. of co-op sugar factories 142(82.8%) 127(47.2%)

Sugar production 62.19 lakh tones(30.9%) 139.26lakh

tones(69.1%)

Sugar production in co-op

Sugar factories 58.94 lmt (58.0%) 42.70lmt(42.0%)

There were 119 co-operative sugar factories which crushed 557 lakh million tones of

sugarcane and produced 63.56 lakh metric tones of sugar. The production of sugar in 1999-

2000 was higher by 22.8 per cent as compared to previous year.

The no. of co-operative sugar factories as on March 31st 2002 in the State was 201, of

which 135 were in production during 2001-02. During the year 2001-02, these 135 sugar

factories crushed 484 lakh tones of sugarcane and produced 56.28 lakh tones of sugar. As per

the pre-seasonal estimation it is expected that 507 lakh tones of sugarcane will be crushed

during 2002-03 and the production of sugar is expected to be 59.11 lakh tones.

(Source: Economic Survey of Maharashtra 2001-02)

The no. of registered co-operative sugar factories as on 31st March,2003 in the state

were 201, of which 144 were in production during 2002-03. During the year 2002-03 these,

144 co-operative and 15 private sugar factories crushed 535 lakh tones of sugarcane and

produced 62.18 lakh tones of sugar. As per the pre-seasonal estimates, it is expected that 412

lakh tones of sugarcane will be crushed during 2003-04 and the production of sugar is

expected to be 47.80 lakh tones.

(Source: Economic Survey of Maharashtra 2003-04)

The no. of co-operative sugar factories registered as on 31st march 2004 in the state

was 202. 120 were in production during 2003-04. These 120 co-operatives and 16 private

sugar factories together crushed 291 lakh metric tones of sugarcane and produced 32 lakh

metric tones sugar. s per the pre-seasonal estimates, it is expected that 192 lakh metric tones

of sugarcane will be crushed during the season 2004-05 and the production of sugar is

expected to be 21.75 lakh metric tones. The season will be closed by 15th march, 2005. the

sugar production during the season will be much lower than that of in the previous year.

(Source: Economic Survey of Maharashtra 2004-05)

Methodology:

To achieve the objectives of the present study the production area of sugar is

considered into three zones viz., south zone, central zone and northeast zone. As the sugar

industry in Maharashtra is dominated by sugar co-operatives the co-operative sugar factories

are selected on the basis of zones and stability. The following sugar co-operatives are

selected to study the labour productivity, capital productivity and sugar cane productivity

during 2000-01 to 2007-008

1.2 Labour productivity:

It is defined as the sugar production divided by wages and salaries spent on particular

year. The selected sugar factories are examined for the period 2000-01 to 2007-08.

South Zone 1.Kolhapur

Table 18. 1- J.K. Warana Sahakari Sakhar Karkhana Ltd.

Sugar Wages& Labour A.L.P

Production salaries productivity

1575448 131628680 0.011969

1629348 130836644 0.012453

1475227 115052954 0.012822

1045391 102741027 0.010175

1372435 145478110 0.009434

1453071 124397408 0.011681

1532085 174412556 0.008784

1395455 137982590 0.010113 0.087432 0.010929

Table 19. 2 - R.B.Patil Sahakari Sakhar Karkhana Ltd

Sugar Wages& Labour A.L.P

Production salaries productivity

1158550 108811016 0.010647

1137633 101044563 0.011259

1037207 106355206 0.009752

589039 85769969 0.006868

676599 81496350 0.008302

967650 111734546 0.00866

1003055 103234421 0.009716

1053223 152675206 0.006898 0.072103 0.009013

Table 20. 3 - Y.M.Krishna Sahakari Sakhar Karkhana Ltd

Sugar Wages& Labour A.L.P

Production salaries productivity

1395561 156079542 0.008941

1405108 143616089 0.009784

1219158 122305931 0.009968

724566 123574731 0.005863

729374 123818530 0.005891

1134340 133455101 0.0085

1247494 132084665 0.009445

1306835 141033633 0.009266 0.067658 0.008457

Central Zone

Table 21. 1 - Malegaon Sahakari Sakhar Karkhana Ltd

Sugar Wages& Labour A.L.P

Production salaries productivity

992271 90068439 0.011017

779404 77503934 0.010056

890947 89798548 0.009922

429705 77273850 0.005561

303597 72662906 0.004178

719100 101731077 0.007069

781785 98145289 0.007966

1017034 146819028 0.006927 0.062695 0.007837

Table 22. 2 - S.M.S.M. Sahakari Sakhar Karkhana Ltd

Sugar Wages & labour A.L.P

Production salaries productivity

1266240 75.21 95233910 0.013296

1282260 78.69 100901039 0.012708

1155200 92.16 106463232 0.010851

730670 119.18 87081251 0.008391

511400 160.56 82110384 0.006228

1071085 94.56 101281798 0.010575

1383365 74.03 102410511 0.013508

1565500 94.19 147454445 0.010617 0.086174 0.010772

Table 23. 3 - Kopergaon Sahakari Sakhar Karkhana Ltd

Sugar Wages& Labour A.L.P

Production salaries productivity

781801 101.53 79376256 0.009849

604980 114.88 69500102 0.008705

592573 138.88 82296538 0.0072

460638 181.51 83610403 0.005509

173601 413.21 71733669 0.00242

438700 211.4 92741180 0.00473

684941 146.8 100549339 0.006812

787386 141.29 111249768 0.007078 0.052304 0.006538

Table 24. 4 - Niphad Sahakari Sakhar Karkhana Ltd

Sugar Wages& Labour A.L.P

Production salaries productivity

934425 132.66 123960821 0.007538

789410 150.75 119003558 0.006633

479320 194.82 93381122 0.005133

386042 242.89 93765741 0.004117

59666 1378.61 82256144 0.000725

281683 362.79 102191776 0.002756

775833 158.65 123085905 0.006303

775324 145.09 112491759 0.006892 0.0400988 0.0050124

North East Zone

Table 25. 1 - Madhukar Sahakari Sakhar Karkhana Ltd

Sugar Wages& Labour A.L.P

Production salaries productivity

513040 142.37 73041505 0.007024

332804 187.77 62490607 0.005326

267359 176 47055184 0.005682

316449 148.73 47065460 0.006724

257382 278.02 71557344 0.003597

340300 248.01 84397803 0.004032

415079 179.42 74473474 0.005574

472438 187.16 88421496 0.005343 0.043301 0.005413

Table 26. 2 - Manjara Sahakari Sakhar Karkhana Ltd

Sugar Wages& Labour A.L.P

Production salaries productivity

787612 88.65 69821804 0.01128

959331 61.88 59363402 0.01616

649726 63.22 41075678 0.015818

382793 126.11 48274025 0.00793

327317 150.46 49248116 0.006646

430990 124.51 53662565 0.008031

679797 90.09 61242912 0.0111

944162 98.91 93387063 0.01011 0.087076 0.010884

Table 27. 3 - Majalgaon Sahakari Sakhar Karkhana Ltd

Sugar Wages& Labour A.L.P

Production salaries productivity

817948 58.39 47759984 0.017126

693921 71.42 49559838 0.014002

637057 52.66 33547422 0.01899

417795 68.66 28685805 0.014565

230013 112.87 25961567 0.00886

378730 72.64 27510947 0.013767

709106 52.4 37157154 0.019084

789680 60.83 48036234 0.016439 0.122832 0.015354

In this study it is observed that

1. The ALP in South Zone is the range of 0.008457 to 0.010929

2. The ALP in Central Zone is in the range of 0.005012 to 0.010772

3. The ALP in North East Zone is in the range of 0.005 to 0.015354

4. The Average Labour Productivity is higher in South Zone in comparison to Central

and North east zones.

1.3 Capital Productivity:

It is defined as ratio of sugar production and capital invested in the factory. In this

study selected sugar factories are examined for the period 2000-01 to 2007-08 to measure the

capital productivity

South Zone

Table 28. 1- J.K. Warana Sahakari Sakhar Karkhana Ltd.

Sugar capital capital A.C.P

Production

Productivity

1575448 106418000 0.014804

1629348 109204000 0.01492

1475227 109306000 0.013496

1045391 109316000 0.009563

1372435 109468000 0.012537

1453071 109518000 0.013268

1532085 109530000 0.013988

1395455 109511000 0.012743 0.105319 0.013165

Table 29. 2- R.B.Patil Sahakari Sakhar Karkhana Ltd

Sugar Capital Capital ACP

Production

Productivity

1158550 55151000 0.021007

1137633 59978000 0.018968

1037207 60488000 0.017147

589039 61969000 0.009505

676599 62299000 0.010861

967650 62585000 0.015461

1003055 62760000 0.015982

1053223 62763000 0.016781 0.125712 0.015714

Table 30. 3 - Y.M.Krishna Sahakari Sakhar Karkhana Ltd

Central Zone

Table 31. 1.Malegaon Sahakari Sakhar Karkhana Ltd

Sugar Capital Capital A.C.P

Produc’n productivity

992271 61046000 0.016254

779404 77794000 0.010019

890947 82298000 0.010826

429705 85724000 0.005013

303597 87933000 0.003453

719100 93995000 0.00765

781785 99465000 0.00786

1017034 101077000 0.010062 0.071137 0.008892

Sugar capital Capital

ACP

Production productivity

1395561 189351000 0.00737

1405108 216334000 0.006495

1219158 233320000 0.005225

724566 253735000 0.002856

729374 256889000 0.002839

1134340 258515000 0.004388

1247494 259287000 0.004811

1306835 260574000 0.005015 0.039 0.004875

Table 32. 2.S.M.S.M. Sahakari Sakhar Karkhana Ltd

Sugarpro’n capital capital productivity ACP

1266240 357049000 0.0035464

1282260 381422000 0.0033618

1155200 387272000 0.0029829

730670 388316000 0.0018816

511400 387621000 0.0013193

1071085 389423000 0.0027504

1383365 389835000 0.0035486

1565500 389832000 0.0040158 0.023407 0.002926

Table 33. 3.Kopergaon Sahakari Sakhar Karkhana Ltd

Sugar prod’n capital capital productivity ACP

781801 31251000 0.0250168

604980 31344000 0.0193013

592573 32556000 0.0182017

460638 101617000 0.0045331

173601 101721000 0.0017066

438700 101759000 0.0043112

684941 130425000 0.0052516

787386 135556000 0.0058086 0.084131 0.010516

Table 34. 4.Niphad Sahakari Sakhar Karkhana Ltd

Sugar capital Capital

ACP

Produ’n productivity

934425 179345000 0.0052102

789410 183777000 0.0042955

479320 190555000 0.0025154

386042 193980000 0.0019901

59666 194283000 0.0003071

281683 195326000 0.0014421

775833 198251000 0.0039134

775324 199893000 0.0038787 0.023552 0.0029441

North East Zone

Table 35. 1.Madhukar Sahakari Sakhar Karkhana Ltd

Sugar capital capital ACP

Produ’n productivity

513040 42481000 0.012077

332804 63575000 0.005235

267359 68461000 0.003905

316449 70635000 0.00448

257382 72448000 0.003553

340300 80438000 0.004231

415079 93313000 0.004448

472438 94220000 0.005014 0.042943 0.005368

Table 36. 2.Manjara Sahakari Sakhar Karkhana Ltd

Sugar capital capital ACP

produc’n productivity

787612 64605000 0.012191

959331 72505000 0.013231

649726 73133000 0.008884

382793 68682000 0.005573

327317 68701000 0.004764

430990 58585000 0.007357

679797 59026000 0.011517

944162 59502000 0.015868 0.079386 0.009923

Table 37. 3.Majalgaon Sahakari Sakhar Karkhana Ltd

Sugar pro’n capital capital productivity ACP

817948 112520000 0.007269

693921 110180000 0.006298

637057 202899000 0.00314

417795 202909000 0.002059

230013 202913000 0.001134

378730 203059000 0.001865

709106 211040000 0.00336

789680 213943000 0.003691 0.028816 0.003602

In this study the following observation have been identified

1. in south zone the ACP range is 0.004875 to 0.015714

2. in central zone the ACP range is 0.002926 to 0.010516

3. in northeast zone the ACP range is 0.003602 to 0.009923

It is analysed that the average capital productivity is higher in south zone in comparison to

central and northeast zone.

1.4 Sugar cane Productivity:

Sugar cane is the main cost deciding factor in sugar production. The sugarcane

productivity is defined as the ratio of sugar production to sugarcane crushing. In this study

the sugarcane productivity is measured in three zones for the period of 2000-01 to 2007-08.

South Zone

Table 38. 1.J.K. Warana Sahakari Sakhar Karkhana Ltd

Sugar

Produc’n

Sugarcane

crushed

Sugarcane

productivity

ASCP

157544800 1258696000 0.125165

162934800 1292927000 0.12602

147522700 1212930000 0.121625

104539100 885696000 0.11803

137243500 1107155000 0.123961

145307100 1150000000 0.126354

153208500 1249295000 0.122636

139545500 1099079000 0.126966 0.990757 0.123845

Table 39. 2.R.B.Patil Sahakari Sakhar Karkhana Ltd

sugarcane

product product in kgs

115855000 916397000 0.126424

113763300 897006000 0.126826

103720700 806338000 0.128632

58903900 521723000 0.112903

67659900 575898000 0.117486

96765000 750165000 0.128992

100305500 811919000 0.123541

105322300 819104000 0.128582 0.993386 0.124173

Table 40. 3.Y.M.Krishna Sahakari Sakhar Karkhana Ltd

Sugar prod’n Sugarcane sugarcane

In kgs Crushed Productivity ASCP

139556100 1134277000 0.123035

140510800 1170539000 0.120039

121915800 1015390000 0.120068

72456600 612523000 0.118292

72937400 596099000 0.122358

113434000 853516000 0.132902

124749400 1074581000 0.116091

130683500 1036281000 0.126108 0.978894 0.122362

Central Zone

Table 41. 1.Malegaon Sahakari Sakhar Karkhana Ltd

Sugar prod’n Sugarcane

sugarcane

In kgs Crushed Productivity ASCP

99227100 809949000 0.12251

77940400 667982000 0.11668

89094700 733800000 0.121416

42970500 388871000 0.110501

30359700 270014000 0.112438

71910000 593474000 0.121168

78178500 660959000 0.11828

101703400 831788000 0.122271 0.945263 0.118158

Table 42. 2. S.M.S.M. Sahakari Sakhar Karkhana Ltd

Sugar prod’n Sugarcane

sugarcane

In kgs Crushed Productivity ASCP

126624000 1066073000 0.1187761

128226000 1065950000 0.1202927

115520000 957351000 0.1206663

73067000 628903000 0.1161817

51140000 450115000 0.1136154

107108500 910220000 0.1176732

138336500 1186766000 0.1165659

156550000 1316203000 0.1189406 0.942712 0.117839

Table 43. 3.Kopergaon Sahakari Sakhar Karkhana Ltd

Sugar prod’n Sugarcane

sugarcane

In kgs Crushed Productivity ASCP

78180100 676670000 0.1155365

60498000 524167000 0.1154174

59257300 522133000 0.1134908

46063800 447083000 0.1030319

17360100 170255000 0.1019653

43870000 414198000 0.1059155

68494100 639028000 0.1071848

78738600 675194000 0.1166163 0.879159 0.109895

Table 44. 4.Niphad Sahakari Sakhar Karkhana Ltd

Sugar prod’n Sugarcane sugarcane

In kgs Crushed Productivity ASCP

93442500 797017000 0.1172403

78941000 657413000 0.1200782

47932000 413445000 0.1159332

38604200 353508000 0.1092032

5966600 59680000 0.0999765

28168300 251134000 0.1121644

77583300 663968000 0.116848

77532400 649176000 0.119432 0.910876 0.1138595

North East Zone

Table 45. 1.Madhukar Sahakari Sakhar Karkhana Ltd

Sugar prod’n Sugarcane

sugarcane

In kgs Crushed Productivity ASCP

51304000 484002000 0.106

33280400 305176000 0.109053

26735900 248410000 0.107628

31644900 287075000 0.110232

25738200 243940000 0.10551

34030000 325380000 0.104585

41507900 403920000 0.102763

47243800 444300000 0.106333 0.852105 0.106513

Table 46. 2.Manjara Sahakari Sakhar Karkhana Ltd

Sugar prod’n Sugarcane sugarcane

In kgs Crushed Productivity ASCP

78761200 612656000 0.128557

95933100 761795000 0.12593

64972600 553069000 0.117476

38279300 343680000 0.111381

32731700 310957000 0.105261

43099000 418066000 0.103091

67979700 566420000 0.120016

94416200 733638000 0.128696 0.940409 0.117551

Table 47. 3.Majalgaon Sahakari Sakhar Karkhana Ltd

Sugar prod’n Sugarcane

sugarcane

In kgs Crushed Productivity ASCP

81794800 728151000 0.112332

69392100 590612000 0.117492

63705700 557047000 0.114363

41779500 387573000 0.107798

23001300 213158000 0.107907

37873000 351847000 0.107641

70910600 622350000 0.11394

78968000 694529000 0.1137 0.895173 0.111897

In this study the following observations are noticed

1. in south zone the average sugarcane productivity range is in between 0.124173 to 0.122362

2. in central zone the average sugarcane productivity range is in between 0.109895 to

0.118158.

3. in northwest zone the average sugarcane productivity range is in between 0.106513 to

0.117551.

It is analysed that the sugarcane productivity in south zone is higher in comparison to central

and northeast zones.

Table 48. Sugar cane productivity trends in Maharashtra are as follows

Year Sugarcane area

(‘000ha)

Production (‘000

tns)

Yield (kg/ha) Sugar production

(lakh M.T.)

1995-96 580.0 46656.1 80442 53.97

1996-97 516.2 41804.8 80986 34.45

1997-98 459.7 38174.3 83042 38.47

1998-99 529.8 47151.1 88998 53.40

1999-2000 590.1 53140.4 90053 65.00

2000-01 595.0 49589.0 83343 67.07

2001-02 578.0 45140.0 78097 56.12

2002-03 573.1 42617.0 74362 62.21

2003-04 442.5 25668.4 58008 31.74

2004-05 326.9 23013.7 70400 22.33

1.5 Impact of substitute goods:

The important substitute goods of sugar are gur and khandasari. The consumption of

gur and khandasari is continuously increasing. In 1960-61 the consumption of gur and

khandasari was 66.87 lakh tones which increased to 117.98 lakh tones in 1997-98 in India. It

could be compared with sugar consumption which was 21.13 lakh tones in 1960-61 incresed

to 139.78 lakh tones in 1997-98. It is observed that the consumption of sugar, gur and

khandasari is increasing simultaneously. Since 1997 the consumption of sugar is more than

gur and khandasari. the per capita consumption of sugar in 1997-98 was 14.9 and gur and

khandasari was 12.6 kg per annum. Since 1997-98 the per capita consumption of sugar is

more than per capita consumption of gur and khandasari. It represents that the consumption

as well as production of gur and khandasari is a tough competition for sugar production as all

these products consume the same raw material that is sugarcane.

Table 49. The trends in sugar productivity:

South Zone A.L.P A.C.P A.Sc.P A.Sug.P

T.K. Warana Sahakari Sakhar Karkhana Ltd 0.010929 0.013165 0.123845 1434808

R.B.Patil Sahakari Sakhar Karkhana Ltd 0.009013 0.015714 0.124173 952869.5

Y.M.Krishna Sahakari Sakhar Karkhana Ltd 0.008457 0.004875 0.122362 1145305

Central Zone

Malegaon Sahkari Sakhar Karkhana Ltd 0.007837 0.008892 0.118158 739230.4

S.M.S.M. Patil Sahakari Sakhar Karkhana Ltd 0.010772 0.002926 0.117839 1120715

Kopergaon Sahkari Sakhar Karkhana Ltd 0.006538 0.010516 0.109895 565577.5

Niphad Sahkari Sakhar Karkhana Ltd 0.005012 0.002944 0.11386 560212.9

North East Zone

Madhukar Sahakari Sakhar Karkhana Ltd 0.005413 0.005368 0.106513 364356.4

Manjara Sahakari Sakhar Karkhana Ltd 0.010884 0.009923 0.117551 645216

Majalgaon Sahakari Sakhar Karkhana Ltd 0.015354 0.003602 0.111897 584281.3

The trends in sugar productivity with respect to labour productivity, capital productivity and

sugarcane productivity for the period 2000-2001 to 2007-2008.

Table 50. South zone

Year

Average

Labour

productivity

Average

Capital

productivity

Average

Sugarcane

productivity

2000-01 1.052 1.439 1.249

2001-02 1.116. 1.346 1.243

2002-03 2.369 1.196 1.234

2003-04 0.763 0.731 1.164

2004-05 0.787 0.874 1.212

2005-06 0.961 1.104 1.294

2006-07 0.931 1.159 1.207

2007-08 0.876 1.151 1.272

It is observed that during the period 2000-01 to 2007-08 the labour productivity has shown a

decreasing trend from 1.052 to 0.876.

The capital productivity for the above period has also shown a decreasing trend from 1.439 to

1.151.

The sugarcane productivity has shown a little increase from 1.249 to 1.272.

However the average sugar production was decreased from 1376519.67 to 1251837.67

Table 51. Central zone

Year

Average

Labour

productivity

Average

Capital

productivity

Average

Sugarcane

productivity

2000-01 0.0417 0.050027 0.474063

2001-02 0.038102 0.036978 0.472468

2002-03 0.033106 0.034526 0.471506

2003-04 0.025578 0.013418 0.438919

2004-05 0.013551 0.006786 0.427995

2005-06 0.02513 0.016154 0.456921

2006-07 0.034589 0.020574 0.458879

2007-08 0.031514 0.023765 0.47726

The average labour productivity was decreased from 0.0417 to 0.031514.

The average capital productivity was decreased from 0.050027 to 0.023765.

The average sugarcane productivity was constant at 0.474.

The average sugar production increased from 993684.25 in 2000-01 to 1036311 in 2007-08.

Table 52. North-east zone

year

Average

Labour

productivity

Average

Capital

productivity

Average

Sugarcane

productivity

2000-01 0.03543 0.031537 0.346889

2001-02 0.035488 0.024764 0.352475

2002-03 0.04049 0.015929 0.339467

2003-04 0.029219 0.012112 0.329411

2004-05 0.019103 0.009451 0.318678

2005-06 0.02583 0.013453 0.315317

2006-07 0.035758 0.019325 0.336719

2007-08 0.031892 0.024573 0.348729

The average labour productivity was constant at 0.035 from 2000-01 to 2007-08 with little

fluctuations

The average capital productivity was decreased from 0.031537 in 2000-01 to 0.024573 in

2007-08.

The average sugarcane productivity was almost constant at 0.346

The average sugar production was increased from 706200 in 2000-01 to 735426.667 in 2007-08.

1.6 Summary, Conclusions and Suggestions

Maharashtra is second largest producer of sugar. The sugar industry has grown rapidly during

the period of 1950s due to the preferential policy of the government towards co-operative

sector. The concept co-operative was well used in the development of sugar industry in

Maharashtra. Even today the state stands first in having highest number of co-operative units

in comparison to public and private units.

The location shift of sugar industry from north India to south India was observed in 1950s.

Later on Maharashtra became second highest producer of sugar in India. However in recent

years the production of sugar in state undergone various changes. Hence it is necessary to

study the changes in productivity trends in recent years in respect to labour, capital and

sugarcane.

In this study it is the main objective to understand the changes in productivity trends of sugar

in relation to labour, capital and sugarcane. The study took place in three zones of

Maharashtra i.e. south zone, northeast zone and central zone. All together 10 sugar factories

were selected in all three zones. The data collected from the annual report of VSI

(Vasantdada Sugar Institute). The averages productivity trends of labour, capital, sugarcane

and sugar production were calculated as shown below.

South zone

(i) labour productivity.

1. The ALP in South Zone is the range of 0.008457 to 0.010929

2. The ALP in Central Zone is in the range of 0.005012 to 0.010772

3. The ALP in North East Zone is in the range of 0.005 to 0.015354

4. The Average Labour Productivity is higher in South Zone in comparison to Central

and North east zones.

(ii) Capital productivity

1. in south zone the ACP range is 0.004875 to 0.015714

2. in central zone the ACP range is 0.002926 to 0.010516

3. in northeast zone the ACP range is 0.003602 to 0.009923

4. It is examined that the average capital productivity is higher in south zone in

comparison to central and northeast zone.

(iii) Sugarcane productivity

1. The average sugarcane productivity range in south zone is in between 0.124173 to

0.122362

2. In central zone the average sugarcane productivity range is in between 0.109895 to

0.118158.

3. In northwest zone the average sugarcane productivity range is in between 0.106513 to

0.117551.

4. It is analysed that the sugarcane productivity in south zone is higher in comparison to

central and northeast zones

The averages of labour, capital and sugarcane productivity in each zone for the period

2000-01 to 2007-08 was calculated and the observations are as follows

(i) South zone

1. It is observed that during the period 2000-01 to 2007-08 the labour productivity has

shown a decreasing trend from 1.052 to 0.876.

2. The capital productivity for the above period has also shown a decreasing trend from

1.439 to 1.151.

3. The sugarcane productivity has shown a little increase from 1.249 to 1.272.

However the average sugar production was decreased from 1376519.67 to 1251837.67

(ii) Central zone

1. The average labour productivity was decreased from 0.0417 to 0.031514.

2. The average capital productivity was decreased from 0.050027 to 0.023765.

3. The average sugarcane productivity was constant at 0.474.

4. The average sugar production increased from 993684.25 in 2000-01 to 1036311 in

2007-08.

(iii) North east zone

1. The average labour productivity was constant at 0.035 from 2000-01 to 2007-08 with

little fluctuations

2. The average capital productivity was decreased from 0.031537 in 2000-01 to

0.024573 in 2007-08.

3. The average sugarcane productivity was almost constant at 0.346

4. The average sugar production increased from 706200 in 2000-01 to 735426.667 in

2007-08.

The above observations conclude that the changes in labour productivity, capital

productivity and sugar cane productivity are influencing the sugar production. The sugar

production is by and large affected by changes in labour productivity, capital productivity and

sugar cane productivity. Among three variables the changes in two variables are significant

to determine the productivity of sugar. It is observed that majority times the changes in labour

productivity and capital productivity are dominating the changes in sugar productivity.

The labour productivity in south zone is higher than central and northeast zone.

The capital productivity in south zone is higher than central and northeast zone.

The sugarcane productivity in south zone is higher than central and northeast zone

The production of sugar is higher in south zone is higher than central and northeast zone.

It is concluded that the south zone is more productive efficient in comparison to

central and northeast zones in Maharashtra. There are various reasons for these differences in

regional productivity, state productivity and international productivity of sugar.

The vital problems sugar industry is facing are :

Technical differences

Government’s sugar and sugarcane price policy

Export policy of sugar

Importance to by products

To rectify the problems and to develop sugar industry the following measures are

immediately required.

Suggestions:

The sugar industry in Maharashtra is influenced by economic, social and political aspects.

Initiating sugar factories is capital oriented activity. Thus the economic conditions as

well as government support will play an important role in the development of sugar industry.

As this industry is agro-based industry the impact of agriculture development is inevitable.

The shifting of cropping pattern and the economic state of farmers is significant as far as

agricultural development is considered. In 1932 on the recommendations of Tariff Board the

government announced special concessions for the establishment of sugar factories. Unrest

among the agriculturists has given birth to co-operative sugar factories in Maharashtra. In the

year 1948, Pravara Co-operative Sugar Factory was established. This encouraged many

entrepreneurs to come together to start sugar factories. It is an economic revolution in

Maharashtra. Later on the government supported these co-operatives financially. During the

development of sugar industry it is noticed that there are violent cyclical fluctuations in

production, prices and the availability of sugarcane. It is also observed that in the present

study these fluctuations are continued. Hence it is indispensable to bring changes in the sugar

industry in the following areas;

It is a well known fact that sugarcane plays a principal role in the production of sugar.

However the availability of sugarcane depends on various technical as well as financial

conditions.

Hence it is necessary to encourage technical changes in production of sugarcane. The

technical changes are implemented in the agriculture sector while cultivating the sugarcane

through enough financial support to agriculture sector.

As far as prices are concerned it is more influenced by the government price policy.

The price policy for sugarcane and price policy of sugar is conflicting.

Now it is necessary to liberalize the levy policy and regulation of free-sale quota.

The international sugar market is not explored by the Indian Sugar Industry, due to

distorted controls like market access, high tariffs and other barriers.

The immediate need of the industry is to remove restrictions on production, trading

and exports, encourage forward sales and brand marketing.

Role of By-Products is another important issue of sugar industry. Molasses and

bagasse are two important by products of sugar industry. These by products usage is

economically as well as environmentally gainful. The significance of value additions by

byproducts was realized of late. Hence, large and speedy efforts are required to create

awareness among sugar co-operatives with proper financial support.

Now it is necessary to develop sugar complexes which promote the sugar industry as

well as Indian economy. In India so far, only two sugar complexes are set up: at Andhra

Sugars A.P. and at Sanjivani S.S.K. Maharashtra.

It is concluded in this study that the role of sugar industry in very important for both

industrial as well as agriculture sectors. Present scenario of globalization is providing

opportunities to develop sugar industry at international level. Hence it is the right time to

decide and act.

SELECT BIBLIOGRAPHY

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43 Co-operative