Survey
* Your assessment is very important for improving the workof artificial intelligence, which forms the content of this project
* Your assessment is very important for improving the workof artificial intelligence, which forms the content of this project
AN ECONOMIC ANALYSIS OF SUGAR INDUSTRY IN PUNJAB Dissertation Submitted to the Punjab Agricultural University in partial fulfillment of the requirements for the degree of DOCTOR OF PHILOSOPHY in AGRICULTURAL ECONOMICS (Minor Subject: Statistics) By Abujam Anuradha Devi (L-2009-BS-47-D) Department of Economics and Sociology College of Basic Sciences and Humanities © PUNJAB AGRICULTURAL UNIVERSITY LUDHIANA-141 004 2013 CERTIFICATE I This is to certify that the thesis entitled, “An economic analysis of sugar industry in Punjab” submitted for the degree of Doctor of Philosophy in the subject of Agricultural Economics (Minor subject: Statistics) to the Punjab Agricultural University, Ludhiana, is a bonafide research work carried out by Abujam Anuradha Devi (L-2009-BS-47-D) under my supervision and that no part of this thesis has been submitted for any other degree. The assistance and help received during the course of investigation have been fully acknowledged. _____________________________ Major Advisor (Dr. S S Chahal) Director Technology Marketing and IPR Cell Punjab Agricultural University Ludhiana-141 004 (India) 2 CERTIFICATE II This is to certify that the thesis entitled, “An economic analysis of sugar industry in Punjab” submitted by Abujam Anuradha Devi (L-2009-BS-47-D) to the Punjab Agricultural University, Ludhiana, in partial fulfillment of the requirements for the degree of Doctor of Philosophy in the subject of Agricultural Economics (Minor subject: Statistics) has been approved by Student’s Advisory Committee along with Head of the Department after an oral examination on the same. ________________ Major Advisor (Dr. S. S. Chahal) _________________ External Examiner ______________________ Head of the Department (Dr. M. S. Sidhu) __________________________ Dean Post-Graduate Studies (Dr. B. R. Garg) 3 Acknowledgement “Journey of thousand miles starts with one step” became the guiding force for me. It was only His blessing and grace that I have been able to make another remarkable achievement in my life. I bow my head to merciful and compassionate ‘Almighty God’ for eternal love and blessings. Indeed the words are adequate, to convey the depth of my feelings of gratitude to my learned Major Advisor, Dr. S.S. Chahal, Director, Technology Marketing an IPR Cell, Punjab Agricultural University, Ludhiana, without those kind inspiration, keen interest and sustained encouragement, this dissertation could not have been started, much less finished. His valuable guidance, constructive criticism, untiring and ever willing help during the entire period of the study have been of immense help to me in planning and execution of the study. It is with immense gratitude that I acknowledge the support and help of Dr. D.K. Grover, Director, Agro-Economic Research Center, Department of Economics and Sociology, PAU, Ludhiana, for his inspiring guidance, constructive criticisms, valuable suggestions throughout the course of investigation and helped me whenever I approach him. With deep sense of gratitude, I am highly indebted and thankful to all my Advisor Committee Members, Dr. B.R.Garg, Senior Economist, Dr. Parminder Kaur, Associate Professor of Agricultural Economics, Department of Economics and Sociology, Dr. S.S. Sidhu, Professor of Statistics, Department of Mathematics, Statistics and Physics and Dr. Pratibha Goyal, School of Business Studies, PAU, Ludhiana for valuable suggestions and rendering their help during the course of investigation. Taking this best opportunity, I would like to acknowledge my heart -felt gratitude and express my sincere thanks to Dr. Karnail Singh, Senior Statistician (Retired) Department of Plant Breeding and Genetics, PAU, Ludhiana for his constant help, inspiring guidance and valuable suggestions. I extend my heartiest appreciation and gratefulness to Dr. M.S.Sidhu, Senior Economist (Marketing)-cum-Head, Department of Economics and Sociology, Punjab Agricultural University, Ludhiana, for providing all necessary facil ities to carry out this investigation. I am grateful to all the sample cane farmers of Punjab and administrative staffs of the sugar mills for providing requisite data. I will be failing in my duty if I do not make a mention of cooperation, generous help and constant encouragement given to me by my friends Siju, Valentine, Sharmila, Bembem, Basanti, Parvinder, Kamala, Anandi, Nun, Richa Sharma, Karamjeet Kaur, Paban and Arshdeep. The financial assistance extended by Department of Science and Technology, Government of India, New Delhi in the shape of INSPIRE Fellowship is gratefully acknowledge. I express my sincere thanks to Rakesh Kumar for setting and printing of my dissertation within a short period of time. Last but not least, I would like to thank my parents for their unconditional support, both financially and emotionally throughout my degree. In particular, the patience and understanding shown by my mum and baba during the study period is greatly appreciated. I know, at times, my temper is particularly trying. Finally, I express my deep sense of gratitude and reverence to my loving mum Abujam Chandrakala Devi and baba Abujam Ibochouba Singh, my brothers Jayanta Kumar Singh, Thoiba and sister Roshni, for their whole hearted support, moral encouragement, silent blessing and for their great inspiration without which I would not have been possible to complete this gigantic task. Abujam Anuradha Devi Dated: 4 Title of Thesis : Name of the student Admission No. Major Subject : Minor Subject Name and designation of Major Adivisor : : Degree to be Awarded : Statistics Dr. S.S. Chahal Director, Technology Marekting and IPR Cell, PAU, Ludhiana Ph.D. Year of award of Degree : 2013 Total Pages in Thesis : 153 + Appendices+Vita Name of University : Punjab Agricultural University Ludhiana- 141004, Punjab, India : AN ECONOMIC ANALYSIS OF SUGAR INDUSTRY IN PUNJAB Abujam Anuradha Devi (L-2009-BS-47-D) Agricultural Economics Abstract The present study was carried out to ascertain the performance of sugar industry in Punjab. The study was carried out by selecting two sugar mills based on highest TCD each from cooperative and private sectors. So as to examine the causes of failures of sugar mills, the Zira Cooperative Sugar mill was selected purposively. In order to achieve the stipulated objectives both secondary and primary data were used. The data were analyzed by using various statistical tools such as compound growth analysis, regression analysis, ratio analysis, tabular analysis, etc. The major findings of the study revealed that the area, production and productivi21ty of sugarcane have declined both at state and national level. The state have lower growth rate of area under sugarcane and production than the national level while the growth of sugarcane yield was higher in the state level. Similarly, growth of sugar production, recovery of sugar and total cane crushed by the mills has been declining through time. The results indicate that there has been wide variation in area and production of sugarcane in the state as well as the national level. The production of sugarcane was affected by area and interaction effect of yield and area. The total cane crushed by the mills was found to be an important factor for production of sugar both at state and national level. The acreage under sugarcane was affected by both price and nonprice factors. The farmers rapidly adjust the area under sugarcane both in short-run and longrun. The profitability, operational performance, solvency and liquidity of the mills were not satisfactory in both the sectors. Comparatively, the private sector had better physical and financial performance than the cooperative sector. The study identified various technological, socio-economic, infrastructural, financial and marketing problems faced by the cane growers. Further, the important constraints of the sugar industry such as low sugar recovery, shortage of sugarcane supply, inability to pay arrear to the cane growers in time, low level of profitability and non-viability of sugar mills were also identified. The case study of Zira Cooperative Sugar Mill revealed that the mill has been under financial stress right from its inception. The prevailing production, processing and marketing of sugarcane and sugar as well as the financial position of the sugar mills were not conducive to the various stakeholders. This calls for pragmatic policy which could benefit both the farmers and sugar mills. Keywords: TCD, Area, Production, Productivity, Growth, Physical, Financial, Constraints. Signature of Major Advisor Signature of the Student 5 Koj dw isrlyK : ividAwrQI dw nwm Aqy dwKlw kRmwk pRmu`K ivSw : sihXogI ivSw pRmu`K slwhkwr dw nwm Aqy Ahudw : : AMkVw ivigAwn fw. AYs. AYs. cwhl fwierYktr, tYknwlojI mwrikitMg Aqy AweI.pI.Awr sYl ifgrI ifgrI nwl snmwinq krn dw swl Koj p`qr iv`c kul pMny XUnIvristI dw nwm : : pI.AYc.fI. 2013 : : 153+AMiqkwvW+vItw pMjwb KyqIbwVI XUnIvristI, luiDAwxw - 141004 : pMjwb dy KMf audXog dw srvyKx AiBXum AnurwDw dyvI (AYl-2009-bI.AYs.-47-fI) KyqIbwVI ArQSwSqr AwriQk swr AMS mOjUdw Koj AiDAYn pMjwb iv`c KMf audXog dI kwrjkuSlqw vyKx leI kIqw igAw hY[ ieh AiDAYn sihkwrI Aqy in`jI sYktr dIAW auhnW do im`lw nMU cux ky kIqw igAw ijnHW dI tI.sI.fI sB qoN v`D sI[ KMf im`lW dI AsPlqw dw inrIKx krn leI zIrw sihkwrI im`l nUM cuixAw igAw hY[ im`Qy hoey audySW nUM nypry cwVn leI mUl Aqy gOx AMkVy vrqy gey hn[ AMkiVAW dw srvyKx krn leI irgrYSx, Anupwq inrIKx Aqy tybl inrIKx Awid vrqy gey hn[ AiDAYn qoN pqw cldw hY ik gMny dw Kyqr, pYdwvwr Aqy JwV rwj Aqy rwStrI p`Dr au`pr G`tdw jw irhw hY[ rwj iv`c gMny hyTlw rkbw Aqy pYdwvwr rwStrI p`Dr nwloN G`t hY, jdik gMny dw JwV rwj p`Dr qy izAwdw hY[ gMny dI aupjwaU pYdwvwr, KMf dI mMg Aqy kul gMny dI Kpq im`lW iv`c lgwqwr G`tdI jw rhI hY[ nqIjy drswaudy hn ik gMny dy Kyqr Aqy pYdwvwr iv`c rwj Aqy rwStrI p`Dr qy bhuq AMqr hY[ gMny dI pYdwvwr nUM Kyqr Aqy Kyqr qy JwV dw AwpsI sMbMD pRBwivq krdw hY[ im`lW iv`c gMny dw pITxw rwj Aqy rwStrI p`Dr au`pr ie`k mh`qvpUrn kwrk hY[ gMny dw Kyqr kImq Aqy kImq rihq kwrkW qoN vI pRBwivq huMdw hY[ ikswn AwpxI mrzI nwl hI gMny dy Kyqr iv`c Coty Aqy lMby smyN leI Pyr bdl krdy hn[ dovyN KyqrW iv`c Awmdn, ikirAw pRxwlI pRdrSn Aqy im`lW dw ApGtn sMqoKjnk nhIN hY[ qulnw qoN pqw cldw hY ik in`jI sYktr dIAW im`lW dw BOiqk Aqy AwriQk pRdrSn sihkwrI sYktr nwloN izAwdw v`DIAw hY[ Koj duAwrw v`K-v`K qrnIkI, smwijk qy AwriQk, mUlFWcw AwriQkqw Aqy mMfIkrn sMbMDI sm`isAwvW swhmxy AweIAW hn, ijnHW dw swhmxw KMf audXog nUM krnw pYMdw hY[ ies qoN ielwvw gMny audXog dIAW mh`qvpUrn AOkVW ijvyN ik G`t mwqrw iv`c pRwpq KMf, gMny dI Gwt, KMf auqpwdkw v`loN smyN isr Bugqwn krn dI AsmrQw, G`tdw lwB p`Dr Aqy KMf im`lW dI AsmrQw pCwxIAW geIAW hn[ zIrw sihkwrI im`l dw AiDAYn d`sdw hY ik im`l SurUAwqI dOr qoN lY ky hux q`k AwriQk dbwA hyT hI rhI hY[ gMny Aqy KMf dI AjokI pYdwvwr, pRosYisMg Aqy mMfIkrn dy nwl nwl KMf im`lW dI mwiek siQqI v`K-v`K dwvydwrw 6 leI AnkUl nhIN hY[ ies leI koeI AmlI nIqI bxwauxI cwhIdI hY jo gMnW auqpwdkW Aqy KMf im`lW leI lwhyvMd swbq ho sky[ mu`K Sbd: tI.sI.fI, Kyqr, pYdwvwr, JwV, AwriQk, sm`isAwvW[ __________________ mu`K slwhkwr dy hsqwKr dy hsqwKr _______________ ividAwrQI CONTENTS CHAPTER TITLE PAGE NO. I INTRODUCTION 1-8 II REVIEW OF LITERATURE 9-37 III MATERIAL AND METHODS 38-55 IV RESULTS AND DISCUSSION 56-116 V A CASE STUDY 117-135 VI SUMMARY 136-142 REFERENCES 143-153 APPENDICES i-xv 7 LIST OF TABLES Table No. Contents Page No. 4.1 Trends in area, yield and production of sugarcane through 1950-51 to 2010-11 57 4.2 Growth of sugarcane through different periods in India 59 4.3 Growth of sugarcane through different periods in Punjab 60 4.4 Period-wise variability in sugarcane area, production and productivity 62 4.5 Decomposition of growth in sugarcane production into area, yield and interaction effect in India 63 4.6 Decomposition of growth in sugarcane production into area, yield and interaction effect in Punjab 64 4.7 Growth of sugar production through different periods in India 65 4.8 Growth of sugar production through different periods in Punjab 65 4.9 Decomposition of growth in sugar production into cane crushed, recovery and Interaction effect in India 66 4.10 Decomposition of growth in sugar production into cane crushed, recovery and interaction effect in Punjab 67 4.11 Estimated coefficient of sugarcane acreage response function (1980-81 to 2010-11) 68 4.12 Estimated coefficient of sugarcane acreage response function by linear regression analysis (1980-81 to 2010-11) 68 4.13 Estimates of short and long-run elasticities and adjustment coefficient 70 4.14 Physical performance of Indian Sucrose Limited, Mukerian, 2006-07 to 2011-2012 72 4.15 Physical performance of Wahid Sandhar Sugar Limited, Phagwara, 200607 to 2011-12 74 4.16 Physical performance of Nawanshahr Cooperative Sugar Mills Limited, 2006-07 to 2010-12 76 4.17 Physical performance of Morinda Cooperative Sugar Mills Limited, Morinda, 2006-07 to 2011-12 77 4.18 Comparison of physical performance of Private and Cooperative sector sugar mills in Punjab 80 4.19 Profitability analysis based on different ratios of private sectors through, 2006-07 to 2010-11 82 8 4.20 Operating performance or efficiency ratios of private sugar mills during a period from 2006-07 to 2011-12 84 4.21 Analysis of solvency ratios of private sugar mills for the periods of 200607 to 2011-12 86 4.22 Analysis of liquidity ratios of private sugar mills through periods from 2006-07 to 2011-12 87 4.23 Profitability analysis based on different ratios of Cooperative sectors through 2006-07 to 2010-11 89 4.24 Operating performance or efficiency analysis based on different ratios of cooperative sectors through 2006-07 to 2010-11 91 4.25 Solvency analysis for cooperative sugar mills in Punjab for period of seven years 93 4.26 Solvency analysis for cooperative sugar mills in Punjab for period of seven years 93 4.27 Comparison of profitability ratios of private and cooperative sector sugar mills in Punjab 95 4.28 Comparison of operating performance/efficiency ratios of private and cooperative sector sugar mills in Punjab 96 4.29 Comparison of solvency ratios of private and cooperative sector sugar mills in Punjab 97 4.30 Comparison of liquidity ratios of private and cooperative sector sugar mills in Punjab 97 4.31 Distribution of the respondents according to age in Punjab 98 4.32 Distribution of the respondents according to educational level in Punjab 99 4.33 Distribution of the respondents according to occupation in Punjab 100 4.34 Distribution of the respondents based on income level in Punjab 100 4.35 Distribution of the respondents according to family size in Punjab 101 4.36 Distribution of the respondents according to operational holding 101 4.37 Distribution of the respondents based on experience in sugarcane production 102 4.38 Distribution of the respondents based on experience in sugarcane production 102 4.39 Technological constraints faced by the respondents of the sugar industry in Punjab 106 4.40 Socio economic constraints perceived by the respondents of the sugar industry in Punjab 109 9 4.41 Infrastructural constraints faced by the respondents of the sugar industry in Punjab 110 4.42 Financial constraints faced by the respondents of the sugar industry in Punjab 112 4.43 Marketing constraints faced by the respondents of the sugar industry in Punjab 113 4.44 Different stages of Zira Cooperative Sugar Mill sickness 120 4.45 Profitability ratios of Zira Cooperative Sugar Mill, 2001-02 to2004-05 121 4.46 Liquidity ratios of Zira Cooperative Sugar Mill, 2001-02 to2004-05 122 4.47 Inventories of the Zira Cooperative Sugar Mill, 2001-02 to 2004-05 123 4.48 Trend analysis of the Zira Cooperative sugar mill working results, 1990-91 to 2004-05 124 4.49 Cane crushed and recovery of sugarcane of the Zira Cooperative sugar mill 125 4.50 Working results of the Zira Cooperative Sugar Mill, 1980-81 to 2004-05 130 4.51 Ratio analysis of the Zira Cooperative Sugar Mill, 2001-02 to 2004-05 131 4.52 Trend analysis of sales and cost of production for period prior to liquidation 132 4.53 Trend analysis for financial ratios for period prior to liquidation 133 4.54 Comparison of cost of production between the sick and non-sick mill in Punjab 135 10 LIST OF FIGURES Figure No. Contents Page No. I Framework for the analysis of sick sugar mill 53 II Trends in area under sugarcane 57 III Trend of sugarcane yield 58 IV Trends of sugarcane production 58 V Growth of sugarcane in India 59 VI Growth of area, production and productivity of sugarcane in Punjab 60 VII Organizational structure 128 11 LIST OF ABBREVIATION USED MT ARIMA Autoregressive integrated moving average BJSMF Benito Juarez Sugar Mill Factory BMP Best management practices CGR Compound growth rate Co Coimbatore CoJ Coimbatore Jaladhar CT Capital turnover CU Capacity utilization CV Coefficient of variation Fig. Figure Ha Hectare IDBI Industrial Development Bank of India IFCI Industrial Finance Corporation of India IMF International Monetary Fund IS Incipient sickness Kg Kilogram LE Livre égyptienne ln Natural log MSP Minimum Support Price MT Metric tonnes N Nawanshahr NH National highway NS Normal state OLS Ordinary Least Square PAU Punjab Agricultural University 12 PDS Public Distribution System R&D Research and Development ROI Returns of investment ROS Returns on sales SAP State Advised Price SMP Statutory Minimum Price SSC Small scale growers TCD Tonnes cane daily TOT Terms of trade TS Towards sickness UP Uttar Pradesh Z Zira 13 CHAPTER I INTRODUCTION India is the largest consumer of sugar in the world. The country ranked second in cane area and is the second largest producer of sugar in the world next to Brazil with a share of over 15 per cent of world sugar production. Sugar industry is also of significant importance to the Indian economy. In fact, the Indian sugar industry is key driver of rural development, supporting India’s economic growth. It occupies an important place among the agro-based industries in India after textile industry. The industry has been a focal point for socioeconomic development in the rural areas as about 50 million sugarcane growers and a large number of rural labourers depend on sugarcane farming and sugar industry for their livelihood. At present, the sugar industry is regulated across the value chain. The key stakeholders of sugar industry, that is farmers, millers, consumers and the government have shared goals of achieving high economic growth, minimizing risks, enhancing farmer miller relationships, meeting growing domestic demand and contributing to the nation's food and energy needs. The industry provides employment to about two million skilled and non-skilled workers and other employed in ancillary activities mostly in the rural areas. Besides, employment generation they also holds the potentialities of developing other industries that related to its by-products. Sugar industry-historical perspectives Ancient Indian literature cited that gur and sharkara were made from sugarcane juice. The earliest record of establishment of first sugar factories in India dates back to 1610 by Captain Hippon at Masulipatam and Petapoli on the Coromandel Coast, and subsequently one at Surat on the West Coast by Captains Best and Dowton in 1612 (Shrivastava et al., 2011). The Sanskrit literature gives the first literary evidence of sugar manufacture and that history of sugarcane industry began in northern India (Marathe, 2009). The industry started growing in an organized way during 1930s after introduction of the Sugar Industry Protection Act, 1932. The Indian sugar industry is a green industry that is self sufficient in its energy needs and generates surplus exportable power through co-generation. The first organized sugar factory was set up at Saran, Marhowrah in Bihar in 1904 by a foreign group, British India Corporation. By 1930 only 29 factories were established. Sugar production was about 1.6 lakh tonnes in 1930. India imported about eight lakh tonnes of sugar from Mauritius, Java (Indonesia) and other countries. There were 615 installed sugar factories in the country against 138 during 1950-51, of which 236 factories were in private sector, 62 in public sector and 317 factories in cooperative sector in 2009 (Anonymous, 2010). The figures increased to 660 in 2011-12 of which 274 were in private sector, 324 in cooperative sector and 62 in public sector. The functional sugar factories were 490 in 2009-10 which increased to 527 in 2010-11 (Anonymous, 2011). At present, the sugar industry has an installed capacity of 31 million tonnes with production of 24.3 million tonnes sugar. The demand for sugar both raw form and processed form has been increased continuously with the growth of the economy. Given the projected growth in domestic and international markets, the sector would need to produce at least 28.5 million MT of sugar by 2017 and at least 600 MT of sugarcane by 2030 to meet the domestic requirement of sweeteners, bioelectricity and ethanol for E10 blending (Anonymous, 2011). Increase in sugar production would be primarily through productivity improvements and increment in milling capacity of existing mills. Sugar industry in Punjab Punjab is called the “Granary of India” or “India’s bread-basket”. The state is one of the most fertile regions on earth. According to the 2008 Global Hunger Index, Punjab has the lowest level of Hunger Index. The state has essentially agrarian economy with lower industrial output. The scarcity of fundamental raw materials was believed to be the main reason. The agro-based industries are going to be the mainstay of the people in the state. Earlier the processing industries for the agricultural commodities such as sugarcane, cotton, pulses and oilseeds were not developed to the extent to make full use of the agricultural surpluses of the state. Therefore, the sugar industry has the potential to become one of the important agro-based industries in the state which on other hand provide a scope for allied industries such as distillers, cogeneration, paper, etc. The sugar industry in Punjab came into existence in the year 1930’s. The sugar industry in the state has the co-existence of different ownership and management structure. At one side, there are privately owned sugar mills and at the other side there are cooperative sugar mills that procure sugarcane from nearby cane growers. Punjab is among the nine major sugar producing states with total sugar production of less than one million MT (Anonymous, 2007). In 1965-66, there were five sugar mills in the state with crushing capacity of 4950 tonnes cane daily (TCD) and sugar production of 0.60 lakh tonnes. There were 23 sugar mills of which 16 in cooperative and seven in private sector in 2008-09. But only 22 sugar mills were functional with crushing capacity of 52016 TCD. The total cane crushed by the sugar mills was 26.03 lakh tonnes with 9.29 per cent recovery and production of 2.4 lakh tonnes of sugar in 2008-09. Eventually, the number of functional sugar mills has sharply declined to 15 in 2010-11 (nine cooperative and seven private sugar mills) with total cane crushing capacity of 34.44 lakh tonnes and recovery of 8.59 per cent. The sugar production has increased from 2.85 in 2010-11 to 3.4 lakh tonnes in 2011-12 (Anonymous, 2012). The most peculiar aspect of sugar industry in the state is seasonal nature and cyclical in production. Like the other industries, the sugar industry in Punjab passes through a large number of hurdles. The factors which are considered as the most important were shortage in sugarcane supply, obsolete technologies, low capacity utilization, poor financial performance and discriminating 2 government policies. Besides, factors such as cyclicality in the business, cane procurement, manufacturing and sales processes, dependency on the monsoon differentiate the sugar industry from any other industry. It has been believed that financial and infrastructural problems were the main reasons for the failure of some of the sugar mills in Punjab. The factory owners were facing the problems of high cost in production sugar as a result the mills engaged has been under liquidation. The farmers on the other side were not getting the payment in time for their product. Thereby, the farmers made the choice to shift from cultivation of sugarcane to rice and wheat cultivation whose price and disposal is assured under Minimum Support Price (MSP) programme. As such, there has been a shortage in supply of sugarcane to the sugar mills. Further, they cyclically affect the normal working days (as 150 days per year to around 68 days per year) of the sugar industry. The TCD of the state’s sugar mills was low and most of them were under-utilization of capacity which brings inefficiency in sugar production. Sugar plant size (in terms of cane crushed per day) was the main criteria for the determination of productivity and viability of the sugar industry (Ray, 2012). The success of the mills largely depends on the financial and physical performance of the respective sugar mills. The finance is the most important function of the organization which was consider as a wheel for the growth of economy of sugar industry. The financial performance refers to the act of performing financial activity. In broader sense, financial performance refers to the degree to which financial objectives were met or has been accomplished. It was the process of measuring the results of a firm's policies and operations in monetary terms. It was used to measure firm's overall financial health over a given period of time and can also be used to compare similar firms across the same industry or to compare industries or sectors in aggregation. It has been seen that most of the cooperative sugar mills were under liquidation and non-functional due to financial crush. Besides, the sugar industry has been facing several problems like mounting stocks, controls by Government and under-utilization of capacity in both cooperative and private sectors. The operation and performance of mills depend on individual and collective decisions on management, makes such as investment in a new facility, raising large amount of debt or adding new line of products or services. The performance of the sugar mills is judged through financial statements. Comparatively the private mills in the state have been performing well to some extent. None of the private mills have so far recorded for being in liquidation in the state. In the near future, the private mills will take over the cooperative mills if there is inefficient management and thus, there is a need of timely awakening. Sugarcane development Sugarcane crop is multi-product crop which is used as the raw material for production of white sugar, gur, khandsari, ethanol, electricity, paper, board, etc. The leaf and top portion 3 of the crop has been used for feeding the cattle. The crop is grown in two distinct agroclimatic regions of the country-the Tropical (largely comprising Maharashtra, Karnataka, Gujarat and Tamil Nadu) and the Sub-tropical (Uttar Pradesh, Punjab, Haryana and Bihar). For almost 94 per cent of the total sugar produced in the country were covered by the states U.P, Maharashtra, Tamil Nadu, Karnataka, Andhra Pradesh and Gujarat in 2009-10. However, the major share of country’s sugarcane production comes from U.P constituting 36.2 per cent followed by Maharashtra (23.6 per cent) in 2010-11 (Anonymous, 2011). The area under sugarcane cultivation of the country was recorded at 5.03 million hectares in 2011-12. It was 4.94 million hectares which increased by 1.79 million hectares over last year in 2010-2011 (Anonymous, 2012). The sugarcane area constituted a negligible portion of the net cropped area of the country. The consumption of sugarcane has been growing historically while the production has been cyclical. The country’s total production of sugarcane was 342.20 million tonnes with a production of 68.09 tonnes per hectare in 20112012. The production was 339.17 million tonnes which is comparatively low indicating a downfall of one per cent over the previous year in 2010-11. However, the highest production of the crop was recorded in the year 2006-07 with the production of 355.52 million tonnes (Anonymous, 2011). The area and yield of sugarcane has been declining considerably over the last decades. These were largely due to shifting of cropping pattern to rice and wheat from sugarcane cultivation. India’s sugar area and production cycles are driven largely by policy interventions, including sugarcane support price policies set by the Central and State Governments as well as sugar storage and trade policies set by the central government. The ecological factors such as rainfall, humidity and temperature also affect sugarcane production. Sugarcane crops remain in the field for three years once it is planted, area and production adjust downward slowly as price incentives fall, thus, prolonging periods of oversupply, weak market prices give rise to financial distress for sugar mills. The performance of the crop has important bearing for growth and development of agriculture but also the capacity utilization and growth of the industrial sector which depends on the supply of its raw materials on agriculture. In Punjab, the area and production of sugarcane has fluctuated over the last four decades. The area was 101 thousand hectares with the production of 6.00 million tonnes and yield of 59.41 tonnes per hectare in 1990-91. It declined to 63.0 thousand hectares with production of 3.72 million tonnes and yield of 58.50 tonnes per hectare in 2009-10 (Anonymous, 2010). The area under sugarcane crop was estimated to decline by 5.48 per cent in 2009-10 over 2008-09 in Punjab. The area under sugarcane was 81 thousand hectares in 2009-10, registering a net decline of 4.44 thousand hectares, due to a substantial upward revision in the prices of cereals especially wheat and paddy crops which comparatively more profitable than sugarcane crop (Chahal et al., 2009). In 2011-12, the area under sugarcane in 4 the state was 80 thousand hectares and sugarcane production of 4.67 million tonnes with productivity of 58.34 tonnes per hectare (Anonymous, 2012). Problems of sugar and sugarcane In October 2009, the Central Government of the country amended the Essential Commodities Act, 1955, through an Ordinance providing for fixing the levy price of sugar on a ‘fair and remunerative price’ to be announced by the Central Government of the country. The move raised serious concerns in the sugar industry which supplies one-fifth of its sugar production at a levy price, noticeably lower than the open market price to support the Public Distribution System (PDS). In 2009-2010, sugar industry was set to supply 20 per cent of its production at a levy price of about `13.50 per kg, fixed in 2003-04, against an open market price of about `45 per kg in January, 2010 (Anonymous, 2010). This represents a loss of revenue potential of a few thousand crore rupees to the sugar mill owners/shareholders. The sugar mills in the country were not properly managed as far as their performance was concern. The heavy losses, sickness and poor performance led to analysis of the financial performance of the sugar mills in India. The production of sugar in the country is cyclical historically same as in the case of sugarcane production. One of the good reasons was the fluctuation of price both at national and international level. The cane growers and factory owners’ face manifold constraints during the whole process of production. The sugarcane and its end product sugar were totally different from other crops in pricing and in other aspects. They become essential commodities under the Essential Commodities Act, 1955. Since, then Government follows the policy of partial control and dual pricing for sugarcane and sugar. The levy quota of ten per cent of sugar produced by sugar factories was requisitioned by the government as compulsory levy at a price fixed by the government in every sugar season for PDS. On other hand, non levy sugar was allowed to sell as per quantity released by government under free sale sugar release mechanism. The problems of pricing sugarcane highly affected the cane growers as well as the sugar mills both under cooperative and private sectors. Moreover, price was considered the most critical economic factor in the area allocation decisions of the farmers. The Statutory Minimum Price (SMP) of sugarcane fixed by the Central Government was lower than the State Advised Price (SAP) of sugarcane fixed by the State Government. The SMP for sugarcane was `139.12 per quintal for different varieties but the SAP for sugarcane in Punjab was different for different varieties of sugarcane. It was `200, `195 and `190 per quintal for early, mid and late varieties respectively for 2010-11 (Anonymous, 2011). The central price and state price difference ranges between `51 to `61 per quintal. These differences were borne by the state government. 5 It has been realized that the SMP was increased to `145 per quintal (4.06 per cent) in 2011-12. Similarly, the SAP has also been increased more considerably than the SMP. It was `230, `225 and `220 per quintal for early, mid and late varieties respectively for 2011-12 (Anonymous, 2012). The differences increased continuously over the year which in turn became burden for the State Government. Therefore, the mills were not able to pay the farmers in time for their products. The upward revision of the SMP and SAP will only increase the area under sugarcane but do not provide any incentive to improve the quality of sugarcane in terms of sucrose content (Ray, 2012). This is evident from the fact that sugar recovery of the state has remained stagnant at around 8.5 per cent for the last decades as compared to 10 per cent at national level. The price of free sugar has been fluctuated depending on the market situation. There is a need to bring parity between the price of the sugar and sugarcane. The retail price of non-levy sugar was `30.76 to 36 per kilogram that is `3076 to 3600 per quintal which means the sugar price was more than double. Due to excessive intervention of the government in fixing the pricing of sugarcane and sugar, most of the existing mills in the states were not allowed to expand their existing capacity and thus restrict to avail the economics of scale. The area planted to sugarcane was not available to grow other crops for the next two to three years as sugarcane cultivation lasts for almost three crops season. The price of sugarcane does not serve as an incentive to other competing crops as economics of sugarcane possesses high risks. The price of the crop depict the income of the farmers on which investment on crop cultivation depend. The area response to price is highly sensitive. As well known the sugarcane is labour intensive crop, the farmers in the state have been facing the problem of labour scarcity, alarming fall in ground water table and delayed payment. This brings threat in the sugarcane production in the state. Moreover, delay payment of the crop contributed to declining area under sugarcane in the state. The continued high cyclicality and low mill profitability may reduce the investment attractiveness of the sector. All of this may have adverse impacts on the social objectives for farmers, mills and consumers. In the absence of improvement in farm productivity, cane expansion may continue to be driven by horizontal growth at the expense of other crops. The sugar industry aspires to continue to serve the domestic demand, while it also aims to enhance the value addition from sugarcane by focusing on emerging by-products through integrated sugar complexes. Farmers seek for increasing yields, higher cane prices and timely payment of cane prices to drive higher economic profit at the farm side. For minimizing crop risks, farmers aspire for effective extension services, crop off take assurance, accessibility of timely finances and improved harvesting and transport infrastructure. Millers aim for increasing economic 6 profit through higher availability of cane, better sucrose content in sugarcane, better sugar realizations in domestic market, flexibility to export sugar, higher value addition from byproducts including alcohol and removal of competition distorting policy interventions. At the same time, millers in general were looking to reduce sugar price risk through hedging. Overall, millers aspire for ease of regulations and greater influence over business levers. Consumers' primary aspirations appear to be the availability of quality sugar at affordable prices. Both household and industrial consumers also seem to aspire for availability of sugar variety in terms of sugar forms like liquid sugar and processed sugar products, albeit on a lower priority. These highlight problems at every phase of the sugarcane cultivation up to the final product. Therefore, giving due consideration to the above described problems of the sugar mills especially under cooperative sector and the sugarcane growers in Punjab, the present study was taken up. Objectives of the study An attempt has been made in the present study to answer uncertainties faced by the sugarcane farmers and sugar industry in the state as an increasing failure of sugar industry greatly affects the economy of the state. In order to ascertain the root causes of such failures, case study was taken up. Keeping in view above stated facts the present study was taken up with following specific objectives: i. to study the trends in production of sugarcane in Punjab and India, ii. to determine the factors affecting sugarcane acreage in Punjab, iii. to examine the physical and financial performance of sugar industry in cooperative vis-à-vis private sector in the state, iv. to examine the various socio-economic problems faced by the cane growers and sugar mills and v. to carry out a case study of a cooperative sugar mill under liquidation and suggest policy measures to build up an efficient base industry in the state. Scope of the study The present study would show trends of sugarcane area, production and productivity in the country and in Punjab. It studies the variation in sugarcane production and important contribution in the change of sugarcane production. In addition, growth in sugar production and factors affecting its production were studied. It would also bring out important factors that determine sugarcane acreage response. The study of physical and financial performance of the sugar mill would be helpful for the policy makers and researchers to frame effective policy and in the development of new technology. The empirical study of liquidated sugar mill would be useful to sugar manufacturers and policy maker to rehabilitate and rejuvenate the existing sick sugar mills. 7 Limitation of the study The present study could not be able to cover certain areas such as economics of sugarcane and sugar production, cost benefit ratios, etc. which might be helpful in the study due to limited time and area. The sample survey method was adopted for the collection of relevant data at a particular period of time. A. B. Sugars Limited., Dasuya was not selected for the present though mill has highest TCD among private sugar mills due to difficulties in collection of information and at the most data required for the study were not rendered by the mills authority. Plan of work The thesis has been divided into six chapters including the introductory chapter. The second chapter deals with review of related studies. The third chapter deals with methodology used in the process of analysis of the study. The fourth chapter deals with the results and discussion of the findings. The case of liquidated sugar mill was discussed in fifth chapter. This is followed by the presentation of the summary and suggestions. 8 CHAPTER II REVIEW OF LITERATURE The purpose of this chapter is to present a review of literature relating to the present study. As such the previous studies were grouped into four broad classes-growth analysis, acreage response, constraints in production of sugarcane and sugar and performance of sugar industry. Growth analysis Alagh and Sharma (1980) analyzed the differences in agricultural growth performance in India, 1960-61 to 1978-79, by taking 1969-70 as the cut-off point for comparison. The period is divided into two 1960-61 to 1969-70 and 1970-71 to 1978/79. The trends for the entire period are also studied. Estimated trend growth rates are presented for foodgrains, sugarcane, major oilseeds, cotton, jute and Mesta for India as a whole and the major states. The estimated growth rates for the crop groups are generally higher in the second sub-period and growth is more evenly spread. The variation around the growth trend is still large. Anti-cyclical policies either of the buffer stock variety or of consideration of forward markets for selected crops are important. The agricultural sector is now less of a problem as a constraint to the planning of a higher growth rate for the Indian economy. The more important problem lies in the areas of financial intervention to permit orderly growth of public investment, and the use of trade policies to permit price stability. Nair et al. (1982) estimated the trends in respect of area, production and productivity of coconut in Kerala across districts during the sixties and seventies. Area under coconut was found to be rapidly expanding during the sixties and the first half of the seventies. However, the production of nuts started declining by early 1970s. By comparing the yield performance over the period of Alappuzha district, situated at the heart of the coconut root (wilt) disease belt and other districts, he repudiated the oft-repeated villainous portrayal of the root (wilt) disease in the coconut economy of the state. Naik and Patnaik (1984) estimated compound growth rates of area, production and productivity of potato in Orissa during the period 1971 to 1981. The growth rates of area (3.5 percent), output (3.08 percent) were found statistically significant but growth rate of productivity (-0.0049 per cent per annum) was found to non-significant. The harvest price had therefore, an explanatory significance in a study of price impacts on area allocation and 9 output. The results of the study revealed that output and area under potatoes were dependent upon the harvest price of potatoes lagged by one year in this area. Parthasarathy (1984) examined inter-district variation in agricultural production in Andhra Pradesh and degree of instability in agricultural production from 1955-56 to 1978-79. It was found that the degree of instability in agricultural production is high in all the districts. It was higher for foodgrains than for 'all crops'. The districts of North coastal Andhra combine high instability with low growth. Nalgonda district in Telangana was rather unique in having experienced high growth rates of production with low instability. The post-green revolution period shows a higher degree of instability. It has been suggested that districts which have achieved higher growth rates were subjected to greater instability. Yeledhalli (1987) computed growth rates of area, production and productivities of dry chillies in Dharwad district by using the compound growth rate method. The growth rate in area (6.73 per cent) was found to be higher compared to the growth rates of production (3.42 percent) and productivity (0.14 percent). The decomposition of growth in dry chillies production was the interaction effect of area and productivity. Grover (1991) studied the instability due to variation in sugarcane production and presence of more competitive gur and khandsari industry. The author determined the factors responsible for fluctuating cane supplies to the sugar factories by simultaneous equation model (three stages least square method). The study indicates that the sugarcane supply to the sugar factory was positively and significantly influenced by price and production of sugarcane, and negatively and significantly influenced by the price of gur. The cane price was positively and significantly influenced by the price of sugar, gur and sugar supply. On the other hand, the price of gur was positively and significantly influenced by the sugarcane price, but negatively influenced by the cane supply to the factories. The average annual free market wholesale price of sugar was influenced the sugarcane price and the government policy of partial decontrol. Krishnan et al. (1991) worked out trends in growth rates of area, production and productivity of major crops in Kerala for the period 1970-71 to 1986-87 and compared them with the corresponding trends at the national level. The negative growth rates of output were registered by four crops out of the ten crops studied namely, rice, tapioca, areca nut and coconut. The growth rates of production were positive and significant for only two crops namely, dry ginger and rubber. The negative and significant growth rates were found for area under rice and tapioca indicating a shift in cropping pattern in favour of cash crops or plantation crops. Raju and Luckose (1991) analyzed the trends in production and yield per acre for chillies in India during the period 1951-52 to 1987-88. The area, production and productivity of chilli have increased during the period under reference. The area under chilli was increased 10 from 540 thousand hectares in 1951-52 to 814 thousand hectares in 1986-87. The corresponding figures for production were 347 and 780 thousand tonnes to and productivity of 620 and 958 kg per hectare respectively. Bhowmick and Ahmed (1993) examined the growths in area, production and yield of major oilseed crops in Assam during the pre and post Green Revolution periods. During the period from 1950-51 to 1988-89, rapeseed and mustard registered 3.34 per cent growth in production which was contributed by 2.96 and 0.35 per cent growth in area and productivity of the crop respectively. The results indicated that area under crop was found to be an important factor to increase oilseed production rather than intensification of production. Patil (1995) worked out compound growth rates of area, production and productivity of groundnut in Dharwad district and at the State level for the period from 1984-85 to 199394. The results revealed that the growth rate in area (0.51 per cent) was positive but nonsignificant statistically. There was a significant growth rates in production (6.89 percent) and productivity (6.34 percent) of groundnut. At state level, the growth rates for area (5.24 per cent), production (10 percent) and productivity (4.63 per cent) of groundnut were estimated to be positive and significant statistically. Kaur et al. (2000) worked out the growth rates of area, production and yield of sugarcane in the state from 1970-71 through 1994-95. There was a cyclical movement in the growth of area, production and productivity of sugarcane in the state during the study periods. This dwindling performance of sugarcane production affects the sugar industry in Punjab. The economics of sugarcane cultivation relating to wheat-paddy crops grown in a single rotation showed that the net return from the cultivation of sugarcane as sole crop exceeds those from wheat and paddy crops rotations by 20 per cent. The reasons for decrease in area under sugarcane were analyzed at two levels- quantitatively and qualitatively. Quantitatively it was estimated that the growth rates of all the factors affecting the area under sugarcane were positive and significantly high, while for the area under sugarcane, the growth rate negative and significantly at 10 per cent level. And qualitatively it was shown that the most severe and most pronounced problem as limiting the area under sugarcane in the state was the marketing of sugarcane followed by non-mechanization of sugar cane cultivation operation, delayed payment by sugar factories. Guledgudda et al. (2001) analysed the trend in area, production and productivity of tea production in India from 1973-74 to 1997-98. The results revealed that the growth in area, production and productivity over the years were positive but growth rate was negligible. Both area and productivity partially contributed towards positive growth in production. Pervez (2001) examined the growth in area, production and yield in the major crops of Pakistan for a period 1970-71 (Period I) to 1984-85 (Period II). The study revealed that the increase in crop production was contributed largely by area than by productivity in Punjab and 11 Sindhu during Period I. The Sindhu region recorded a higher growth in area, production and yield as compared to Punjab in Period II. It was also observed that Punjab recorded a low degree of instability in growth rates in most of the crops as compared to Sindhu region in Period II. Ramasamy et al. (2001) analyzed the trend in area, production and productivity of sugarcane for Coimbatore district for 32 years ending 1996-97. The trend equation was fitted following the Ordinary Least Square Method for the three sub-periods, Period-I (1965-67 to 1972-73), Period-II (1973-74 to 1985-86) and Period-III (1986-87 to 1996-97). The results revealed that there was deceleration in area and production and no significant increase in yield. An analysis shows that the mean yield of sugarcane substantially increased in Period-II over Period-I but marginally declined in Period-III. The coefficient of variation in yield was 8.88 percent in Period-I which was decreases to 8.45 and 7.75 per cent in Period-II and III respectively. The finding revealed that the area under sugarcane and yield were showing stability over the years. Chahal et al. (2003) examined growth of maize in Punjab for the period of 1950-51 to 1998-99. The compound growth rates for area, production and productivity of maize were 3.13, 2.60 and 5.81 per cent per annum respectively. The corresponding figures for the periods of 1965-66 to 1985-86 were -3.31, 0.74 and -2.59 per cent per annum with similar trend was observed for the periods of 1985-66 to 1998-99. The growth rates were significant for the three parameters through periods. The decline in production was attributed to decline in area continuously. The decomposition in maize production shows that yield was important factor that contribute to increased maize production. Singh and Srivastava (2003) investigated the growth rate and instabilities in sugarcane production through time series data for the three regions of Uttar Pradesh. The study made use of semi-log equations to estimate compound growth rates in area, production and productivity of cane. The coefficient of variation analysis of detrended data and decomposed analysis were used to examine the magnitude of instability in area, production and productivity of cane. The results showed that the area, production and productivity of cane registered a significant and positive growth in all the three regions as well as at the state level, with different magnitude. The growth rate of 1.60, 3.48 and 1.85 per cent per annum were registered for sugarcane acreage, production and productivity. The instability in area, production and productivity of sugarcane were prominent in the central region. The instability in production and productivity was the lowest in western region and area instability was the lowest in eastern region. However, instability in production of sugarcane registered the highest at the state level. Further, it was observed that variability in area under sugarcane was the major problem of production instability, accounting for more than half of the production 12 variability of the state. The cane area and cane yield variability together account for more than 80 per cent of the total production variability in Uttar Pradesh. Varghese (2004) worked out the trend in area, production and productivity of cardamom in Kerala for a period from 1970-71 to 2002-03 using semi-logarithmic growth equation. The area under cardamom registered a negative growth rate (-1.216%) which was significant statistically. The output grows at an average annual trend growth rate of 4.14 per cent and yield registered an average annual growth rate of 5.51 per cent. Lathika and Kumar (2005) analyzed the growth trends in area, production and productivity of coconut for different coconut producing states/union territories in India. The period has been divided into two sub-periods as Phase-I (1951 to 1995) and Phase-II (1996 to 2002). Area shows positive growth in both phases for selected states except for the Andaman and Nicobar islands where the growth was negative (-9.69) in Phase-II. The production also showed a positive growth in all the states in both the phases and Andhra Pradesh has highest growth in Phase-II (16.69%). The growth rate of productivity shows negative growth in Kerala and Orissa in the Phase-I, Karnataka in the Phase-II. El-Sharif et al. (2009) study the main axes to improve rates of self-sufficiency of sugar through increasing the volume of supply of sugar and by rationalization of the assumption of sugar. There was a need to increase the area under sugarcane and sugar beets and their productivity in order to increase the supply of sugar. Moreover, the productivity of sugarcane and sugar beet can be achieved through farmers adoption of the modern technologies and modernization of manufacturing processes used in sugar production. Nevertheless, the study recommends the necessity to set a pricing policy of the sugar crops and to increase investment directed to the sugar industry to open new production lines in the sugarcane factories. Geol (2009) reported that the cane production in the state Punjab has increased overtime. The area under sugarcane has been fluctuated over a time which leads the production and productivity remains low. The author study that there is shortage of supply of sugarcane to mills as cane production concentrated in fewer districts, which adversely affect the function of industries such cane crushed (lakh tonnes), cane utilization (%) and number of working days. The decline in the area, production and productivity in the state indicates that at farm level cane production has not kept pace with capacity expansion at the industry level in the state. The cooperative and private mills extend several facilities to farmers to sustain their interest in cane cultivation. It was indentified that private mills were comparatively more economically efficient than cooperative sugar mills. Rehman et al. (2011) investigates the trends in area, production and yield of major crops (wheat, rice, sugarcane and cotton) of Pakistani agriculture by using component analysis model. The study period has been divided into two periods: Period-I, 1972 to 1988, 13 represents the pre structural adjustment period, and Period-II, 1989 to 2009, was the post structural adjustment period. The comparison of production and acreage growth rates in both periods revealed that wheat, sugarcane and cotton, but not rice, show better performance in Period-I. The yield growth rate comparison shows that wheat and cotton have better growth rates in period one while rice and sugarcane performed better in Period-I. The results that growth rates in both periods were different for individual as well as aggregate crops. The results clearly show that the growth performance of major crops, except rice, was better in pre-structural adjustment period than under the post-structural period in which subsidy for agriculture was reduced. The main focus of structural adjustment program prescribed by IMF was to reduce budget deficit by reducing subsidies and financial sector reforms. The results of decomposition analysis for examining the sources of output growth show that sources of output growth were different in both periods. During the pre-adjustment period, increase in output was predominant in the case of wheat, rice and cotton, and this growth was mainly due to the yield effect. In the case of sugarcane, the area effect was found to be a key source of output growth. In the post structural adjustment period, the source of output growth in wheat and cotton was due to yield effect. However, in the case of sugarcane and rice, the major source of growth was accounted for by the area effect. There is an urgent need to increase crop production, particularly the food grains production, which will become inevitable in view of population growth. Acreage response to sugarcane production Krishna (1963) studied farm supply response in India and Pakistan. A Nerlovian Adjustment Model for 11 crops was adopted in the study for the period of 1914-15 to 194546. The variables such as price of the crops, rainfall, yield of perspective crop and total irrigated area in the relevant season was included in the model. It was found that only price of maize, sugarcane and cotton was an important factor responsible in the allocation of area under the crops. In the case of sugarcane, adjustment of acreage was more responsive in the long-run (0.60) than in the short-run (0.34). Raj (1963) study is the first study among those studies that used Nerlove framework in Indian context. The pre-Independence data for Punjab (Undivided) was used and concluded that the Punjab farmers have responded to economic stimuli. Krishana and Rao (1965, 1967) tried quite a few price formulations to specify the price variables and those on which farmers base their expectations. It was found that traditional regression models give satisfactory results if not superior results compared with those obtained by using adjustment lag model as far as proportion of explained variation in wheat acreage is concerned. Kahlon et al. (1965) studied price and cross elasticity of crop acreage of wheat, sugarcane, paddy and other crops of Punjab for the period of 1950-51 to 1961-62. The results 14 indicated that wheat acreage was significantly responded to price changes. The coefficient of price elasticity of production of wheat, sugarcane and paddy were higher than that for the other crops. The price elasticity of sugarcane acreage was 0.642. Whereas, the cross elasticity of sugarcane acreage relative to maize and cotton were -0.571 and -1.083 respectively. Parikh (1967) work of supply response through the distributed lag models comes very close to the Nerlovian framework. Both adjustment lag and price expectation models along with the distributive lags were used. After analyzing different formulations with the data it was arrived at the result that non-price factors are quite important as compared to the price factors. It was worth noting here that the data set covered the period prior to 1939. Herdt (1970) has evaluated supply response at aggregate output level for period 1907 to 1964 for Punjab agriculture. The reference period was divided into two sub-periods: 1907 to 1946 and 1947 to 1964. It was concluded that the 1907-1946 period tends to support the hypothesis of a positive, although small, aggregate supply response of agriculture. The results for 1951-1964 suggest the opposite, or at least do not support the hypothesis. The disaggregated approach given by Tweeten and Quance (1963) was to measure supply elasticities. Jha (1970) viewed that it might not be possible to obtain larger output through expansion of acreage in the long-run; the same might be realized by superior production technology. In other words, the response of output might be elastic in spite of inelastic acreage response. Hence it was concluded that the impact of price could be more meaningfully measured in terms of variations in production rather than variations in terms of acreage. Maji et al. (1971) argued that in the times of changing technology, there might be a considerable discrepancy between the acreage elasticities estimates based on the time series data and the actual current estimates. This problem would become severe if the technological change was one of the land savings types. It was advocated that price elasticity of output would be more realistic than that of acreage. Madhavan (1972) utilized a production function framework to arrive at the desired demand for land. A production function under the assumption of constant ratios of elasticity is maximized to obtain the factor demand equation. The estimated equation indicated that actual planted area of a crop in the given period is a function of the log of relative price of the crop, the expected yield of the crop under consideration as well as that of the competing crop and the weather index. Acharya and Bhatia (1974) analyzed acreage response to price, yield and rainfall changes of different crops in Rajastan. The harvest prices was used assuming that the harvest prices to be exercising more influence on the decisions of the farmers as majority of the farmers dispose off their produce immediately after harvest. In order to compare the effect 15 and obtain better estimates, both relative and absolute prices were studied. The price-relative for each crop was computed by deflating the price of the crop in question with respect to the price of its most competing crop. The positive price elasticity of the crop was found. Singh et al. (1974) analyzed the cost and returns structure based on various cost concepts of different size group of sugarcane farms in Uttar Pradesh. The average expenditure on working and fixed cost amounted to `3122.26 and `7255.36 per hectare respectively. It was analyzed that the working expenditure was higher on small farms in comparison to the medium and large size farms. The fixed cost was found to be higher in medium farm than small and large size farms. It was noticed that the total cost of cultivation has been reduced with the increase in the size of farms. The net return per hectare was highest in large size farms in comparison to the other farms and the net monetary returns depend upon the including and excluding labour on the farm. Therefore, the cost of cultivation of sugarcane is high and is not proportionate to the sugarcane price. In the same study some of the methodological issues in supply response was examined namely the relative superiority or otherwise of the Nerlovian Lagged Adjustment Model vis-a-vis traditional model. The appropriate proxy for price expectation and quantification and incorporation of inter-regional characteristics in the macro models to yield more meaningful results, with the help of data on lndian Virginia tobacco for the period 194041 to 1967-68. It was found that both traditional and Nerlovian Lagged Adjustment Model with appropriate price specifications and with the inclusion of the relevant non-price variables proved to be equally efficient in regard to the estimates of short-run elasticities. However, Adjustment Lag Model explained supply variance better by yielding consistently higher values of R2. The inclusion of lagged acreage in the model also led to the reduction of positive serial correlation in the 'errors'. With regard to price specification in addition to Zero-Order Correlation analysis, it was suggested that separate regression analyses be run with alternate price specifications with regard to the commodity's own prices as well as that of the competing commodities. An aggregate supply functions must also make adequate allowance for the inter-regional characteristics and their impact on the magnitudes of supply and variation therein for, this would help to establish more reasonable picture of supply response behaviour. Batra (1976) argued that if land was heterogeneous and if other inputs constrained production, farmers might decide to increase the planned output of a specific crop by devoting less but better land to the crop. Therefore, it was assumed that elasticity of planned output would be equal to the sum of elasticities of area and yield. It was concluded that there was negative acreage response of the crop with respect to its price. 16 Sawant (1978) claimed that land would be good proxy for production so long as it was a major input and other inputs were closely complementary to it. But it was argued that in a situation where it was not so, the use of non-land inputs should be explicitly considered while determining supply response. The results so obtained showed that the contribution of yield per acre to supply response was distinctly higher than that of acreage and thus, suggested the inadequacy of acreage response. Narayana et al. (1981) estimated farm supply response and acreage allocation. The improvement was made upon the conventional econometric techniques. The necessity for improvement arises because the traditional Nerlovian Model of adaptive expectation does not separate past prices into stationary component and random component. It attaches same weights to both the components for predicting future prices. The study uses expected revenue instead of expected price and formulate revenue expectation function for each crop by isolating stationary and random components in past prices and attach suitable weights for both in prediction. The method was based on ARIMA technique combined with BOX-Jenkins procedure for estimations. Basavaraja (1982) felt that it would be better to estimate both acreage and yield responses with a view to properly gauging the impact of price and non-price variables on the supply of cotton in Karnataka State. The production response in addition to area and yield responses were estimated for the purpose of comparison. The results revealed that there was positive response of the farmers in terms of acreage under cotton to its price. Narayana and Shah (1982) analyzed farmers’ acreage response in Kenya by adopting Nervolian Model. The study mainly distinguished between the responses of small farmers visà-vis large farmers. The small farmers’ area adjustment parameters towards the desired acreage in the case of food crops were much higher than for non-food crops; whereas for large farms, the adjustment towards desired acreage was higher for commercial crops like sugarcane. Bapna et al. (1981) derived a system of output supply and factor demand equation from the profit function. They began with monotonically increasing profit function and derived output supply and factor demand curves. Two systems are derived from the maximization of the profit function, namely, Generalized Leonteif and Normalized Quadratic Systems. The authors pooled the time series and cross section data by following error component model. It is confirmed by the authors that a Maximum-Likelihood Estimation procedure would be better than the three-stage least-squares procedure. The results were obtained for 96 districts spread over semi-arid tropical regions of the country. The authors indicated that 25 out of the 32 own elasticities had the anticipated sign and also demonstrated remarkable extent of price responsiveness of the semi-arid tropical farmers. The high supply elasticity was noted for sorghum despite the small proportion of its marketed surplus. 17 Gajja et al. (1983) found that decisions regarding area allocation for groundnut in Rajasthan corresponded strongly with the harvest price lagged by one year. It was concluded that price behaviour was a decisive factor for area allocation for groundnuts in conjunction with such factor as its own productivity performance, prices of competing crops and rainfall patterns in Rajasthan. Lal (1987) in the study on response of sugarcane producers to price and non-price factors examined the impact of price and non-price factors on sugarcane acreage and estimated the short and long run supply elasticities. It was found that the major factors significantly and positively influencing sugarcane area in different districts of Uttar Pradesh were the farmers' own adjustment lags in area (their previous year cane acreage), relative sugarcane profitability, rainfall during sowing months and time trends. The study suggests that the price of competing crops must be taken into account when evolving a suitable price structure for sugarcane. The risk arising out of price fluctuations needs to be minimized. If the farmers of the area are assured of irrigational facilities from canals or other sources, there was great scope for increasing sugarcane area in spite of low rainfall in the pre planting period. Mahajanshetti et al. (1990) estimates area response functions of sorghum for 12 Districts in Karnataka state, and for the state as a whole, using data covering the period 1962/63-1983/84. The area under competing crops of jowar was used to deflate the relative price factors and incorporated this relative price of jowar into the area, yield and production response models. The higher expected yields generally encourage farmers to allocate smaller areas to the crop with the anticipation that on-farm consumption requirements, generally fixed, will not be reduced. The greater influence of non-price variables over the price variable indicates the subsistence nature of this staple food crop. Janaiah et al. (1991) while studying the farm supply response of cotton in Andhara Pradesh for the period 1956-57 to 85-86, used both the farm harvest price of cotton and its competing crop (chillies). The results revealed that the previous year’s price had exerted significant positive influence on current area in the state as a whole and its regions except in Rayalaseema, whereas the price of competing crop (chillies) in Rayalaseema region and the state as a whole was observed to have negative relationship with current year’s area. Murthy et al. (1992) in the study on supply response of turmeric in Guntur district of Andhra Pradesh estimated the supply response of turmeric to price and non-price factors in Guntur district of Andhra Pradesh state, using data for the period 1972/73-1984/85. Neither yield nor acreage found to be responsive to the level of prices observed. Bhowmick and Ahamed (1993) studied the supply response of major oilseed crops in Assam for the period 1972-73 to 1988-1989. The results showed that increase in oilseeds production had been related to increased acreage rather than intensification of oilseed crops production. 18 Grover (1993) studied sugar price model and identified various factors responsible for fluctuations in the price of sugar and other sweetening agents like gur and khandsari. The Three Stage Least Square Method was used to estimate the factors that influence the price of sugar, sugarcane, gur and sugarcane supply to the factories. The free market wholesale average price was found to influence positively and significantly by price of sugarcane, gur price and negatively influence by supply of sugar. It was found that the price of sugarcane was positively influenced by the price of sugar and supply of sugar. Similarly, the price of gur was positively and significantly influenced by supply of sugarcane to the factories, price of sugar and negatively affected by production of sugar. The price of sugarcane, sugarcane production and daily installed crushing capacity were the important factors which have positive influenced on supply of cane to the sugar factories. Tripathy and Gowda (1993) by making use of one year lagged harvest price in the model to study the area response of groundnut in Orissa obtained a positive and significant impact of harvest price on the area under groundnut. The short-run elasticity was 0.334 while the corresponding long-run elasticity turned out to be 0.3619. Monthly groundnut wholesale price data for all districts of Orissa state (India) for the period 1974-90 were collected and used in the analysis of groundnut prices in Orissa market and its impact on area and production by Mohanty (1995). The findings revealed that both monthly and annual wholesale prices of groundnut vary significantly in most districts as well as at the state level. A significant relationship between groundnut price and groundnut area and production was observed. Deshpande (1994) studied supply response of chilli in Karnataka State for the period 1969-70 to 1990-91 and concluded that the increase in the total output of chilli in the state was the result of shifting land from other crops rather than by increasing the yield of the crop. Grover (1994) analyzed acreage response of sugarcane in Punjab. The area under sugarcane was affected by both price and non-price factors such as weather, yield and irrigation. In addition, government policies and disposal problems faced by the cane growers were also included as an important explanatory variable. It was found that 88.00 per cent of the total variation in dependent variable was explained by the explanatory variables. The results revealed that the area under sugarcane crop was positively and significantly influenced by the lagged area under sugarcane, lagged relative profitability of sugarcane with respect to competing crops, price of gur and government policies. While, the lagged year disposal problems faced by the growers was negatively and significantly affect the area allocation under sugarcane. However, installed capacity of the sugar factories, lagged price of sugarcane and sugar price does not affect the acreage response of sugarcane, but price of sugarcane play its role through relative profitability of sugarcane. 19 Hazell et al. (1995) estimated aggregate supply elasticities for Indian agriculture using national and state level data. The results from the national and state level analyses were found to be similar, and show that aggregate supply was inelastic. Both levels of analyses showed that growth in agricultural output in India in recent decades is largely attributable to increased irrigation. Palanivel (1995) estimated the aggregate agricultural supply response by using more appropriately constructed variables for the period 1951-52 through 1987-88. The model was developed within the basic Nerlovian Partial Adjustment framework. The farm harvest prices and retail prices were used in estimating the index for prices received and the index for prices paid by farmers, respectively. It was argued that since farmers sold bulk of their products immediately after the harvest, farm harvest prices seemed to be a better approximation for the prices received. Similarly, it was also pointed that as farmers purchase their requirements (particularly family consumption items) from retail markets, rural retail prices seemed to be a better approximation for the prices paid. The results indicated that the elasticity of aggregate agricultural output with respect to TOT (terms of trade) was positive and statistically significant but non-price factors are equally, if not more, important. Omezzine (1996) studied the winter tomato farmers’ response in Tunisia. The adaptive expectation geometric distributed-lag model was used to test farmers’ reaction to expected prices of inputs and outputs as well as to other determinants of supply. The results indicated that farmers’ reaction to the price they expect depends on previous year’s prices. Ravikumar and Raju (1996) studied the marketing system of jaggery and producer’s share of consumer rupee in the regulated Anakapalle jaggery market. It was observed that there were a large number of middlemen and market functionaries involve in the marketing of jaggery. There was lack of storage facilities of jaggery and basic amenities expected for a market during peak season. There is a need to strengthen the credit facilities, development of transport and other infrastructural facilities. The spread of the consumer’s price was worked out to `637.75 per quintal as the net amount received by the producer and `774.56 per quintal as the purchase price of the consumer. Thus, the total marketing charges paid by the producer’s exporters and retailers was `63.74 constituting 8.23 per cent of the price paid by the consumer. The producer’s share in the price paid by the consumer was found to be 82.34 per cent. Dhindsa and Sharma (1997) had used lagged relative price to study the supply response of prices in Punjab state and arrived at non-significant negative impact of the variable on area under gram in two regions and the state as a whole. It was contend that the non-significant impact of relative price variable would show that the farmers in various 20 regions of Punjab did not take into consideration the changes in relative price of the crop (gram) while allocating area under this crop. Kumar and Rosegrant (1997) worked on the dynamic supply analysis of cereals with an intention to separate the output decision in to area and yield per hectare decisions. The study used pooled cross section- time series data across regions of India pre reform period 1970-71 to 1990-91. A joint estimation of area, yield and input demand in recursive block system has been adopted by employing Zellner’s SUR estimation technique. The expected revenue has been used as a price incentive indicator. The dynamic response has been estimated within a static framework by including lagged dependent variable. The results revealed that non-price factors mostly explained shift in cropping pattern. An empirical investigation on the supply of maize and tobacco for commercial agriculture in Zimbabwe was presented by Townsend et al. (1997). The Error Correction Model, which employs the concept of co-integration to avoid spurious regressions, was used in the analysis. The factors affecting percentage area planted to maize were, expected real maize price, real price of tobacco, real price of fertilizer and government intervention. The factors affecting percentage area planted to tobacco were real price of tobacco, expected real price of maize and institutional factors. The price elasticity of maize was 1.44 and 1.76 in the short and the long run respectively. For tobacco, these were 0.28 and 1.36 in the short and long-run, respectively. The results revealed that acreage response of farmers towards maize was more than tobacco in the both short and long-runs. Dixit et al. (1998) mentioned that in modern agriculture, at the advent of land saving technologies, land becomes a secondary factor in production. Hence results found that the yield/output response was pleaded rather than the area response. Another group of researchers, Batra (1976), Basavaraja (1982), and Kumar and Rosegrant (1997), however, worked on both area and yield responses in order to assess the farmers response to price and non-price factors. Mishra (1998) attempted to assess the impact of economic reforms initiated in 1991 along with price and non-price factors on aggregate supply in the Post-Green Revolution period. The results assured that aggregate supply measured either through aggregate output or marketable surplus does respond significantly positively to terms of trade. Singh (1998) approximated the output decisions of farmers in terms of area under the crop rather than its yield while studying supply response of oilseeds in Uttar Pradesh. The Nerlovian Lag Adjustment Model was employed by using farm harvest price to study the supply response of oilseeds in Uttar Pradesh for the year 1966-67 to 1989-90. The results revealed that the area enjoyed by the crops can be considered as a barometer of the farmers land allocation decision. Further, the area allocation under a crop was a function of several endogenous factors, whereas, the yield was influenced by several exogenous factors. It was 21 further revealed that the farmers could keep area constant and increase output by varying yield level. The result showed that the price variable had negative impact on area allocation for groundnut, linseed and rapeseed-mustard. It was statistically significant only in the case of groundnut. In the case of sesame, there was positive significant acreage response. Gulati et al. (1999) analysed supply response using pooled data for 23 crop zones in India. By utilizing cross-sectional district data covering the period 1970-71 to 1990-91, the estimates were derived zone-wise for various crops. The study found that non-price factors mostly explain shift in cropping pattern. Kale et al. (1999) studied the cost of cultivation of the three planting types of sugarcane namely Adsali, Suru and Ratoon. The average cost of cultivation of Adsali, Suru and ratoon sugarcane during 1987-88 estimated at `28472, `22515 and `15493 respectively, increased by 26, 35 and 45 per cent respectively during 1992-93. The net returns for three crops were increased by 62, 107 and 114 per cent respectively due to increase in the price of sugarcane paid to the sugarcane cultivators. The cost A for all these crops was accounted for 50 to 62 per cent (Adsali), 46 to 58 per cent (Suru) and 32 to 50 per cent (ratoon) to the total cost. It was observed that there was a decrease in cost on account of hired human labour and fertilizer and increase in cost on account of family labour and rental value of land. Therefore, the ratoon crop was analyzed to be more remunerative than Adsali and Suru crop because of no expenditure on preparatory tillage and planting material. Ramasamy et al. (1999) studied the supply response of cane producers to price and non-price factors. The coefficients were found to be positive and statistically significant indicating responsiveness of the farmers to changes in the price variables defined as weighted index of sugar and jaggery. The irrigation was found to be important non-price factor. Yield risks and dummy variables representing policy regime of partial decontrol were not found to influence sugarcane acreage. There has been quick area adjustment to price changes (0.7311 and 0.8047 respectively for state and district) which attributed to the high level of technology adopted in sugarcane cultivation and absence of major production constraints in sugarcane production. The long-run elasticities of acreage response were larger than short-run elasticities allowing producers adequate time to fully adjust their resources. Arega (2000) studied the supply response of maize in Karnataka to evaluate the impact of relative price and selected non-price factors and to analyze the short and long run price elasticities. The results indicated that relative price factor had positive and significant bearing on acreage of maize in none of the selected districts but at the state level. Districts namely Belgaum and Bijapur evidenced significant negative impact of price on acreage of maize. 22 Mushtaq and Dawson (2002) quantified the acreage responses of wheat, cotton, sugarcane and rice in Pakistan using co-integration techniques and impulse response analysis. The results indicate that acreages of wheat and basmati rice do not respond significantly to shocks in own-price while cotton, sugarcane and high yielding variety (HYV) rice do, and that long-run equilibrium was re-established after about four years. An irrigated area was an important determinant of acreage. Brauw et al. (2003) studied both flexibility and supply responsiveness of Chinese farmers using pooled cross section, time-series data for the period 1975-1995. The supply responsiveness of Chinese farmers has been studied introducing a new concept of degree of flexibility in the adjustment of quasi-fixed factors. The quasi fixed was defined as those inputs which take more than one period to adjust to changes in relative prices or other exogenous factors. The simultaneous estimation of input demand and output supply was adopted following Gallant (1992) method of Non-Linear Three Stage Least Square estimation simultaneously for two quasi fixed inputs and three outputs. It was found that land and labour were less flexible for adjustment in the early reform period and the flexibility has significantly increased in the late reform period where market was fully liberalized. The dummy variables representing early reform period and late reform period have been introduced. It was found that the price responses to change between early reform and late reforms periods. The results showed that the own price response variable displayed significant increase in the late reform period especially for labour but not much change was seen in the case of area response. However, farmers increased their speed of adjustment between early and late reforms periods. The study confirmed that gradual reform process has worked to the advantage of Chinese agriculture. Deb (2003) explored the presence of long-run relationship between terms of trade (TOT) and agricultural output by using cointegration analysis and error correction model. The bivariate results between TOT and output level in agriculture reflect no statistically significant cointegration. The non-cointegratedness indicates that no direct long-run relationship exists between TOT and output level in Indian agriculture. This, in turn, would suggest that a favourable TOT structure alone may not be effective in sustaining higher agricultural growth. Further, irrigation ratio was included as a technology between TOT and output. Then it was found that variables were cointegrated. Finally it was concluded that growth in agricultural output may respond better if specific structural variables were suitably combined with the price variables. El-Batran (2003) conducted a study on supply response for wheat in Egypt. The wheat acreage supply response in Egypt during the period 1980-2001 examined using different models. The results indicated that there was a positive supply response to the relative price of wheat and competing crops (sugarcane and faba beans) and to the relative net profit 23 between wheat and multi cut berseem. The positive supply response reflected the role of technical change to increase the cultivated area under wheat. Alagh (2004) studied aggregate agricultural supply function in India and examined price elasticity of the aggregate agricultural supply function. An acreage response function for the period 1950-51 to 1996-97 corroborates the findings of earlier scholars that India's aggregate supply function was not price responsive. However, periodizing the framework of analysis, due to changed growth rates and policies after 1980-81, suggests a weak relationship between acreage response and terms of trade for the latter period. The agrarian economy reflects the transitional nature of the policy regime since 1980. Rao (2004) examined agricultural supply response at aggregate level for Andhra Pradesh by using Nerlove Partial Adjustment Model. It was found the short-run elasticities of output with respect to TOT for aggregate agriculture vary from 0.20 to 0.29 and the long-run elasticities vary from 0.21 to 0.31. The results also indicated that non-price factors are more important determinants in aggregate agricultural supply than price related factors in the state of Andhra Pradesh. Abrar et al. (2004) explained the crop level supply response by region wise in Ethiopia. The results showed that the output prices are clearly an important part of the incentive structure, but non-prices factors are the binding constraints. This is most apparent in the relatively non-commercial Northern highlands where these factors were far more important in affecting production and resource use than price incentives. Surekha (2005) developed a non-linear autoregressive distributed lag models to study supply response for rice. The standard methods was criticized saying that most of the structural form parameters are either non linear functions or ratios of reduced form parameters and as a result the structural form parameters do not possess finite moments. Such estimators were likely to be inconsistent and also very often lead to low estimates. This could be one source of trouble in wide range of studies obtaining low elasticities from Nerlovian Supply Response Models. As a method to overcome this problem, an alternative estimation method was used based on Bayesian Paradigm, which takes care of the problem stated above. Taking into account appropriate variance covariance structure of the error term, the parameters was estimated using Bayesian two step procedure. Using the two stages Bayesian estimator it was found that a large value for supply response as compared to the estimated derived standard least square method. This seems to have explained the low supply response estimated by many empirical researchers. It was further found that low adjustment coefficient that explains farmers’ reluctance to make larger changes in main cereal crops like rice. The results revealed that the farmers adjust slowly toward the desired acreage where farmers were reluctant to make larger adjustments in main cereal crops that are used for self-consumption. It was 24 further found that a long run elasticity of 1.9 following Bayesian estimation method against 0.538 obtained which indicated high sensitivity of estimates to estimation techniques. The same study was also conducted in Pakistan in which it was estimated the responses of cotton, wheat and sugarcane crops’ area to changes in their prices and other relevant factors using Nerlovian Model covered time series data from 1970-71 to 2006-07 (Nosheen and Iqbal, 2008). The coefficient of the area response models from respective crops were estimated through Ordinary Least Squares Method. The short run price elasticity of cotton area has been estimated at 0.263 while the long run price elasticity works out to 1.09. The short run and long run price elasticity of wheat has been calculated at 0.045 and 0.105 respectively. In the case of sugarcane, the short run and long run price elasticity has been worked at 0.229 and 0.653 respectively. The adjustment coefficients of cotton, wheat and sugarcane have been estimated at 0.241, 0.435 and 0.350 respectively. The results have shown that farmers do response to price incentive. The adjustment of area response to price movement shows moderate pace of adjustment in the long run by the farmers in the case of cotton and sugarcane. The rapid adjustment of wheat area in response to price was indicated by the farmers. The study reveals that there were powerful monopolies and oligopolistic structure in cotton, wheat and sugarcane markets which distort the incentives for the producers resulting in wasteful and inefficient use of national resources. There was a need to remove these distortions and correct market imperfections so as to make best use of the available resources and increase farm production and improve competitiveness in world market. Mythili (2008) estimated supply response for major crops during pre-and post-reform periods using Nerlovian adjustment-cum-adaptive expectation model. The estimation was based on dynamic panel data approach with pooled cross section-time series data across states for India. The study found no significant difference in supply elasticities between pre-and post reform periods for majority of crops. The study also indicated that farmers increasingly respond better through non-acreage inputs than shifting the acreage. This includes better technology, use of better quality of inputs and intensive cultivation. Many more studies (Thamarajakshi, 1977; Krishna, 1982; Mungekar, 1997; Desai and Namboodiri, 1997) were also available in the context of Indian agriculture. Thamarajakshi, (1977) reported a statistically significant and effective relation between aggregate farm output and non-price factors (irrigation) but the author could not detect any statistically significant impact of TOT on agricultural output. Krishna, (1982) also drew same conclusion but difference between both the studies was that Krishna observed a marginal impact of TOT on agricultural output. Mungekar, (1997) and Desai and Namboodiri, (1997) reported negative impact of TOT on agricultural output. Both studies also observed 25 significant impact of non price factors such as irrigation, rainfall, area under high yielding verity seeds, fertilizer use, rural roads and other infrastructure facilities. Kumawat and Prasad (2012) examined the supply response of sugarcane in India, U.P and Maharashtra using Nerlovian model. The area under sugarcane was affected mainly by sugar prices in India and U.P and rainfall in Maharashtra. The elasticity of area with respect to sugar price was very low (0.19) in U.P and high (1.13) in Maharashtra. The yield of sugarcane was affected by rainfall in India and in tow individual states. Thus, non-price factors are more important factors in the farmers’ decisions about inputs other than area. The total supply response is the response of the total output to price and non-price factors. In fact, it was the planned output that should respond to changes in these variables. In other words, growers tended to plan certain level of output to be produced in response to price and non-price factors and it was this planned output that had to be considered as a response variable. However, the non-availability of time series data on planned output made it necessary to use some appropriate proxy. The response variable through which the farmers’ decisions are reflected, however, there is little consonance amongst the researchers. Some researchers claim that area under the crop could be a better proxy for the planned output. The area statistics were not only readily available and more dependable but also least influenced by external factors. The protagonist of area response are Sinha et al. (1934), Candler (1957), Nerlove (1958), Mangahas et al. (1966), Jakhade and Mujamdar (1964), Sahay (1971), Madhavan (1972) and Cummings (1975). Constraints in production sugarcane and sugar Grover (1987) identified the problems faced by the sugar industry at the mills and growers levels. The fluctuation of area under sugarcane was the important problem faced by the sugar industry which leads to fluctuation in sugarcane supply to the mills. This fluctuation gave rise to instability in production and prices of sugar and other sweetening agents. The other important problems were low recovery of sugar, high cane price fixed by the State Government and larger diversion of sugarcane produce to sweetening agents other than sugar. The cane growers faced problems regarding obtaining of cane requisition slips, delayed payment, problems of weigh-men and transportation, delayed in unloading of sugarcane and malpractices in the distribution of cane indents by the sugar mills. Rais and Rath (1990) examined and identified the problems that causes the sickness of the sugar industry in Uttar Pradesh clustering of small sized plats without much foresight for the future development and expansion have been one of the foremost reasons for the technical and financial sickness of the sugar industry. It has been reported that 50-60 per cent sugar mills in the state were sick. The sickness of mill was defined as the mills which had incurred cash losses for the last three consecutively or more should be clubbed into the category of sick. The results revealed that cooperate sector has higher sick mills than the 26 private sector. The sickness of mills has been cause by inefficient management, obsolete plant and machinery, low capacity utilization, low recovery rate, high loss of sugar in bagass and high cost of conversion as internal factors. While inadequate supply of sugarcane and inconsistencies in the government policies related to pricing of inputs and output levy on sugar and on the by-product of the sugar industry as external factors. Arulraj (1998) analyzed the constraints affecting sugarcane planting productivity. It was found that high fertilizer cost, non-availability of labour, delay in harvest, difficult in cane harvest, difficulty in cane transport, non-availability of skilled labour for various operations, lodging of cane, flowering of cane, poor cane yield from ratoon, lower income obtained from sugarcane crop as compared to other crops were the constraints faced by the cane growers . Tarimo and Takamura (1998) analyzed the constraint of sugarcane production in Tanzania. The study found out various constraints related to edaphic such as unreliable seasonal rainfall and poor irrigation in the sugarcane fields resulting in salinification of soils, biological such as low productivity of sugarcane, husbandry (used of obsolete technology in sugarcane production such as lack of pest control such as for rats and the use of fire before cane cutting), processing (used for processing sugarcane are old and generally crude in performance), marketing infrastructural conditions and insufficient storage facilities during the peak production season cause imbalances in sugar distribution to the country. The sustainable sugar production in the country depends on improved production technology, marketing and storage infrastructures at factories and regional centers. The marketing infrastructure was laden with exorbitant storage overheads which have to be paid by the endconsumers. Therefore, it was found that there is a need to strengthen research in the sugarcane industry to ensure availability of high-yielding, disease-and-pest resistant clones which are adapted to the Tanzanian soil and climate conditions. The study conducted by Nain et al. (2002) found irregularity in the distribution of sugarcane purchase indent delay in payments of sugarcane to the farmers (by Cooperative sugar mill), delay in unloading, lack of transportation facilities as the major problems reported by the farmers in Haryana in the marketing of sugarcane to the sugar mills. All the problems faced by the farmers need to be attended by the sugar mills on priority basis for the development of sugar industry in the state. Abdel-Maksoud and El-Sharabassy (2007) identified production and marketing problems facing sugar cane growers in Qena governorate, Upper Egypt as perceived by farmers and extension personnel of the governorate. The most important production problems perceived by focus groups of farmers and extension personnel were spread of different kinds of weeds and insects, weak role of agricultural extension, shortage and high costs of fertilizers and labor, high costs of production, insecticides and irrigation. The high costs and 27 unsystematic cutting, shortage and high costs of transportation, delay of cutting and delivery of product to the factory, inaccurate weigh and low prices of the product were the most important marketing problems mentioned by farmers and extension personnel in Qena governorate. With regard to marketing problems, members of the three focus groups in the first village agreed upon the existence and priorities of delay of cutting, high costs of transportation (Livre égyptienne (L.E.) 15 per tonnes), stealing of product during transportation, delay of transportation and delivery, and inaccuracy of sugar cane weigh at the factory. In the second village, high costs of transportation and inaccuracy of sugar cane weigh were mentioned by members of the three focus groups. Non-availability of loading machines, delay of cutting, lower price of product and high ratio of defects were mentioned by only one or two focus groups held in the village. Mahlangu and Lewis (2008) found that there were a range of factors at farm level, contract level, institutional and mills level that affect small scale growers’ (SSG) sugarcane production. There was indication of trend of decreasing production levels and yields of sugarcane among small scale growers. It has been analyzed that SSGs were not making the effort to improve farming practices as returns are declining and provide little incentive to invest resources. The study identified shrinking yields and associated financial returns as a major challenge. The other challenges were lack of integrity among individuals and dishonesty. SSGs were facing the problem of high wage rate which make them to find good workers to assist. Yet, the poor communication between SSG structure, harvest contractors, haulers and the mill were other major challenges. The authors revealed that the challenges need to be holistically addressed if farming practices are to be effectively improved and the sustainability of SSG sugarcane production enhanced. Therefore, the study recommends that the introduction of the best management practices (BMP) project should be accompanied by parallel intervention. Shinde et al. (2009) analyzed the problems of the farmers in the sugarcane production in Raibag taluk of Balgaum district. It was found that the majority of farmers faced the problems on account of low price of the produce, price fluctuation, high cost of production, high wages for hired labour, lack of labour availability, pest and disease infestation, scarcity of own fund and lack of crop cutting order from sugar industry, which lead to uncertainty of income to the farmers. The increase in profitability of sugarcane production and adoption of intercropping system would increase return per rupee of investment. Moreover, the better management practices and efficient utilization of family labour will compensate the labour problems. Lahoti et al. (2010) studied was carried out, in the year 2005, to identify the constraints in adoption of sugarcane production technology by interviewing 150 sugarcane growers from ten different villages of command area of Vaidyanath Co-operative Sugar Mill 28 Limited, Pangari, (Maharashtra). The constraint variable was operationalized as the difficulties faced by sugarcane growers for adoption of sugarcane production technology. The constraints encountered by most of the respondents in adoption of sugarcane production technology were irregular supply of electricity, high cost of pesticides, and inadequacy of irrigation water at required time, non availability of labour for intercultural operations, high cost of fertilizers, and non availability of good quality manure and lack of knowledge about spraying of insecticides. Non availability of contact office near the village and transportation of sugarcane sets were also the constraints faced by the sugarcane growers. Timely and regular supply of inputs at cheaper rates, with regular supply of electricity and ensuring remunerative price to sugarcane were some of suggestions made by sugarcane growers. Alcudia et al. (2011) identified the main socio-economic and technological factors influencing yields in sugar cane at Benito Juarez Sugar Mill Factory (BJSMF). A total of 150 growers were interviewed, whose information was analyzed with descriptive statistics. The relevant socio-economic characteristics were age (51 per cent growers were 50 to 70 years old); school attendance (40 per cent coursed primary school); lack of family labor, among others. Relevant technological issues were the higher yields in a smaller area planted with variety MEX 79-431, mean yields ranged from 50 to 60 tonnes per hectare, commonly applied fertilizers are based on the formula known as triple 17 by 30 per cent of growers and the 20-10-10 fertilizer mix is used by 26 per cent. The lack of technical advisory access was reported by 58 per cent of them. Murali and Balakrishna (2012) identified the labour problems in the sugarcane production in Tamil Nadu. The labour scarcity coupled with high wage rate of labour was found affected timely irrigation and harvesting of the crop to a greater extent. It reduces area under sugarcane cultivation (from 3.91 lakh ha 2006-2007 to 3.14 lakh ha in 2009-2010) in the state. Modern sugarcane machinery and labour saving devices were introduced at large scale to reduce the dependency of labour, and complete the farm operation in time. Mechanical operations proved that it was superior to manual operations. It reduced cost of production and enable efficient utilization of resources with better work output. It was estimated that furrow method of irrigation requires about 320 man-hours as against 30 manhours for drip irrigation. The manual harvesting required about 1,000 man-hour with the cost of `55,000 to harvest 100 tonnes per ha (`550 per tonnes) against `32,500 per ha (`325 per tonnes) with the labour engagement of 12 man-hours per ha. Now it is inevitable to use modern sugarcane machinery, which is now available in the-country like sugarcane planters weeding machinery and imported harvesters. 2.1 Performance of sugar industry 29 Puri (1963) highlighted that the sugar industry was faced problems, such as small number of sugar mills, lower percentage recovery of sugar, lesser supplies of cane sue to diversion to Gur and Khandsari units which paid higher prices to the cane growers, controlled price and distribution of its bye-product (molasses) in Punjab. As a result, the working of many sugar factories became un-economic. Ahmed (1972) observed that the sugar industry expressed dissatisfaction with the low levy prices. The government started taking into account the escalation (increase in railway freight rates, dearness allowances, parking charges, higher depreciation and emergency risk assurance premium) suggested by Tariff Commission. Thereafter, notified levied prices in certain zones became lower than the fixed ex-factory price (exclusive of excise duty) at which sugar was to be delivered to the Government to maintain buffer stock under Public Distribution System (PDS). Bahl (1972) observed the existence of wide gap in the granting of license and the installation of capacity in the sugar industry. On the other hand, internal demand for sugar was growing. Therefore, to bridge the gap between demand and supply it required an increase in the production of sugarcane by paying higher prices to the cane growers so that they could augment the production of sugarcane. Kanoria (1978) pointed out that due to wide disparities in cane payment, cane supplies from Gur and Khandsari units were diverted to the sugar industry during 1977-78. This brings the sugar industry to increased its capacity utilization and hence, sugar production but despite the excise rebate concession on additional production, cost of production increased for the sugar industry. It was due to an extension of its crushing season to the hot summer months which steeply reduced sugar recoveries, though; the cane price paid by the mills remained above their statutory level. As a result, the industry had to incur heavy losses since the mills were forced to deliver large quantities of levy sugar at uneconomic rates while its market prices had fallen rapidly. Bura (1979) stated that decontrol of sugar led to fall in its prices and brought heavy losses to the industry. It was due to tremendous increase in sugar production during 1977-78. So, it failed to pay a remunerative price to the cane growers and make their due payments. Thereby, an ordinance was promulgated by the Government to take over the management of those sugar factories which had failed to start crushing operations in time and reduce their dues. Grewal and Rangi (1982) acknowledged the problem of fluctuating supplies of cane that engulfed the Indian sugar industry so the mills in Punjab had to run after farmers when this failed to get adequate supplies of cane on the other hand, cane growers had to face problems in the disposal of their crop when mills failed to crush the available supplies. The fluctuations in cane supplies resulted from the prices of sugarcane, Gur and due to the 30 problems faced by the farmers in the disposal of cane. Besides this Government policy for the regulation of sales of sugar (it manifested itself in several forms) also affected the sugar market. The control of sugar (nearly for a year that is from August 1978 to June 1979) initially brought a slump in its price and thereby increased its domestic demand tremendously. But later on it led to a peak hike in the price of sugar and Gur. Attwood and Baviskar (1987) studied a comparative sociological analysis of the cooperative sugar factories in Maharashtra in order to pinpoint the organizational factors which are crucial for their success. A comparative analysis of privately-owned sugar factories in India revealed a basic weakness in the cane supply relationship between the private factories and the sugarcane growers-a weakness which the co-operative factories have overcome. As a result, the co-operatives can operate at higher technical and economic efficiency than the private factories. Moreover, although the co-operatives received some helpful subsidies from the government, much larger subsidies were directed to the private factories at the expense of the more efficient co-operatives. The success of the co-operative sugar factories depends not only on a superior cane supply system (which resolves a problem specific to the sugar industry), but also on their ability to generate a stable alliance among the small, medium and large cane growers who were the shareholders. This alliance was made possible by two sets of factors: internal factors, which are specific to the technical requirements of sugar production; and external factors, which are rooted in the agrarian system of the region where these cooperatives have flourished. Comparisons with other types of co-operatives in other regions of India show that the presence or absence of similar factors determines whether a given type of co-operative will succeed or fail. Detailed comparisons with the successful dairy cooperatives of Gujarat show that co-operative alliances between small and large farmers may take different organizational forms under different regional conditions. The political organization was also influenced by the nature and scale of the production process. The general conclusion was that the probable success or failure of co-operative organizations can be predicted through such comparative analyses-analyses which compared co-ops with other types of private and co-operative enterprises, taking into account the technical and organizational requirements of the production process, the distribution of interests and possibilities for a stable alliance among the members, and the regional agrarian systems which determine the natural and social environments of the co-operatives. In the study conducted by Grover (1987) estimated the performance of sugar mills in Punjab. The performance of the sugar mills was judged on the basis of several efficiency criteria such as cane crushed, recovery, sugar production, mechanical breakdowns, operational efficiency, capacity utilization and cost of sugar production. The results revealed that Batala Sugar Mill showed highest recovery followed by Morinda and Phagwara respectively. It was found that Phagwara gave lowest time losses due to mechanical 31 breakdown followed by Batala and Morinda respectively. The results further revealed that Phagwara Sugar Mill had highest operational efficiency followed by Morinda. Also Phagwara Sugar Mill showed better performance in terms of capacity utilization. Comparatively, Batala Sugar Mill had the lowest cost of sugar production. Nikam (1988) conducted a study of three co-operative mills (Terana, Siddheshwar and Madhukar) located in Central Maharashtra. The results indicated that the average recovery of sugar varied across the mills. All the three mills showed general efficiency during most of the years but both in the case of early start and late crushing, shortage and poor quality of sugarcane reduced the recovery of sugar. Azad et al. (1990) determines the disposal pattern of sugarcane and cost structure involved in the processing of sugar in sugar factories for public, cooperative and private organizations. The results indicate that the organization, management and supervision of private sugar factories were in the hands of experienced, efficient and responsible persons as compared to those in the public and cooperative sectors. The results further showed that private sector sugar mills in Meerut district of Uttar Pradesh crushed nearly 2-3 quintals of total cane crushed 2/3 quantity of the total cane crushed and were bigger in size. It has a higher recovery of sugar due to the efficiency of management and technical staff and better maintenance of plant and equipment compared with public and co-operative sector mills. Therefore, variable cost per quintal of crystal sugar for private sector remained low. But the total fixed cost due to big size of the plant and large strength of the permanent labour and technical staff was higher. However total processing cost per quintal o sugar remained the lowest for them which increased their net returns per quintal of output. Dawar (1990) study the performance of sugar industry in Punjab and Haryana which evaluated in terms of returns to scale. The contribution of inputs such as labour, capital and raw materials in sugar manufacturing process were highlighted and explored. The inputs were found to be efficiently managed and productively utilized. The results revealed that the performance of cooperative sugar factories has been performed better than in Haryana. The input capital has performed well while labour and raw materials did not yield the desired results. But in Haryana there is a need for reorganization and rehabilitation of the existing sugar factories rather than expansion and installation of new factories. Dhanuka (1990) observed that the sugar industry was facing financial crisis due to the lack of availability of sufficient quantities of sugarcane and other restrictions such as higher excise duty imposed on the sale of free sale sugar. The cost of sugar production had increased for the mills due to a number of factors, such as an increase in the price of sugarcane, working of sugar mills during hot summer months which reduced the recovery of sugar, higher wages of labour, cost of transportation, spares and packing materials and other cost ingredients. The cost of production was even higher than the price of sugar realized by the industry. Due to an 32 increased gap between the cost of production and the price of sugar led the industry to incur losses. As a result, industry’s dependence on the borrowed funds had increased which got reflected in lower production. Singh (1998) found that the sugar recovery in Muzaffarnagar district of Uttar Pradesh was more for the Shamli Sugar Mill compared with that of Mansurpur Mill. But both the sugar mills faced the problems either of excessive or short supplies of sugarcane during the crushing season. The crushing capacity of the mills was too low as compared to the supply of sugarcane to the mills. The capacity of the mills could not be increased due to the refusal of permission by Government and lack of funds. Goel and Kaur (2000) examined the performance of Bhogpur and Jagraon sugar mills in Punjab. Jagraon mill daily crushing capacity (2500 tonnes) has been more than double Bhogpur sugar mill (1100 tonnes). The mill with higher TCD met the major chunk of its cane requirements from the mid maturing varieties of cane. Bhogpur, oldest sugar mill keep the plant running for a longer period in order to keep the cost of capital lower together lower labour cost of running a plant. While, Jagraon, new sugar mill increase the use of installed capacity by lowering the number of working days so as to reap the benefit of economics of scale. Due to availability of several tax concessions and policy bias of the Government, Jagraon sugar mill tends to keep per unit cost of production for drastically low which increases per unit profit margins. Gohil (2000) analyzed the profitability of Bardoli Cooperative Sugar mill and represented by straight-line trend based on least square method. It was analyzed that the net profit ratio, the return on net capital employed, return on owner’s fund and earnings per share trend were declined continuously during 1997-98 and 1988-89 as base year. It was shown that the profitability was decreasing and adversely affected. The owners fund was not used properly on the unit. The value of one equity share of the unit was `500 and during the last three year, earning per share trend was `10 on an average-based, which was only two per cent of its share-price. A major portion of cost comes from operating expenses and the trend during 1997-98. This indicates that there was need to control the operating expenses. The management was failed to earn enough return on total capital employed. The rate of recovery of the unit was 11 per cent on an average based during 1997-98 and was more than the normal rate (8.5 per cent) as it was the key indicator for productivity and profitability. Further it was noticed that the sugar mills faced problem of low profitability which can be control by adopting prudent measures. Goel (2002) opined that a large number of sugar factories faced an unbearable heavy losses on their operation due to several factories such as higher SMP (Statutory minimum price) coupled with precipitous decline in sugar prices. An increase in price of sugarcane 33 bring more area under sugarcane lead to large sugar production vis-à-vis massive build up of stocks which grew from 54 lakh tonnes to 109 lakh tonnes during 1998-99 and 2002-03. Under this circumstances industry fail make to payment to the sugarcane farmers. Several measures were suggested to combat these problems to some extent, such as relief in excise duty on sugar, molasses and central cess, regulated release mechanism, buffer stocks, future trading in sugar, to encourage sanction of adequate cash credit limited by the banking sector and classified the sugar industry as advances to the priority sector. Nain et al. (2002) examined the comparative economics of sugarcane processing in the Public/Cooperative sector and Private sector. It was observed that the processing cost of sugarcane for manufacturing one quintal sugar was found higher in Cooperative sector sugar mill (`193.50) in comparison to Private sector (`113.44). The processing efficiency in terms of value addition per unit cost of processing was found higher in Private sector (837.45 %) in comparison to Cooperative sector (465.12 %). The higher processing efficiency in Private sector may be attributed to lower fixed as well as overhead expenses and more quantity of sugarcane crushed. Shinde et al. (2002) evaluate performance of cooperative sugar factory in Ahmednagar district over the period of 1990-91 to 1999-00. The study showed that the technical health of the sugar factory considering the health components such as crushing capacity, daily average cane crushed, total cane crushed and the quality of cane crushed from the mill was good during the year under study. The regression analysis revealed that the factors such as per quintal cost of sugar and percentage of sugarcane crushed from the outside jurisdiction of the factory turned out highly significant and explained 79.94 per cent of variation by the factors. Singh et al. (2007) analyzed the efficiency of the sugar factories across the different regions of the state Uttar Pradesh. It was observed that the average crushing capacity of sugar mills in the private sector of Western Region was highest followed by the Central and Eastern Region of the state. The average capacity and number of operating days was at satisfactory level which influence in deriving the benefits of economies of scale. The profitability and efficiency was estimated in the private sector factories in the Western Region and least efficient in cooperative sector in Eastern Region. The overall efficiency of the sugar industry was 73.5 per cent on account of assured cane supply in the crushing season in Western Region. The increase used of the variables such as raw materials and stores, manufacturing and depreciation cost has a significant contribution in sugar production. The firm/factoryspecific efficiencies ranged from 45 to 92 per cent. Half of the sugar mills in the state were operating above 75 per cent level of efficiency, most being in the Private sector. The variability in the level of efficiencies was largely due to the nature and scale of operation. 34 Shinde (2011) analyzed the pre and post performance of Ajara Talika Shetakari Sahakari Sugar Factory Limited., Kolhapur in Maharashtra. The sick cooperation sugar factory has been leased out to survive in the changing environment. The author defined preleasing period as cooperative management while post leasing period as private management period. The seven key parameters such as cane crushed, sugar produced, recovery, capacity utilization, reduced mill extraction, gross season and cane price paid to cane growers were used for analysis. The students’t-test was adopted for the evaluation. The study revealed that there was no significant difference in the performance of pre and post leasing period for the parameters cane crushed and gross season taken. It was analyzed that the performance of private management were better than the cooperative management for sugar produced, reduced mill extraction, capacity utilization, recovery and cane price paid. The author concluded that the factory which was on threshold of closure can survived by better management practices adopted by the private management during post leasing period. Bhagat (2010) revealed that under utilization of production capacity is a common issue for Nepalese manufacturing enterprises and sugar industry is no exception to this. The study was mainly deals with the cause of underutilization of production capacity of Nepalese sugar mills as well as the market situation of sugar and sugarcane. In spite of sufficient production of sugarcane, the sugar mills do not get adequate quantity and proper quality of sugarcane at right time. Almost half of the sugarcane production has no market which revealed the poor procurement system. The approved production capacity of Nepalese sugar mills was more than domestic requirement of sugar. However, the unfulfilled demand for sugar is fulfilled mainly by imported as well as smuggled Indian sugar. The capacity utilization rate of Nepalese sugar industry, which has been decreasing, dropped to 45 percent in 2008-09. The main identified reasons are stoppage, breakdown and slow motion of machines, delay in settlement of minimum support price of sugarcane and late commencement of production season, political instability, less operation days of sugar mills and ultimately the overlook of sugar producers to utilize their full capacity of production. Measures to improve the capacity utilization rate of sugar mills have become an urgent need. Nandhini et al. (2012) study the effectiveness of performance appraisal system in sugar mills in Tamil Nadu. The performance appraisal has been defined as a process of evaluating an employee’s performance of a job in terms of its requirement. The performance appraisal has been considered as a most significant and indispensable tool for an organization, for the information it provides is highly useful in making decisions regarding various personal aspects such as promotions and merit increases. It has been done to maintain individual and group development by informing the employee of his performance standard, to suggest ways of improving the employee’s performance when it was not found to be up to the mark during the review period, to identify training and development needs and to evaluate effectiveness of 35 training and development programmers and to plan career development, human resources planning based on potentialities. The sugar industry in Tamil Nadu has achieved a high degree of stability and there has been a steady increase in the output. During the crushing season, the cane planning was done to achieve the timely completion of crushing and the Co operative and Public Sector Sugar Mills were envisaging 110 per cent capacity utilization. The Chi-square test shows that there was a significant relationship between educational qualification and monthly income of the employers. Ray (2012) evaluated the economic performance of Indian sugar industry in view of capacity utilization measured econometrically at the aggregate level of over a period from 1979-80 to 2008-09. The trend in growth rate of capacity utilization follows a decelerating path during the post reform period as there was a sharp decline in average capacity utilization rate in post-reform period as compared to pre-reform period. Secondly, annual average growth rate of capacity output shows steep upward trend but actual output grows at a much slower rate than capacity output resulting declining growth rate in capacity utilization (CU). Thirdly, the liberalization process was found to have its significant negative impact on capacity utilization since there was a fall in average growth rate of capacity utilization during the post-reform period. Fourth, the empirical findings suggest that there exist considerable variations in the capacity utilization rates over years within same industry. Finally, it was noticed from the results that capacity utilization has more sensitive to the extent of capital deepening of the sugar sector. In order to utilize its capacity fully and run efficiently, the sugar mills within the industry should get uninterrupted supply of raw sugar cane uniformly throughout the seasons and the government should ensure the supply of raw inputs. There is a need of coordinated and concerted effort for appreciation and consolidation of the needs of the consumer, farmer, and processor and to address to various above issues if India has to attain the glory of self sufficiency and attain the status of net exporter and an important significant player in the international market. There is an urgent need to improve in productivity both in terms of yield as well as sugar contents and recovery by adopting better harvesting practices and close coordination of sugar mills with farmers. It has been estimated that better farming and harvesting practices could result up to one per cent improvement in extraction which can lead to 10 per cent increase in production. Therefore, mills and farmers to work together to improve yield and extraction through better harvesting in order to become internationally competitive that is cost effective and quality producer. Presented reviewed of the literature have brought out that none of the study was done on growth of sugar production, its instability and decomposition of sugar production into different effects. Many studies were on acreage response for price and non-price factors using Nerlovian Model. But the relative income of sugarcane farmers against it 36 competing crops namely paddy and wheat as independent variables was included in few studies. An attempt has been made to compare the Linear Model and Nerlovian Model of sugarcane acreage response so that true picture of acreage response under sugarcane crop in the state could be highlighted. The comparison of these two models was not found in the literature reviewed. The physical and financial performance of the sugar industries was not analyzed minutely based on different parameters by any researchers. A few studies have compared the economics of the two sectors of the sugar mills but not even a single study was found to compare the two sectors based on physical and financial performance of the sugar mills. The constraints faced by various interest groups involve in production and processing of sugarcane and its marketing was studied by many researchers but few studies was on constraints faced by the farmers right from the production of sugarcane to processing and marketing of sugarcane and sugar. Moreover, in-depth study of the sick sugar mill was not done so far. Therefore, in the light of above stated facts an attempt has been made in the present study to examine and identify various problems in production and processing of sugarcane in the state. 37 CHAPTER III MATERIAL AND METHODS The chapter describes and explains the methodology deployed in the present study. The chapter was organized in sub-heads such as the sampling procedure, sources of data, analytical technique, and operational definition. In order to draw a representative sample, the detail sampling procedures is discussed as under: Sampling Procedures The procedures for the selection of ultimate respondents for fulfilling the stipulated objectives have been divided into different phases. A Simple Random Sampling technique was followed to select the respondents. The different phases for the selection of respondents were discussed as follows: Selection of sugar mills In Punjab, there were 24 sugar mills with a crushing capacity of 70016 TCD, 8.80 per cent recovery and production of 302.3 thousand tonnes of sugar in 2010-11 (Anonymous, 2011). Out of the total sugar mills in the state, 15 sugar mills were in cooperative sector and nine in private sector. Among the cooperative sugar mills, only nine were functioning in the study period and seven sugar mills under liquidation. The crushing capacity of the functioning sugar mills under cooperative and private sector was listed down. The simple random sampling method was used to select mill, as such two mills each from cooperative and private sector were selected randomly based on highest crushing capacity (TCD) of the sugar mill. Accordingly, two cooperative sugar mills namely Morinda and Nawanshahr Cooperative Sugar Mills Limited, each having crushing capacity of 2500 TCD, were selected for the present study. Similarly, Wahid Sandhar Sugar Limited, Phagwara and Indian Sucrose Limited, Mukerian having daily crushing capacity of 4500 and 5000 TCD respectively were selected from private sector. Thus, a sample of four mills was taken for the present study. The sugar mills under cooperative sector in Punjab has suffered from the malady of sickness over last decade and there assumed to unmanageable dimension and no sign of abatement. There was indeed call for timely and proper monitoring of the mills in the state. Therefore, it has been realized to have in-depth knowledge about the sugar mills under liquidation and to find out the root causes of the mill sickness in the state. Keeping in mind the stated problem and to help the policy makers to frame an efficient plan and policy measures to build an efficient based sugar industry, Zira Co-operative Sugar Mills, Limited, Zira was selected purposively for the fulfillment of the stipulated objective. 38 Selection of sugarcane farmers A simple random sampling technique was adopted to select the sugarcane farmers. The farmers residing in vicinity area of the selected sugar mills were considered to be the population for the present study. Accordingly 15 sugarcane farmers were selected randomly from each area of selected sugar mills. Hence, there were a total of 60 sugarcane farmers comprising 30 each from cooperative and private sugar mills respectively. For examination of various constraints regarding the sugarcane production and its disposal, and socioeconomic problems faced by the cane growers, 60 famers were interviewed personally. Besides, 15 sugarcane farmers were selected randomly from the vicinity area of selected liquidated sugar mill and interviewed personally to analyze minutely the problems faced by them. Therefore, the total representative sample for the present study was 75 sugarcane farmers. Collection of Data The present study was based on the primary and secondary data. The collection of the data from different sources is discussed under the following sub-heads: Secondary sources The secondary data for the last 61 years, a period from 1950-51 to 2010-11 based on various parameters relating to sugarcane and its competing crops such as wheat and rice were collected. The requisite time-series data pertaining to the area, yield and production of sugarcane and cane crushed, recovery and production of sugar in India and Punjab were collected from various issues of the Statistical Abstract of Punjab, Economic Survey of India, Agricultural Statistics at a Glance, Indian Sugar and from websites like www.indiastat.com. To study and estimate the physical and financial performance of the sugar mills vis-àvis the problems faced by the sugar mills, the relevant information were obtained from the Punjab State Federation Cooperative Sugar Mills Limited and Statistical Abstract of Punjab, etc. Further, the data pertaining to crushing capacity, capacity utilization, sugar recovery, sugar production, average crushing days, molasses production, etc. and mill information such as working at a glance, balance sheet, income statement were collected from the sample sugar mills. Primary sources The primary data and other relevant information for the present study were collected from the selected sample farmers with the help of pre-tested well structured schedule through personal interview for the year 2010-11. Data on demographic characteristics like age, economic status, family size, educational level and economic parameters such as land inventory, farm buildings, area under sugarcane and experience in sugarcane cultivation were collected. The opinion of the farmers on the various constraints in sugarcane production, its disposal, the financial problems and 39 socio-economic problems faced by the cane growers were collected. Besides, measures to overcome the problems have also been suggested for sustainable development of sugarcane and sugar production in Punjab. The information related to the problems faced in processing and production of sugar from the concerned officers of the mill was interviewed personally. Analytical Techniques The study examines the growth rates of area, production and yield of sugarcane, and cane crushed recovery of sugar and sugar production for Punjab and the country for last 61 years. The study period has been divided into three periods to appraise the impact of preGreen Revolution from 1950 to 1965, post-Green Revolution from 1966-1990 and postliberalization from 1991-2010 on sugarcane and sugar production. The estimation of growth rates was mostly done by linear growth rate and compound growth rate (CGR). Therefore, CGR was followed to estimate the growth rate of area, productivity and production of sugarcane for each of the three periods. The same estimation method was followed for the growth rate of cane crushed, sugar recovery and sugar production for each of the three periods. It is the most appropriate and appreciable to analyze the movement of agricultural crops in terms of compound growth rate rather than linear growth rate for the study. As the linear growth rate has inherent limitations to perform the comparison of growth rates between periods and crops (Dandekar, 1980, Mohammad T A S, 2008, Rehman et al., 2011). Compound growth analysis For evaluating the trend in production of sugarcane and sugar in Punjab and India, an exponential form of the growth function was used as follows: Yt = ABt Where, Yt = Production/ area/yield of a crop or production/cane crushed/recovery of sugar for the year‘t’. A = Intercept indicating Y in the base period (t = 0). B = (1 + r). r = Compound growth rate. t = time period. The model was linearized by means of logarithmic transformation, which was given as ln Yt = ln A + t (ln B) The slope coefficient of B measures the relative changes in Y for a given absolute change in the value of explanatory variable in period t. Therefore, the compound growth was estimated finally by using the following equation; ln B = ln (1 + r) r = [antilog (ln B) -1] CGR = [antilog (ln B) -1]100 or[r100] 40 The t-test was applied to test the significance of B. Instability in area, production and productivity was measured through coefficient of variation (CV) analysis using de-trended data. It was given as CV = Standard Deviation × 100 Mean Decomposition of growth analysis The relative contribution of area and productivity towards the total production of sugarcane was measured by using the Component Analysis. Similarly, the relative contribution of cane crushed and sugar recovery to the total production of sugar was also measured. The model has been used to study growth performance of the crops by several researchers (Siju and Kombairaju, 2001, Rehman et al., 2011). The form of the model is given as: ∆P = (∆A*Yo) + (∆Y*Ao) + (∆A*∆Y) Change in production = Area Effect + Yield Effect + Interaction Effect Or Change in production = Cane crushed Effect + Recovery Effect + Interaction Effect Where, ∆P = Change in production/ Difference in average production during two periods ∆A = Difference in average area/cane crushed during two periods ∆Y = Difference in average yield/average recovery during two periods Ao = Average area under sugarcane/average cane crushed of sugarcane during the base year Yo = Average yield /average sugar recovery of sugarcane during the base year Therefore, the total production of sugarcane was attributed due to area and yield that can be decomposed into three effects viz; yield, area and interaction effects. Similarly, the total sugar production of sugar was decomposed into cane crushed, recovery and interaction effects. Acreage response The area and yield of sugarcane has declined considerably over the last decades. This was largely due to shifting of cropping pattern in favour of rice and wheat from sugarcane cultivation. Over the last 61 years, area under sugarcane has declined with fluctuation from 1.51 lakh hectares during 1950-51 to 0.70 lakh hectares in 2010-11 in Punjab. Sugarcane is an annual crop which occupies land for 12 to 18 months followed by its ratoon crop for two to three crops. Thus, the area planted under sugarcane is not available for other crops for the next two to three years. There were various price and non-price factors which influenced the farmer’s decision in allocation of area under sugarcane. Therefore, considering the factors at 41 once, the acreage response of sugarcane in Punjab was analyzed by employing the Nerlovian Model. The model was described as under: Model specification Most of the econometric analyses on acreage response have been carried on annual/ seasonal crops. The underlying objective of the acreage response is to find out how farmers react to movements in price and non-price factors related to the crop that they intends to produce. The non-price factors are yield risk, marketing problems, economics of other competing crops, etc. When more than one crop is being cultivated the aim is to find out how the farmers intend to allocate the resources between the various crops in response to change in the relative price level and relative profitability. Therefore, to empirically estimate the magnitude and nature of the acreage response to change in price and non-price factors, Marc Nerlovian Model was used for the present study. The model has been extensively used over the last three decades. The significant features of the model are as follows: i. The rational farmer is more likely to respond to the price he expects rather than to the price of the previous period and the expected price will depend only to the limited extent on the actual price in the previous period. Further, for each period the farmer revises the price he expects to prevail in the coming year which is taken as weighted moving average of the past price, the weights decline exponentially as one goes back in time (Sangwan, 1985). ii. The model reflects technological and institutional constraints which allowed the farmers only a fraction of the intended acreage of the current planted area to the desired area in the current production year. In the specification of sugarcane acreage response model, the two crops paddy and wheat was considered as competing crops. This was mainly because of extensive cultivation of these crops in the state. Moreover, sugarcane is an annual crop which competes for the land and other resources with both the crops. The three crops have been cultivated in the state for commercial purpose so to say the cash crops of the state; they meet the cash requirement of the farmers. The comprehensive (including the additional variables) Nerlovian Adjustment Model was used in the present study. The model has been presented in the following way: A∗t = a + b1 SPt∗ + b2 It∗ + b3 SYt∗ + b4 RPR t + b5 RYR t + b6 GPt∗ + b7 Dt + Ut … … … … (1) The independent variables included in the model were explained as under: Area under sugarcane in period‘t’ The model was intended to explain the variations in planned or desired area of sugarcane in the state. However, the area planned to grow sugarcane was an unobservable variable which cannot be estimated. So a proxy for this variable was use. The assumptions of the model were presented as in the following ways: 42 A∗t = At At − At−1 = β(A∗t − At−1 ), 0 < 𝛽 < 1 At = β(A∗t − At−1 ) + At−1 At = βA∗t − βAt−1 + At−1 At = βA∗t + At−1 (1 − β) … … … … … . . (2) Where, A∗t = Desired area under sugarcane crop (000’hectare) in period t At = Actual area under sugarcane crop in (000’hectare) period t At−1 = Actual area under sugarcane crop (000’hectare) in period t-1 and β = Coefficient of acreage adjustment The equation highlights that the actual planted area of sugarcane in period ‘t’ was equal to the actual planted area in period t-1 plus the proportion of the difference between the desired planted area in period ‘t’ and actual planted area in period t-1. This implies that the farmers cannot fully adjust their actual planted area to the desired area in response to the explanatory variables. The coefficient of acreage adjustment (β) indicates the speed of adjustment between desired and actual area in the previous period. If β approaches to unity, adjustment was instantaneous while if β approaches to 0, area remains unchanged from year to year. Basically, technological and institutional factors such as price, risk, relative income, etc. prevent the intended area for being realized during the period. Expected price of sugarcane The farmers make the decision of growing sugarcane crop on the basis of expected price. The rational farmer is more likely to respond to the price that is expected rather than to the price of previous period. The expected price of sugarcane depends only to a limited extent on the actual price in the previous period. The expected price of sugarcane was also unobservable. According to Adaptive Expectations Hypothesis proposed by Nerlove the expected price was expressed in terms of directly observable variable. 𝑃𝑡∗ = 𝑃𝑡−1 … … … … … … . . (3) ∗ ∗ ), Pt∗ − Pt−1 = α(Pt−1 − Pt−1 0 ≤ α ≤ 1 … … … … (4) Where, Pt−1 = Actual price of sugarcane crop (`q-1) in period t-1 Pt∗ = Expected price of sugarcane crop in period t ∗ Pt−1 = Expected price of sugarcane crop in period t-1 α = Coefficient of expectations The equation states that for each period the farmer revises the price he expects to prevail in the coming period in proportion to the mistake he made in the expected previous price. If α is equal to zero, previous year actual price of sugarcane will have no impact on the 43 current year expected price of sugarcane, and if α is equal to one, current year expected price of sugarcane will be equal to last year’s actual price of sugarcane. Expected yield of sugarcane An expected yield of sugarcane was considered to be another important variable which influence the desired area under sugarcane in Punjab. This was because relative income of the sugarcane as compared to paddy and wheat not only depend on expected price but also on the expected yield of sugarcane. The hypothesis was framed to measure the expected yield of sugarcane which states as: Yt∗ = Yt−1 … … … … … … . . (5) Where, Yt∗ = Expected yield of sugarcane (quintal/hectare) in period t Yt−1 = Actual yield of sugarcane (quintal/hectare) in period t-1 Relative price and yield risk of sugarcane Risk is an important factor in the decision making process of the farmers. The relative price and yield risk of sugarcane to the competing crops paddy and wheat was unobservable. It was measured by the ratio of standard deviation of three preceding prices and yields of sugarcane to the standard deviation of three preceding prices and yields of combination of paddy and wheat. Mathematically, these were expressed as: 3 ̅̅̅ 2 √∑i=1(SPt−i − SPt ) 3 RPR t = 3 ̅̅̅̅̅̅ 2 √∑i=1(PPWt−i − PPWt ) 3 Where, RPR t = Relative price risk of sugarcane to combine price of paddy and wheat in period t SPt−i = Price of sugarcane (`q-1) in period t-i SP ̅̅̅ SPt = ∑3i=1 3t−i PPWt−i = Combine prices of paddy and wheat (`q-1) in period t-i PPWt−i ̅̅̅̅̅̅ PPWt = ∑3i=1 3 Mathematical expression of yield risk is given as follows: 3 ̅̅̅ 2 √∑i=1(SYt−i − SYt ) 3 RYR t = 3 ̅̅̅̅̅̅ 2 √∑i=1(YPWt−i − YPWt ) 3 Where, 44 RYR t = Relative yield risk of sugarcane to combine yield of paddy and wheat in period t SYt−i = Yield of sugarcane (quintal/hectare) in period t-i ̅̅̅t = ∑3i=1 SYt−i SY 3 YPWt−i = Combine of paddy and wheat yield (`q-1) in period t-i YPW ̅̅̅̅̅̅ YPWt = ∑3i=1 3 t−i Relative expected income of sugarcane to paddy and wheat This was also another important variable which effects allocation of area under sugarcane. It is the ratio of gross income from sugarcane to gross income from paddy and wheat in combination. The studies of Krishna (1962) and Behrman (1966), pointed out the need to consider the income elasticity of consumption within the farm household. The assumption was that expected current relative income is equal to previous year actual relative income of sugarcane to competing crops. Mathematically, it is expressed as follow: It∗ = It−1 … … … … … … . . (6) It can be obtain by the following mathematical form, It−1 = (PPt−1 (SPt−1 × SYt−1 ) × PYt−1 ) + (PWt−1 × WYt−1 ) Where, It∗ = Expected relative income from sugarcane to competing crops paddy and wheat in period t It−1 = Actual relative income from sugarcane to competing crops paddy and wheat in period t-1 PPt−1 = Actual price of paddy (`q-1) in period t-1 PYt−1 = Actual yield of paddy (quintal/hectare) in period t-1 PWt−1 = Actual price of wheat (`q-1) in period t-1 WYt−1 = Actual yield of wheat (qha-1) in period t-1 Expected price of gur The expected price of gur was also one of the variables which are believed to influence the acreage in sugarcane response model. Since gur is an alternative end product of sugarcane beside white sugar. An assumption was made that the expected price of gur depends on the previous year actual gur price. As the expected price is unobservable, it can be expressed as GPt∗ = GPt−1 … … … … … … . . (7) Where, 45 GPt∗ = Expected gur price (`q-1) in period t GPt−1 = Actual gur price (`q-1) in period t-1 A dummy variable (Dt) was included in the sugarcane acreage response model to measure the effect of sugarcane marketing problems on the planted area. In order to highlight the marketing problem the average sugarcane crushing days in a year by the mills in the state was taken. It was tallying with the state average sugarcane crushing days in a year (150 days). The variable takes a value of one in year in which average crushing days is more than 150 days considering existence of marketing problem and zero otherwise. Now, the estimating model has been obtained by substituting equations (3), (5), (6) and (7) in equation (2) and rearranging as follows: At = β(a + b1 SPt−1 + b2 It−1 + b3 Yt−1 + b4 RPR t + b5 RYR t + b6 GPt−1 ) + (1 − β)At−1 + β(b7 Dt + βUt … … (8) Where, Ut = Error term in period t. All the variables were in logarithmic terms for convenience of mathematical manipulations and for direct estimation of elasticities. The coefficient of adjustment β provides link between short-run and long-run elasticities. The long-run price elasticities were the ratio of short-run elasticities to the coefficient of adjustment β. In the final estimation of final sugarcane acreage response model, only those variables are retained which entered significantly in step-wise regression analysis. The variables in the sugarcane acreage response model were in logarithmic form for convenience of mathematical manipulation and for direct measurement of short and long run elasticities (Niamatullah and Khiar-uz-Zaman, 2009).Therefore, the statistically better equation (8) is presented as follows: At = β(a + b1 SPt−1 + b2 It−1 + b3 Yt−1 ) + (1 − β)At−1 + βUt … … … … (9) The sugarcane acreage response model was estimated by the Ordinary Least Squares (OLS) technique. The estimation of the model was done using the data from 1980-81 to 201011. F–statistics was followed to test the overall significant of the model. The lagged dependent variable (At-1) was included as one of the explanatory variable in the model. The inclusion of lagged dependent variable in the model might cause serial correlation with the residuals which underestimated the model. Thus, Durbin-Watson test was adopted to test the presence of autocorrelation in the model. Also, independent variables were tested for the stochastic independent. Linear sugarcane acreage response model was also estimated by OLS technique for those retained variables. A comparison was studied between log-linear and linear model. Physical and Financial Performance of Sugar Industry 46 The detailed procedure to examine the physical and financial performance of sugar mills is represented separately as under: Physical performance of the sugar industry The physical performance of the selected sugar mills was estimated through tabular analysis. The analysis was worked out for average crushing capacity per day, total cane crushed, sugar and molasses production and crushing seasons (day) for the period 2006-07 to 2011-12. The capacity utilization of the selected sugar mills was worked out to ascertain the production level of the sugar mills where the maximum sustainable level of output could be attain for the above said periods. The capacity utilization is an economic concept which refers to the extent to which an enterprise actually uses its installed productive capacity (Ray, 2012). It is a short run concept which is measured as the ratio between the actual canes crushed to the potential cane crushed times duration of crushing (days per year). It is also defined as the output which can be produced at minimum average total cost, given by the existing stock of plant and equipment, existing techniques and factor prices (Hickman, 1964). Capacity utilization is given as Capacity utilization (%) = Actual cane crushed in a year × 100 Potential cane crushed × Duration of crushing (days per year) The potential cane crushed was considered separately for those selected sugar mills and 150 days as duration of crushing. The capacity utilization of the selected sugar mills measures the mill performance which depends on the external factors which were beyond the control of management such as supply of raw materials and government policies on pricing of sugarcane. A comparison was workout between the Cooperative sectors and Private sectors of the selected sugar mills for the periods under study. In order to verify the significant difference between the two sectors, Student’t-test was employed. Financial performance of sugar industry Financial performance was an important indicator of the financial position of a firm at a point of a time and over a given period of time. In boarder sense, financial performance refers to the degree to which financial objectives has been accomplished. It measures the results of a firm’s policies and operations in monetary terms. Basically, financial performance refers to the act of performing financial activities of a firm. In order to study the financial activities of the sugar industry, financial performance has been analyzed. The financial analysis involves the use of financial statements such as balance sheets and income statements of the sugar industry. The analysis assesses the sugar industry profitability performance, liquidity performance, operation or efficiency performance and leverage of the firm. The Ratio Analysis has been adopted as a tool to analyzed financial performance of the selected sugar mills for a period from 2006-07 to 2011-2012. It expressed the numerical 47 relationship between the two or more financial parameters. It has been used for the present study since it determined the financial strength and weakness of the sugar mills. It also reveals whether the mills’ financial position has been improving or deteriorating over time. The financial ratio analysis has been classified into different categories which were as follows: Profitability Ratios The profitability ratios give a good understanding of how well the mill utilized its resources in generating profit and shareholder value. There were two types of profitability ratios such as profit margin ratios and rate of returns ratios. Profit margin analysis The profit margins such as gross profit margin, operating profit margin, pretax profit margin and net profit margin were work out to display the amount of profit the sugar mill generated. The ratios were expressed as a ratio specifically “earning” as a percentage of the sales. It detects the consistency or positive/negative trends in the mills’ earnings. A positive profit margin translated into positive investment quality. The four profit margins were estimated as: 1. Gross profit margin ratio: It is the ratio between gross profit and sales. Gross profit margin = Gross profit Sales The ratio shows the margin left after manufacturing costs. It also measures the efficiency of production and pricing of the mill. 2. Operating profit margin ratio: It is the ratio of operating profit to sales. Operating profit margin = Operating profit Sales It measures the efficiency of management decisions. It was used as preferred metric of investment analyst for making inter-firm comparisons and financial projection. 3. Pretax profit margin ratio: It is the ratio between profit before tax and sales of the firm. Pretax profit margin = Pretax profit sales It measures the efficiency of tax management, which allows manipulating the timing and magnitude of the mill taxable income. 4. Net profit margin ratio: It is the ratio between net profit and sales. Net profit margin = Net profit sales The ratio shows the earning left for shareholders (both equity and preference) as a percentage of sales. It also measures the overall efficiency of production, administration, selling and financing. Higher the margin, the more effective the mill convert revenue into 48 actual profit. A low profit margin indicates a low margin of safety, higher risk that a decline in sales erases profits and result in a net loss. Rate of Returns Ratio The ratio reflects the relationship between profit and investment. The ratio measures the mill effectiveness in generating income from its resources. The important rate of returns ratios were discussed as follows: 1. Return on assets: It is the ratio between the net incomes (profit) to the average total assets. It is expressed in percentage. For the present study annual total assets of the mill were used instead of average total assets. Return on assets = Net income (profit) Average total assets The ratio measures the capital used efficiency of the mill total assets. It indicates the mills’ profitability to its total assets. Higher the return, the more efficient management was in utilizing the mills’ total assets. 2. Return on equity: It is the ratio between the net income and average net worth or average shareholder equity and is expressed as a percentage. The total net worth of a year has been used in place of average net worth. Return on equity = Net income Average shareholder equity The ratio measures the shareholders’ equity earnings from their investment in the mill. It reflects the productivity of the ownership capital employed in the mill. Higher the ratio percentage, the more efficient management was in utilizing the mill’s equity and better returns to its shareholders. 3. Return on capital employed: It is the ratio, expressed as a percentage, between the net income and capital employed. Return on equity = Net income Capital employed It gives the clear picture of impacts of leverage used on the mills’ profitability. It also gauged the management ability to generate earnings from the mills’ total pool of capital. Operating Performance or Efficiency Ratios The ratios measures how well the mill turns its assets into revenue and how efficiently the mill converts its sales into cash. The ratios were based on the relationship between the level of activity, represented by sales or cost of goods sold, and level of various assets. Basically, the ratios measures the efficient and effectiveness of the mill in using its resources to generate sales and increase shareholders value. Better the ratios, better is for shareholders. The important efficiency ratios were explained briefly as under: 49 Fixed turnover ratio: The ratio is defined as the ratio between the sales and average fixed assets. The annual fixed assets were used in place of average fixed assets. Fixed turnover ratio = Sales Annual fixed assets The ratio was used to measure the productivity of the mills’ fixed assets with respect to generating sales. In other sense, it was used to measures sales per rupee of investment in fixed assets. The ratio measures the efficiency of the mill with respect to fixed assets employed. A high ratio indicates high degree of efficiency in the assets utilization and low ratio indicates inefficient use of assets. Total assets turnover ratio: It is the ratio between the sales and the average total assets of the mill. The annual total assets were used instead of average total assets. Total assets turnover ratio = Sales Annual total assets The ratio measures utilization of assets of the mill. Low asset turnover ratio means the mill was not managing its assets wisely and also indicates the assets were obsolete. The mill with low asset turnover ratios was likely to operate below its full capacity. Working capital turnover ratio: It is the ratio between the sales and working capital of the mill. The working capital turnover ratio is used to analyze the relationship between the money used to fund operations and the sales generated from these operations. It is given as Working capital turnover ratio = Sales Working capital The ratio measures how well the mill was utilizing its working capital to support a given level of sales. A high turnover ratio indicates that management was extremely efficient in using the mill’s short-term assets and liabilities to support sales. In a general sense, the higher the working capital turnover, the better because the mill was generating a bunch of sales compared to the money that uses to fund the sales. However, an extremely high working capital turnover ratio indicates that the mill does not have enough capital to support it sales growth and collapse of the mill may be imminent. This was particularly a strong indicator when the accounts payable component of working capital was very high. Current assets turnover ratio: It is ratio of sales to the current assets of the mill. It was given as: Current assets turnover ratio = Sales Current asset The ratio indicates how efficiently the mill used its current assets to generate revenue. Inventory turnover ratio: It is defined as the ratio between cost of sales and average 50 inventory of the mill. For the present study annul inventory was used in place of average inventory of the mill. Inventory turnover ratio = Cost of goods sold Annual Inventory The ratio measures how many times per period; the mill sells and replaces its inventory. It also measures the inventory management efficiency of the mill. In general, a higher value indicates better performance and lower value means inefficiency in controlling inventory levels. Debtors turnover ratio: It is also called accounts receivable turnover. It is the ratio of cost of goods sales to average accounts receivable. It is an activity or efficiency ratio that measures average number of times the mill collects its receivables during a year. Debtors turnover ratio = Cost of goods sold account recievable An accounts receivable turnover measures the efficiency of a business in collecting its credit sales. Generally a high value of accounts receivable turnover shows greater efficiency of credit management. And lower value indicates inefficiency in collecting outstanding sales. Solvency or Leverage Ratios Financial leverage refers to the use of debt finance. The leverage ratios help in assessing the risk arising from the use of debt capital. The ratios measure ability of the mill to pay its long term debt and interest of debt. The important solvency ratios were discussed as under: Debt-equity ratio: It was the ratio of total liabilities to the shareholder’s equity which measured in percentage. It measures the relative contribution of creditors and owners. Lower values means mills were using lesser leverage and has higher degree of protection enjoyed by the mill. The ratio was given as follows: Debt − equity ratio = Total liabilities Shareholder ′ s equity Liquidity Ratios The ratios measure the ability of the mill to pay off its short term obligations. The ratios were generally based on the relationship between current assets (the source of meeting short term obligations) and current liabilities. The ratios show the number of times the short term debt obligations were covered by the cash and liquid assets. Generally, the higher the liquidity ratios are, the higher the margin of safety that the mill posses to meet its current liabilities. Liquidity ratios greater than 1 means the short term obligations were fully covered indicating the good financial health of the mill and less likely fall into financial stresses. The 51 most important liquidity ratios were current ratio, acid/quick test and cash ratio which were discussed as under: Current ratio: It was the ratio between the current assets and current liabilities. The ratio was measures to ascertain the ability of the mill to meets its current liabilities. It was given as Current ratio = Current Assets Current Liabilities The higher the ratio better was the short term liquidity of the mill. According to Chandra (2003) it was state that a firm with a high proportion of current assets in the form of cash and account receivable is more liquid than a firm with a high proportion of current assets in the form of inventories even though both firms have the current ratio. The current assets include cash and balance, loans and advances, debtors and inventories. Current liabilities consist of loans and advances taken, trade creditors, accrued expenses and provision. Acid test / Quick ratio: It was the ratio between the quick assets and current liabilities. The quick assets were defined as total current assets excluding inventories. By excluding inventory, the quick ratio focuses on the more liquid assets of the mill. It was given as: Acid test/Quick ratio = Quick Assets Current Liabilities The Acid test ratio was fairly stringent measure of liquidity because it was based on those current assets which were highly liquid. The ratio measures ability of the mill to meet its short-term liabilities with its short-term assets. A higher ratio indicates the more liquid current position of the mill. It was used to compare with current ratio. If the current ratio was significantly higher, it is clear indication that the mill’s current assets are dependent on inventory. Cash ratio: It is ratio between the sum of cash and cash equivalents or invested fund of the mill to the current liabilities. It is given as: Cash ratio = Cash + Cash equivalents + Invested fund Current Liabilities The ratio was more stringent and conservative than current and quick ratios. It considered only the most liquid short-term assets of the mill, which were those that can be most easily used to pay off current obligations. It ignores inventory and accounts receivable. Socio-Economic Problems The demographic features of the sample farmers were presented and analyzed by using the tabular analysis. The farmers’ ages, family size, income level, area under sugarcane crops, experience in sugarcane cultivation and contact of the farmers with cane expert were categorized by using Cumulative Cube Root Method. The percentage of each constraint faced 52 by the respondents was worked out to show the degree of constraint percept by the respondents in sugarcane cultivation. Besides, 15 farmers in the hither land of selected liquidated sugar mill were interviewed personally regarding the constraints faced by them with the closing of sugar mill and the suggestions regarding the re-establishment of sugar mill. A Case Study of Liquidated Sugar Mill The brief description for the analysis of sick sugar mill is presented in the given Figure I: Study of stages of sickness Symptoms Comparison between sick and non-sick sugar mill Causes Financial ratios analysis Ratios analysis Profitability ratios Trends analysis Selection of successful Cooperative sugar mill Student’ t-test Liquidity ratios Non-financial analysis Fig. I: Framework for the analysis of sick sugar mill Analysis of Financial Health of Sick Sugar Mill The financial health of sick sugar mill is discussed as under: Stages of sugar mill sickness An individual unit passes through several stages before it becomes sick. The knowledge about the various stages of sickness is very essential for taking corrective and appropriate measures in appropriate time. The different stages of sickness along with the determinants which identify these stages as per the guidelines of Reserve Bank of India (RBI) are given below:Normal unit A normal unit is characterized by the efficient functioning of its functional areas like production, marketing, finance and personnel. In other words, a unit can be called healthy or in a normal state (NS) when it is earning profits, the current ratio is more than one, net worth is positive and debt-equity ratio is good. 53 Tending towards sickness At this stage a unit shows certain initial aberration in any of its functional areas. In other words, the unit faces some environmental constraints. At this time, the unit is said to be tending towards sickness (TS). The distinctive features of this stage are decline in profit in the last year as compared to the previous year and loss estimated in the current year. Incipient sickness The continuation of the deterioration in the functional areas of the unit, results in the actual setting in of industrial sickness. This stage is termed as incipient sickness (IS). At this stage, the unit incurs cash losses but imbalance in the financial structure may not be apparent. Analysis of Causes and Symptoms of Mill Sickness There were many factors which bring the sugar mill into failure. Some of the factors were financial and others were non-financial. In-depth analysis of the financial statements of the mill foresees the factors proceeding towards sickness. Liquidation of the mill does not happen at sudden but it takes certain years to collapse the mill. Certain signs and symptoms of the sickness have manifested in either ways which needed proper and timely monitoring of the mill. The symptoms are the sure signals that something is wrong and impel management to find the causes and correct them. Many causes and symptoms have been identified which was relevant to the present study. Therefore, addressing the objectives of the study, based on the John Argenti’s Model of Cooperative failure, two symptoms were identified. The causes of the mill were identified based on two categories. Symptoms 1. Financial Ratios 2. Non-financial symptoms Causes 1. External causes The external causes of sickness are beyond the control of the promoters and it is genuinely not at fault. The external factors usually effects all the units of the same industrial group simultaneously (Singh, 2011) 2. Internal causes The internal causes imply those which originate within the unit and can be controlled by the management, if properly tackled (Arora and Sood, 2003). According to Singh (2011), in most of the cases, the sickness was bred within the unit itself. Operational Definitions The operational definitions of the terms used in the analysis based on the present study were given as under: 54 Gross profit: It is the difference between the sales of sugar and its by-products and cost of goods sold in a year. Cost of goods sold: It is sum of expenses on raw materials, manufacturing and labour. It can also be defined as sum of opening stock, purchases and direct expenses less closing stock of the mill. Operating profit: It is the difference between the operating income and operating expenses (expenses on selling, general and administrative such as provident fund, bank charges, hire charges for vehicle). Net profit: It is the difference between gross profit after meeting all the expenses including interest and tax. Assets: It is defined as resources of the sugar mill which have some value to the mill. It includes cash, cash equivalent, marketable securities, receivable accounts and inventory, investment, raw materials, finish goods, prepaid expenses, goodwill, loans and advances. Fixed assets: The assets which are not mean for sale such land, sugar mill, building, crushing machines and others machines used for different purposes. Current assets: It is defined as cash and balances, inventory and loan and advances of the mill. The asset is held for short period of time. Liabilities: The business entity that has be paid. It includes notes payable, current portion of term debt payable, accrued expenses and taxes, capital, reserves and surpluses, bank term loan, unsecure long term loan, expenses payable, provisions equity capital, preferences share. Current liabilities: An obligations which are expected to mature in a year. It include loans and advances taken, trade creditors, accrued expenses and provision. 55 CHAPTER IV RESULTS AND DISCUSSION Keeping in view the specific objectives of the present study, the results of the analysis are reported in this chapter under the following heads: Growth of Sugarcane and Sugar in Punjab and India Sugarcane is a competing crop with paddy and wheat in the state. The cultivation of sugarcane was highly affected by the development of technology (seeds, plant protection, etc.). Besides, dual pricing policy by the government and behaviour of sugar mills during surplus season affect the farmers’ decision on allocation of area under sugarcane which in turns affect sugarcane production. The year-wise changes in area, production and productivity of sugarcane in the country and in Punjab from 1950-51 to 2010-11 is presented in Table 4.1. The data for the periods 1950-51 to 1965-66 of the state was estimated to segregate from combine data of Haryana and Punjab on area, production and productivity of sugarcane. The perusal of Table 4.1 and Fig. II shows that trend in area under sugarcane of the country has been increasing over last six decades. On an average, area under sugarcane was estimated to be 3105 and 109 thousand hectares at national and state level. The area under sugarcane at the state level, has been declining over the periods but remained stagnant in Period-I and II (108 thousand hectares). This may be due to shifting of cropping pattern in favour of paddy and wheat due to favourable government policies of these crops. The yield of sugarcane at the overall was worked at 54.95 and 49.00 tonnes per hectare at national and state level respectively. It was observed to be substantially higher from 40.88 tonnes per hectare in Period-I to 67.38 tonnes per hectare in Period-III at the national level (Fig. III). Similar, result was obtained for the state sugarcane yield, it was recorded highest in Period-III (60.62 tonnes per hectare) and lowest in Period-I (31.00 tonnes per hectare). The sugarcane production shows increasing trend over the years at the national and state level (Fig. IV). On an average, production of sugarcane at national level was found to be 180131 thousand tonnes and 5339 thousand tonnes at the state level. The relative share of area and production of sugarcane of the state to the country presented in Table 4.1 shows that there has been declining share through periods. The state share at overall was found to be 3.51 and 2.96 per cent of area and production of 56 sugarcane respectively to the country’s area and production of sugarcane. The highest share of area and production was estimated at 5.44 and 4.16 per cent respectively. The per cent of area and production was declined to 2.56 and 2.31 per cent during Period-III respectively. Table 4.1: Trends in area, yield and production of sugarcane through 1950-51 to 2010-11 (Area = '000 hectare, Yield = tonnes per hectare and Production = '000 tonnes) Period Punjab Contribution of Punjab (%) India Area Yield Production Area Yield Production Area Production I 113# 31.00# 3574# 2076 40.88 85940 5.44 4.16 II 108 52.26 5496 2886 54.03 157865 3.75 3.48 III 108 60.62 6554 4201 67.38 283316 2.56 2.31 Overall 109 49.00 5339 3105 54.95 180131 3.51 2.96 # indicate estimated values 5000 4500 4201 4000 Area ('000 ha) 3500 3105 3000 2886 2500 2076 2000 1500 1000 500 0 Area (India) Area (Punjab) 113 I 2076 113 108 II 2886 108 108 III 4201 108 Fig. II: Trends in area under sugarcane 57 109 Overall 3105 109 Yield (tonnes/hectare) 140 67.38 120 54.03 100 80 54.95 40.88 60 60.62 52.26 49 40 31 20 0 I 40.88 31 Yield (India) Yield (Punjab) II 54.03 52.26 III 67.38 60.62 Overall 54.95 49 Fig. III: Trends of sugarcane yield Production ('000 tonnes) 350000 300000 283316 250000 200000 180131 157865 150000 100000 85940 50000 0 Production (India) Production (Punjab) 5496 II 157865 5496 3574 I 85940 3574 6554 III 283316 6554 5339 Overall 180131 5339 Fig. IV: Trends of sugarcane production Growth of sugarcane production in India and Punjab The growth of sugarcane production, productivity and area under sugarcane in the country and in Punjab was worked out for different periods and the same are presented in Tables 4.2 and 4.3, Fig. V and VI. The perusal of Table 4.2 and Fig. V shows that area under sugarcane has been decreasing over the years in the country with compound growth rate of 1.69 per cent per annum. 58 Table 4.2: Growth of sugarcane through different periods in India (Per cent) Periods Area Production Productivity I 3.40* 5.34** 1.88** II 1.60** 3.09** 1.48** III 1.27** 1.24** -0.03NS Overall 1.69** 2.87** 1.16* ** and *significant at one and five percent level respectively NS: Non-significant 6 Area 5.34 Production Productivity 5 Growth rate (%) 4 3.4 3.09 3 2.87 2 1.6 1.88 1.24 1.27 1.48 1 0 I III -0.03 II 1.69 1.16 Overall Periods -1 Fig. V: Growth of sugarcane in India The sugarcane acreage registered a significant and positive growth rate in all the periods which was highest in Period-I (3.40 per cent) followed by Period-II (1.60 per cent) and III (1.27 per cent). At the state level, the declining trend of sugarcane area was observed at the rate of 0.28 per cent annum over the years (Table 4.3 and Fig.VI). Sugarcane area registered a significant growth only in Period-I and negative growth in the two sub-periods. The growth rate was highest in Period-I with a growth rate of 3.23 per cent prior to Green Revolution. The negative growth rate was obtained in Period-II (-1.88 per cent) and Period-III (-1.85 per cent). 59 At the national level, sugarcane production registered a compound growth rate of 2.87 per cent per annum. Sugarcane production showed significant and positive growth rates in all the sub-periods. The highest growth rate was found in the Period-I (5.34 per cent per annum) followed by Period-II (3.0 per cent per annum) and Period-III (1.24 per cent per annum). At the state level, the annual compound growth rate of sugarcane production show a significant and positive growth of 1.26 per cent per annum. However, there has been significant positive growth in Periods-I and II, and significant negative growth in Period-III (2-02). The highest growth was found in Period-I (4.92 per cent per annum) followed by Period-II (0.79 per cent per annum). Table 4.3: Growth of sugarcane through different periods in Punjab (Per cent) Periods Area Production Productivity I 3.23** 4.92** 1.69** II -1.88** 0.79* 2.65** III -1.85* -2.02* -0.24NS Overall -0.28* 1.26* 1.54** ** and * significant at one and five percent level respectively NS: Non-significant 6 Area 5 Production Productivity 4.92 Growth rate (%) 4 3.23 3 2.65 2 1 1.54 1.26 1.69 0.79 0 I III -0.24 II Overall -0.28 -1 -2 -3 -1.85 -1.88 -2.02 Periods Fig.VI: Growth of area, production and productivity of sugarcane in Punjab The sugarcane productivity in the country was significant and had positive growth rate with an annual growth of 1.16 per cent. The highest growth was observed in Period-I 60 (1.88 per cent per annum) which was followed by Period-II (1.48 per cent per annum). The non-significant negative growth was found in Period-III (0.03 per cent per annum). At the state level, the annual compound growth rate of sugarcane productivity was registered at 1.54 per cent per annum. The sugarcane productivity registered a significant and positive growth rate in all the periods except Period-III which show non-significant negative growth rate (0.24 per cent per annum). Therefore, the CGR of area and production of sugarcane in the state was comparatively lower than the country growth rate. The CGR of sugarcane acreage at both national and state level during Period-I indicated a highest growth which enhanced the growth rate of sugarcane production in the same period. But the yield growth for the state was higher than the country yield growth. Further, the results revealed that at both national and state levels, the CGR of area, production and yield of sugarcane has been declined and least growth was obtained during post Green Revolution and liberalization periods. The main reason for the deceleration of growth during these periods was deceleration in investment in irrigation and other rural infrastructure and non-availability of yield raising cost reducing new technology. The same reason was reported by Bhalla and Singh (2010). In addition, postGreen Revolution period marked by development seed-fertilizer technology was spread in irrigated Punjab state which was considered as an instrumental in raising the yield and output levels of wheat and paddy only. While these technologies remain untouched for sugarcane crop in the state as well as the diversification of cropping pattern to wheat and paddy causes declined in growth of area, production and productivity of the crop. Instabilities in Sugarcane Production Instability in area, productivity and production at state and national levels for all the sub-periods were determined through coefficient of variation and is presented in Table 4.4. Wide fluctuation in the area under sugarcane cultivation was noticed as could be observed from the coefficient of variation (CV) at both national and state levels. For the country as a whole, CV of area was to the tune of 29.76 percent recording a highest variation. The area instability of the country was found to be higher in Period-I (17.62 per cent) which eventually declined to 10.77 per cent during Period-III. The area under sugarcane shows comparatively higher variability in all the three sub periods in Punjab. Overall, CV of sugarcane acreage worked out to be 22.02 per cent. The lowest variability (17.88 per cent) was recorded in Period-I (prior to Green Revolution period) which indicated lower fluctuation in area under sugarcane. While CV of acreage in Period-III was recorded to be highest (26.31 per cent) was followed by 20.61 per cent in Period-II. This was mainly due to shifting of area to paddy and wheat cultivation in the state and technology development in favour of paddy, wheat and high value crops. 61 The coefficient of variation in sugarcane yield was 20.47 per cent at the national level. The variability remained constant during Period-I (11.02 per cent) and Period-II (11.35 per cent). The yield variability of the country was greatly declined to 4.45 per cent showing more stable in productivity of sugarcane after liberalization of the economy. This was due to development of new technology, improvement in sugarcane cultivation and change of the cropping pattern to high value gain the yield of sugarcane in some major sugarcane producing states in southern region of the country. Similar results were reported by Bhalla and Singh (2010). Table 4.4: Period-wise variability in sugarcane area, production and productivity (Per cent) Periods Punjab India Area Productivity Production Area Productivity Production I 17.88 9.35 26.15 17.62 11.02 25.69 II 20.61 19.69 15.03 13.29 11.35 23.39 III 26.31 4.90 28.38 10.77 4.45 12.42 Overall 22.02 27.24 32.19 29.76 20.47 46.82 The results presented in Table 4.4 further indicate wide fluctuation in sugarcane yield of the state with average variability of 27.24 per cent. The CV of sugarcane productivity was estimated to be 19.69 per cent in Period-II which was twice the magnitude in Period-I (9.35 per cent) and Period-III (4.90 per cent). In the case of sugarcane production, the country has registered high variability with CV of 46.82 percent on an average. The highest CV was obtained in Period-I (25.69 per cent) which gradually declined to 12.42 per cent in Period-III. The declined in variability in area and productivity of sugarcane leads to gradual decline in fluctuation of sugarcane production over the periods. At the state level, average variability of sugarcane production was worked to be 32.19 per cent. The CV was found to be highest in Period-III (28.38 per cent) showing wide fluctuation in sugarcane production. This was accompanied by high variation of sugarcane acreage and low variation of yield during this period. The fluctuation was lowest during Period-II (15.03 per cent). Thus, area, production and productivity of sugarcane in Punjab showed year to year fluctuation. However, variation in area under sugarcane contributed more than that in yield and production (Ramsamy et al., 2001). The variation in sugarcane production in the country was contributing more than that in area and yield at the overall level. However, the stability of sugarcane acreage, production and productivity at the national has increased over the periods. 62 But, at the state level, fluctuation in the stability of sugarcane acreage, production and productivity was observed over the periods. Therefore, the results clearly evinced that there was a wide fluctuation of sugarcane acreage, production and productivity at the state level over the periods. Thus, there was a need to bring stability in area under sugarcane to increase its production thereby stabilized the supply of raw materials to the sugar mills in the state. Decomposition of Growth in Sugarcane Production in India and Punjab The main components of growth of sugarcane production were increase in area and yield. The relative contribution of area and productivity towards the total sugarcane production of the country and the state is presented in Table 4.5 and 4.6. It was found that at the overall, area effect (40.07 per cent) was responsible for increase in sugarcane production in the country. The contribution of interaction effect of area and yield (36.13 per cent) and yield effect (23.81 per cent) was also considered to be an important factor for increasing sugarcane production in the country. In all the three sub-periods, area effect had major contribution in increasing sugarcane production which was followed by yield effect and interaction effect. The perusal of Table 4.6 showed that the decomposition of growth in sugarcane production in Punjab. The increase in sugarcane production over 61 years was due to yield of the crop (181.29 per cent). The contribution of yield effect was so high that it could offset the negative effect of area (-38.59 per cent) and interaction effect of area and yield (-42.69 per cent). It was observed from the Table 4.1.6 that during Period-I, area effect (59.59 per cent) was responsible factor for an increase in sugarcane production and followed by yield effect (27.54 per cent) and interaction effect of area and yield (12.87 per cent). During Period-II, yield effect was found to be an important factor for an increase in production of sugarcane in the state. The results further indicated that decline in growth of sugarcane production during Period-II was due to negative effect of area (99.54 per cent) and interaction of area and yield (91.49 per cent). While in Period-III, increase in sugarcane production was most importantly due to area effect (96.26 per cent) and yield effect (5.28 per cent). Table 4.5: Decomposition of growth in sugarcane production into area, yield and interaction effect in India (Per cent) Periods Area effect Yield effect Interaction effect TE 1950-51 to 1965-66 51.83 33.68 14.49 TE 1966-67 to 1990-91 45.61 35.79 18.60 TE 1991-92 to 2010-11 86.42 10.87 2.70 TE 1950-51 to 2010-11 40.07 23.81 36.13 63 Therefore, the analysis of the results indicated that change in sugarcane production over the years was due to area and its interaction effect at the national level. However, change in sugarcane in Punjab was found mainly due to yield and area effects. Thus, there is need to bring more area under cultivation and development of new low cost production technology and high yielding varieties. Table 4.6: Decomposition of growth in sugarcane production into area, yield and interaction effect in Punjab (Per cent) Period Area effect Yield effect Interaction effect TE 1950-51 to 1965-66 59.59 27.54 12.87 TE 1966-67 to 1990-91 -99.54 291.03 -91.49 TE 1991-92 to 2010-11 96.26 5.28 -1.58 TE 1950-51 to 2010-11 -38.59 181.29 -42.69 TE: Triennium ending Growth of Sugar Production The sugar production was determined by various factors. Most importantly availability of sugarcane, the basic raw material and per cent recovery of sugar were factors which determine the parameters of sugar production. Besides, the numbers of normal working days, price of sugarcane and remunerative returns from the sale of sugar were also providing incentive to the sugar industry. Therefore, the growth of sugar production over the periods as well as for the three periods was studied by estimating the total cane crushed by the sugar mills and per cent recovery of sugar. Growth of sugar production in India The growth of sugar production in India is presented in Table 4.7. The results showed that the average growth rate of sugar production was 5.15 per cent. The growth of sugar production in all the three periods was found to be positive and statistically significant. The CGR were estimated to be 7.32, 5.92 and 3.99 per cent in Period-I, II and III respectively. Though, the growth was positive and significant over the periods yet it was greatly declined from Period-I (7.32 per cent) to Period-III (3.99 per cent). The total cane crushed by the sugar mills in India was showing positive growth to the tune of 4.99 per cent per annum. In all the three periods, significant growth of cane crushed was observed. However, the highest growth was obtained in Period-I (7.44 per cent) and lowest growth in period-III (3.16 per cent). This shows that the growth of cane crushed by the sugar mills has been declining through periods. Further, the percent recovery of sugar presented in Table 4.7 showed an average growth of 0.07 per cent per annum for the composite periods of 61 years. The average growth of percent recovery of sugar was very small; however, it has been increased in the segregated periods. In 64 Period-I, non-significant negative growth (-0.06 per cent) was obtained. While in Periods-II and III, the per cent recovery of sugar was significantly increased from 0.15 to 0.18 per cent but at mere margin. The study of the growth of sugar production for the last 61 years and for the segregated periods indicated highest growth of sugar production in Period-I at both state and national level. This was due to larger availability of sugarcane to the mills for crushing which was indicated by the highest growth rate of cane crushed in the same period. The period under study also showed that the per cent recovery of sugar minimally affect the sugar production. Table 4.7: Growth of sugar production through different periods in India (Per cent) Period Cane crushed Recovery Production I 7.44** -0.06NS 7.32** II 5.77** 0.15* 5.92** III 3.16** 0.18* 3.99** Overall 4.99** 0.07** 5.15** ** and * significant at one and five percent level respectively NS: Non-significant Growth of sugar production in Punjab The growth of sugar production in the state presented in Table 4.8 showed that at the overall the growth was found to be 5.50 per cent per annum. In Periods-I and II, the growth rate of sugar production was positive significant and more than that of the average growth rate (5.50 per cent). It was 15.33 and 9.43 per cent per annum for Period-I and II respectively but declined through periods. The value in Period-III shows that growth of sugar production was 1.62 per cent which was non-significant statistically. Table 4.8: Growth of sugar production through different periods in Punjab (Per cent) Period Cane crushed Recovery Production I 14.44** -1.02** 15.33** II 8.44** 0.95** 9.43** III -1.68NS 0.04NS -1.62NS 5.17** 0.08NS 5.50** Overall ** and * significant at 1 and 5 percent level respectively NS: Non-significant 65 The results pertaining to total cane crushed by the sugar mills in the state shows that the growth was 5.17 per cent per annum and found to be statistically significant. During Periods-I and II, the growth rate was estimated to be 14.44 and 8.44 per cent respectively. The growth was positive and significant statistically but declined in Period-II. However, in PeriodIII, there was non-significant declined in the growth of cane crushed (-1.68 per cent). The per cent recovery of sugar also affects the sugar production in the particular crushing season. It has a direct relationship with the production of sugar. On an average, the growth of recovery was estimated to be 0.08 per cent per annum which was non-significant. The results revealed that growth of per cent recovery have been significantly declined by -1.02 per cent in PeriodI. While in Periods-II and III, positive growth was obtained which was significant in Period-II (0.95 per cent) but non-significant in Period-III (0.04 per cent). The results revealed that highest growth of sugar production was found in Period-I due to highest growth of total cane crushed by the sugar mills in Punjab. Therefore, growth of sugar production was largely contributed by availability of sugarcane and least by recovery of sugar in the state. Decomposition of Growth of Sugar Production The change in sugar production was decomposed into effect of cane crushed by the sugar mills, recovery effect and interaction effect of cane crushed and recovery. The study of decomposition of change in sugar production into different effects determined the important factors which was responsible for change and brings out the extent of factors effectiveness. Decomposition of growth in sugar production in India The growth of sugar production was decomposed into three effects and is presented in Table 4.9. The decomposition of sugar production at the overall level shows that 79.22 per cent of growth of sugar production was due to cane crushed effect. The interaction effect and recovery effect contributed 19.33 and 1.44 per cent in the growth of production respectively. In the segregated periods, the cane crushed effect has also been the important that affects the growth of sugar production in the country. Table 4.9: Decomposition of growth in sugar production into cane crushed, recovery and Interaction effect in India (Per cent) Period Cane crushed effect Recovery effect Interaction effect TE 1950-51 to 1965-66 101.19 -0.50 -0.70 TE 1966-67 to 1990-91 96.77 0.83 2.40 TE 1991-92 to 2010-11 66.00 19.99 14.01 TE 1950-51 to 2010-11 79.22 1.44 19.33 66 It was estimated to be 101.19, 96.77 and 66.00 per cent in Period-I, II and III respectively. But in Period-I, negative effect of recovery (-0.50 per cent) and interaction effect of cane crushed and recovery (-0.70 per cent) was offset by the positive effect of cane crushed. In Period-II, besides cane crushed effect, 19.99 and 14.01 per cent of sugar production was due to recovery and interaction effect of cane crushed and recovery. Decomposition of growth of sugar production in Punjab The decomposition of growth of sugar production is exhibited in Table 4.10. The results showed that increase in sugar production was due to the stated three effects. At the overall, cane crushed effect was found to be an important factor responsible for the growth of sugar production with the contribution of 93.27 per cent. The remaining contribution of 6.24 and 0.49 per cent was due to interaction of recovery and cane crushed effect and recovery effect respectively. In all the three periods, cane crushed by the mills was found to be an important factor affecting the sugar production. In Period-I, 95.66 per cent of the total effect of sugar production was due to cane crushed and the remaining 3.39 and 0.95 per cent due to interaction and recovery effect respectively. In Period-II growth of sugar production was mainly due to cane crushed effect (82.21 per cent), interaction effect 15.20 per cent) and minutely by recovery effect (2.58 per cent). While in Period-III, 87.21 per cent of growth of sugar production in the state was due to cane crushed effect which was followed by 18.65 per cent of recovery effect. But, negative effect of interaction of cane crushed and recovery (-5.86 per cent) was found in Period-III which was offset by positive effect of cane crushed and recovery. Table 4.10: Decomposition of growth in sugar production into cane crushed, recovery and interaction effect in Punjab (Per cent) Period Cane crushed effect Recovery effect Interaction effect TE 1950-51 to 1965-66 95.66 0.95 3.39 TE 1966-67 to 1990-91 82.21 2.58 15.20 TE 1991-92 to 2010-11 87.21 18.65 -5.86 TE 1950-51 to 2010-11 93.27 0.49 6.24 Therefore, the results of decomposition of sugar production revealed that the total cane crushed by the sugar mills was an important factor that affects the growth of sugar production in both the state and national level. Besides, percent recovery of sugar was found to be another important factor that affects the sugar production by about 20 per cent at both state and national level. Acreage Response of Sugarcane in Punjab 67 The results pertaining to sugarcane acreage response analysis and related statistics were presented in the Table 4.11. The plausibility in terms of economic theory and logic and priori expectations of signs of the estimated coefficients was examined. The entered variables have logical signs and are consistent with economic theory. Table 4.11: Estimated coefficient of sugarcane acreage response function, 1980-81 to 2010-11 Dependent variable = ln (sugarcane area) Variables Coefficients Standard error t-statistics p-value 8.794*** 2.334 3.768 0.001 ** 0.197 2.057 0.050 0.174 *** 0.048 3.654 0.001 0.033 *** 0.008 4.224 0.000 Log lagged sugarcane yield -0.768** 0.300 -2.559 0.017 Mean of dependent variable 8.229 F-statistics Standard deviation of dependent variable 0.164 Standard error of the estimates 0.069 R2 0.844 Sum of square estimates 0.660 0.819 Durbin Watson test Intercept Log lagged sugarcane area 0.406 Log lagged sugarcane price Log lagged relative income ha 2 Adjusted R -1 33.766*** 1.540*** ***, ** and * significant at 1, 5 and 10 per cent level NS: Non-significant In the present study, sugarcane acreage response model included only those suitable explanatory variables which entered the model through step-wise regression method. The estimated coefficients show a good fit to the data. The Coefficient of Multiple Determinant (R2) was quite high which explained 84.4 per cent of the variation in the dependent variable during the period under reference. The F-statistics was found to be statistically significant, which confirmed the overall fitness of the model. The inclusion of lagged dependent variable as one of the explanatory variable might bring serial correlation of the residual terms in the model. Therefore, Durbin-Watson Test was used to shows the absence of autocorrelation. The Durbin-Watson statistics was estimated to be 1.540 at k = 4 (k is number explanatory variable) and was statistically significant at one per cent level, indicating absence of autocorrelation in the model. Table 4.12: Estimated coefficient of sugarcane acreage response function by linear regression analysis (1980-81 to 2010-11) Variables Intercept Lagged sugarcane area Lagged sugarcane price Lagged relative income ha-1 Lagged sugarcane yield F-value R2 Adjusted R2 Coefficients 3464.59** 0.58** 4.81* -621.11NS -2.52NS 18.11*** 0.74 0.70 68 Standard error 1679.91 0.22 2.65 463.29 2.14 t-statistics 2.06 2.67 1.82 -1.34 -1.18 p-value 0.05 0.01 0.08 0.19 0.25 Durbin-Watson 1.39NS ***, ** and * significant at 1, 5 and 10 per cent level NS: Non-significant The data were analyzed by using Linear Regression method and the results are presented in Table 4.12. It was found that the model could explain only 74.30 per cent of the variation in sugarcane acreage. The logical signs of the estimated coefficients were not consistent with the economic theory. However, the overall fitness of the model was observed as the value of F-statistics was statistically significant. Durbin-Watson Test shows inconclusive value which could not indicate the absence of autocorrelation in the model. Comparatively, Log-linear analysis of the data was found to be economically and statistically relevant in explaining the sugarcane acreage response for the period under study. The coefficient estimated indicates elasticities of sugarcane area with respect to the respective variables. The coefficients of the explanatory variables included in the function are discussed as under: Lagged sugarcane area The coefficient of sugarcane lagged area was estimated to be 0.406 and was statistically significant (Table 4.11). The farmers have a positive response to sugarcane lagged area in allocation of area under sugarcane for coming season. Thus, experience in sugarcane cultivation, management, technology and institution seems to play a significant role in expansion of area under sugarcane. The findings are in line with the study conducted by Nosheen and Iqbal (2008). The perusal of Table 4.11 further shows the pact in which the farmers adjust the acreage under sugarcane in response to the change lagged area under sugarcane. This can be seen from the numerical value of the adjustment coefficient (β). The adjustment coefficient (β) was worked out to be 0.594 which is quite large and indicate rapid adjustments of area under sugarcane by the farmers. The estimated coefficient implies that one per cent increase in sugarcane area in previous season; the farmers expand acreage by 0.406 per cent in next season. It may also be pointed out that, the long-run elasticity was 0.683 which was higher than the short-run elasticity (0.406) (Table 4.13). This indicates rapid adjustment of area under sugarcane in the long-run. Lagged sugarcane price The elasticity coefficient of sugarcane area with respect to one year lagged sugarcane price was positive and highly significant (Table 4.11). This brings into light positive response of the farmers to changes in sugarcane price in deciding the allocation of area under sugarcane. These findings are in line with the findings of Jaforullah (1992). In the findings of Ramulu (1996), it was revealed that increase in price of sugarcane might improve production of sugarcane considerably and more area under sugarcane. The estimated coefficient of sugarcane price implies one percent increase in sugarcane price, ceterus paribus, was 69 expected the farmers to expand their area under sugarcane by 0.174 per cent in the short–run. The long-run price elasticity of sugarcane area was estimated at 0.293 which was higher than the short-run price elasticity (Table 4.13). Table 4.13: Estimates of short and long-run elasticities and adjustment coefficient Variables Short-run elasticities Long-run elasticities Lagged sugarcane area 0.406 0.684 Lagged sugarcane price 0.174 0.0293 Lagged relative income ha-1 0.033 0.0556 Lagged sugarcane yield -0.768 -1.293 Adjustment Coefficient (β) 0.594 Hence, one percent increase in sugarcane price there is likely to increase the area under sugarcane by 0.293 per cent in the long-run. The same findings have been reputed by Rahman and Yunus (1993), in which the long-run price elasticity with respect to sugarcane acreage was higher than short-run price elasticity by almost 55 per cent. The higher magnitude of long-run price elasticity indicates there is essential scope for price policy in farmers’ decision of allocation of area under sugarcane in the study area. Therefore, the results of the analysis have shown the farmers responses to price incentive both in long and short run. Lagged relative income of sugarcane to competing crops The influence of relative income of sugarcane to competing crops such as paddy and wheat on sugarcane acreage response in the state was highly significant. The elasticity coefficient of lagged relative income of sugarcane was found to be positive and statistically significant at one per cent level of significant. These findings are in consonance with the study of Narayan and Parikh (1981). The results presented in Table 4.11, revealed that higher relative income of sugarcane leads to larger area to sugarcane crop in the next year. The area elasticity with respect to relative income of sugarcane was worked out to be 0.033 in the short-run. The long-run relative income elasticity of sugarcane area was estimated to be 0.056 (Table 4.13). The short-run elasticity of relative income was lower than the longrun elasticity. This indicates that the acreage response seems to be higher in the long-run than in the short-run. The results further revealed that 10 percent increase in relative income from sugarcane to competing crops leads the farmers to increase their area by 3.3 per cent in the next season. The relative income effect of sugarcane was small on the acreage 70 response of sugarcane because of lower relative price of sugarcane with respect paddy and wheat. Lagged sugarcane yield The estimated coefficient of lagged sugarcane was quite higher, negative and statistically significant. The coefficient indicates negative relationship between the lagged sugarcane yield and sugarcane acreage. This implies that one per cent increase in lagged sugarcane yield leads to 0.768 per cent decline in sugarcane area in the next crop season. The significant negative relationship between the acreage response and sugarcane yield may explained by the crop being long duration as compared to competing crops such as paddy and wheat. The short-run lagged sugarcane yield was -0.768 while the long-run yield elasticity was works out to be -1.293 (Table 4.13). This indicated the extent to which sugarcane yield is considered by the cane growers in the decision of area allocation under sugarcane. The results revealed that sugarcane own yield plays a less important role in acreage decisions. As the years proceed in sugarcane cultivation, the contraction of sugarcane acreage seems to be more as the lagged yield of sugarcane increases. This was very crucial since normally as yield increases the area under crops increase. But as the case of the present study, there exist, alternative results this may be due institutional constraints such as delayed in payment, relative lower price for sugarcane as compared to paddy and wheat. The results of the sugarcane acreage response indicate that decision of the farmers in the allocation of area under sugarcane was affected by both price and non-price factors. The farmers respond positively to the change in lagged sugarcane area, price of the cane and its relative income. But, an increase in yield of sugarcane in the previous season leads to the contraction of sugarcane area in the current season. An adjustment coefficient showed rapid adjustment of area under sugarcane by the farmer. However, the adjustment of sugarcane acreage was higher in the long run than in short-run. Physical and Financial Performance of Cooperative vis-à-vis Private Sector Sugar Mills The purpose of the present study was to examine an efficient performance of the selected sugar mills from two different sectors of Punjab. The efficient performance was measured in terms of physical and financial performance which is discussed as under: Physical performance of sugar mills in Punjab The details of mill-wise performance of various physical parameters such as cane crushing, recovery, sugar and molasses production, capacity utilization, duration of season and sugar sold were discussed under the following heads: Private Sugar Mills in Punjab The physical performance of sugar mills in private sector are discussed as under: Indian Sucrose Limited, Mukerian 71 The physical performance of Indian Sucrose Limited, Mukerian is furnished in Table 4.14. The results indicated fluctuation in the crushing of sugarcane by mill over the years. The mill had crushed sugarcane on an average of 5.16 lakh tonnes. The highest quantity of cane that crushed by the mill was recorded in 2006 (6.75 lakh tonnes) and lowest in 2009 (3.06 lakh tonnes). The shortage of cane availability to the mills due to contraction of sugarcane acreage and low productivity often leads to decline in crushing of cane by the mill. Moreover, the year 2009 was recorded as a drought year as the country received 689.8 mm of average rainfall against the normal average rainfall of 892.2 mm as such production of sugarcane declined (Anonymous, 2010). Table 4.14: Physical performance of Indian Sucrose Limited, Mukerian, 2006-07 to 2011-2012 (Lakh tonnes) Particulars 2006 2007 2008 2009 2010 2011 Overall Total sugarcane crush 6.75 6.59 3.43 3.06 5.12 5.98 5.16 Average cane crush/ day (tonnes) 4272.15 4364.24 3536.08 3974.03 4452.17 4564.86 4229.51 Recovery (%) 9.97 9.64 9.54 8.84 9.49 9.92 9.57 Sugar production 0.67 0.64 0.33 0.27 0.49 0.59 0.49 Molasses production 0.37 0.34 0.21 0.13 0.25 0.28 0.26 Capacity utilization (%) 89.99 87.97 45.77 40.80 68.23 79.75 68.75 Duration of season 158 151 97 77 115 131 122 Sugar sold (`Lakh) 9030.54 8898.73 9888.40 9237.80 9589.00 9554.00 9366.41 The overall per day average cane crushed in the mill was estimated to be 4229.51 tonnes against the potential crushing capacity of 5000 TCD. Though, the total cane crushed of sugarcane was found to be highest in 2006 but per day average cane crushed was estimated to be highest in 2011 with quantity of 4564.86 tonnes (Table 4.41). Since 2011, the number of days that the mill operated and total cane crushed was lowest as compared to that in 2006. The lowest per day average cane crushed was found to be 3536.08 tonnes in 2008. The perusal of Table 4.14 revealed that Mukerian Sugar Mill had recorded average recovery of sugar at the rate of 9.57 per cent. The per cent recovery of the mill has a direct bearing on the technical efficiency with regards to conversion of sugarcane to sugar (Singh et al, 2007). The recovery percentage of the mill was found to be in the range of 8.84 to 9.97 per 72 cent, the lowest per cent recovery of sugar was recorded in 2009 (8.84 per cent). However, the highest recovery (9.97 per cent) of sugar was realized in 2006 which was followed by 9.92 per cent in 2011. An increase in per cent recovery leads to higher production of sugar per unit cane crushed. On an average, the mill produces 0.49 lakh tonnes of sugar. The highest sugar production was recorded in 2006 with production of 0.67 lakh tonnes which was followed by 0.64 lakh tonnes in 2007. The lowest quantity of sugar (0.27 lakh tonnes) was produced in 2009. The results presented in Table 4.14 indicate average production of molasses to the tune of 0.26 lakh tonnes. The highest quantity of molasses was produced in 2006 (0.37 lakh tonnes) which declined to 0.13 lakh tonnes in 2009. The important factor that indicates economies of scale of the sugar mill is its capacity utilization. The capacity utilization of the mill on an average was estimated to be 68.75 per cent. It was found to be highest in 2006 (89.99 per cent) followed by 2007 (87.97 per cent) while lowest utilization was recorded in 2009 (40.80 per cent). It was noteworthy that in most of the time, the mill had experienced low capacity utilization which signified unsatisfactory performance of the mill. The number of days that the mill will operate greatly affects the production of sugar and its by-products. The normal working days of sugar mill are 150 days per year (Anonymous, 2011). But, Mukerian Sugar Mill on an average operates 108 days per year. The highest duration of crushing was found to be 158 days in 2006 followed by 151 days in 2007 and minimum being 77 days in 2009. On the other hand the mill accrued an average of income of `9366.41 lakh per year from the sale of sugar. The highest income of the mill was found to be `9888.40 lakh in 2008 and lowest in `8898.73 lakh in 2007. Wahid Sandhar Sugar Limited, Phagwara The physical performance of Wahid Sandhar Sugar Limited, Phagwara is exhibited in Table 4.15. The average quantity of sugarcane crushed by the sugar mill was found to be 3.34 lakh tonnes. The highest cane was crushed in 2007 which stood at 4.52 lakh tonnes and lowest (2.33 lakh tonnes) in 2009. The mill on an average had crushed 3092.59 tonnes of cane per day against average capacity of 4500 TCD. The highest quantity of cane that mill had crushed daily was worked out to be 3548.08 tonnes in 2008 and lowest quantity at 2775.51 tonnes in 2010. The actual cane crushed was lower as compared to the potential crushing capacity of the mill. This was mainly attributed to the shrinkage of area under sugarcane and hence shortage of supply of raw material (sugarcane) to the mill. The results presented in Table 4.15 indicate an average per cent recovery of sugar of the mill which was estimated to be 9.34 percent. The highest recovery of the mill was 73 9.69 per cent in 2006 and lowest recovery was recorded in 2010 (8.75 per cent). The lower per cent recovery of sugar indicates technical inefficiency of the mill in the conversion of sugarcane to sugar. The recovery of sugar has been declined throughout the years but still greater than the state average recovery of 8.8 per cent (Anonymous, 2011). The overall sugar production of the mill was estimated to be 0.32 lakh tonnes. The sugar production of the mill has been declining through time from 0.43 lakh tonnes in 2007 to 0.24 lakh tonnes in 2010. Similarly, production of molasses has also been declined from 0.19 lakh tonnes in 2007 to 0.10 lakh tonnes in 2009. However, the overall production of molasses of the mill was estimated to be 0.15. The capacity utilization of the sample mill exhibited fluctuation over the last seven years. On an average, the capacity utilization was 49.51 per cent while highest utilization was come out to be 66.96 per cent in 2007 and lowest in 2009 (34.52 per cent). The sample mill in the study period has been under utilization of capacity because the mill had capacity of 4500 TCD which means mill can crush 4.86 lakh tonnes of sugarcane for 108 days. The capacity utilization of the sugar mills was less than 50 per cent in the last three years which indicate that the mill was operating under capacity. This implies that actual output fell far short of capacity output of the mill, which resulted from the shrinkage of area under sugarcane and acute shortage in supply of sugarcane-the basic raw material of the sugar mill. The average duration of cane crushed of the mill was recorded to be 108 days (Table 4.15). Table 4.15: Physical performance of Wahid Sandhar Sugar Limited, Phagwara, 2006-07 to 2011-12 (Lakh tonnes) Particulars 2006 2007 2008 2009 2010 2011 Overall Total Sugarcane crush 4.13 4.52 3.69 2.33 2.72 2.66 3.34 Average cane crush/day (tonnes) 3036.76 3348.15 3548.08 2876.54 2775.51 2829.79 3092.59 Recovery (%) 9.69 9.47 9.28 9.39 8.75 9.46 9.34 Sugar production 0.40 0.43 0.34 0.27 0.24 0.25 0.32 Molasses production 0.18 0.19 0.15 0.10 0.13 0.12 0.15 Capacity utilization (%) 61.19 66.96 54.67 34.52 40.30 39.41 49.51 Duration of season (days/year) 136 135 104 81 98 94 108 74 Sugar sold (`Lakh) 6102.25 7763.25 8132.65 9616.31 9244.93 6145.23 7834.10 The results presented in Table 4.15 show that duration of cane crushed has been declining over the years and even lower than the state average of 150 days per year (Anonymous, 2011). The duration of sugar mill operation has impacted on mill performance. Longer the duration of mill operation higher is the capacity utilization and vice-versa. This is evident from the results where highest duration of mill operation was recorded in 2008 (136 days) and lowest in 2009 (81 days). Further, the mill earned average revenue of `7834.10 lakh from the sale of sugar. It has been fluctuating over the last seven years while the highest revenue was earned in 2009 by `9616.31 lakh and lowest revenue in 2006 by `6102.25 lakh. This was due to fluctuation of sugar price both for free and levy sugar. Moreover, the sugar was highly politicized which greatly affect the price of the sugar. The results revealed that the physical performance of the both private sugar mills was unsatisfactory. Both the mills were operating under capacity and not able to fully utilize their existing capacity due to inadequate supply of cane and excessive government intervention in the operation of the mills. Further, low sugar recovery from sugarcane added up excess capacity in the sugar mills. Cooperative Sugar Mills in Punjab The physical performance of sugar mills in cooperative sector are discussed under the following sub-heads: Nawanshahr Cooperative Sugar Mills Limited The physical performance of Nawanshahr Cooperative Sugar Mill Limited is presented in Table 4.16. The average total crushing capacity of the sample sugar mill was estimated to be 2.63 lakh tonnes of sugarcane. The total sugarcane crushed by the mill was found to be highest in 2007 with total quantity of 3.53 lakh tonnes and lowest (1.66 lakh tonnes) in 2009. The average crushing capacity was worked out to be 2369.37 tonnes per day. The results showed that average daily crushing capacity of the mill was found to be static over the years at around 2400 tonnes which was highest. The lowest daily crushing capacity was recorded in 2007 (2292.21 tonnes). The percentage recovery of sugar of the sample sugar mill was estimated to be 9.03 per cent at overall level. The recovery has witness a declined from 9.53 percent in 2008 to 8.60 per cent in 2010. This was due to obsolete machineries used in sugarcane crushing leads to decline in percentage recovery of sugar. Moreover, lack of 75 technology up-gradation reflects in the declined in percent recovery of sugar and daily crushing capacity of the mill. The overall production of sugar was worked out to be 0.24 lakh tonnes. In 2006 and 2007, equal quantity of sugar was produced to the tune of 0.32 lakh tonnes which was highest over the periods under reference. However, the production of sugar was declined to 0.15 lakh tonnes in 2009. The lower production of sugar in 2009 was due to low sugar recovery, low cane crushed and short duration of cane crushed. The molasses production of the mill was worked out to be 0.12 lakh tonnes at the overall level. The highest production of molasses was estimated at 0.16 lakh tonnes in 2007 and lowest (0.07 lakh tonnes) in 2009. The results presented in Table 4.16 revealed that the overall capacity utilization of the sample sugar mill was found to be 70.09 per cent. The results showed fluctuation in utilizing the capacity of the mill. The highest capacity utilization was found to be 94.13 per cent in 2007 and lowest (44.26 per cent) in 2009.The average duration of cane crushing was 111 days per year. The highest duration of season was recorded to be 154 days in 2007 and lowest duration (69 days) in 2009. Due to short supply of sugarcane for crushing, duration of season has been shortening in the period under study. The results further revealed that highest capacity utilization is obtained when large quantity of cane was crushed by the mill for a longer period of time. Nevertheless, the mill on an average had earned revenue of `5009.84 lakh from the sale of sugar. The highest revenue (`7149.47 lakh) was recorded in 2010 and lowest revenue (`2953.70 lakh) was registered in 2008 on the sale of white sugar. Table 4.16: Physical performance of Nawanshahr Cooperative Sugar Mills Limited, 2006-07 to 2010-12 (Lakh tonnes) Particulars 2006 2007 2008 2009 2010 2011 Overall Total Sugarcane crush 3.42 3.53 2.09 1.66 2.38 2.69 2.63 Average cane crushed/day (tonnes) 2358.62 2292.21 2348.31 2405.80 2404.04 2490.74 2369.37 Recovery (%) 9.26 9.05 9.53 8.97 8.6 8.79 9.03 Sugar production 0.32 0.32 0.20 0.15 0.21 0.22 0.24 Molasses production 0.15 0.16 0.09 0.07 0.10 0.11 0.12 76 Capacity utilization (%) 91.20 94.13 55.73 44.26 63.47 Duration of season (days) 145 154 89 69 99 Sugar sold (`Lakh) 71.73 108 70.09 111 5039.73 4834.64 2953.70 6470.22 7149.47 3611.25 5009.84 Morinda Cooperative Sugar Mills Limited The results presented in Table 4.17 exhibit the physical performance of Morinda Cooperative Sugar Mill Limited for the period of 2006-07 to 2011-2012. The average sugarcane crushed by the mill was estimated to be 1.72 lakh tonnes. The total quantity of sugarcane crushed in the period under study exhibited erratic trend which varies from 0.75 lakh tonnes in 2009 to 2.65 lakh tonnes in 2007. The overall daily cane crushed by the mill was found to be 2234 tonnes against the potential crushing capacity of 2500 TCD. It was found that the daily average cane crushed has been fluctuating over the periods due fluctuation in sugarcane production in the state. In 2006 and 2007, equal cane crushing capacity was found (2477 tonnes) which was the highest crushing capacity of the mill during the periods under study. While, lowest crushing capacity was estimated at 1598 tonnes in 2009. Table 4.17: Physical performance of Morinda Cooperative Sugar Mills Limited, Morinda, 2006-07 to 2011-12 (Lakh tonnes) Particulars 2006 2007 2008 2009 2010 2011 Overall Total Sugarcane crushed 2.18 2.65 1.04 0.75 1.58 2.14 1.72 Average cane crush/day (tonnes) 2477 2477 1891 1598 2257 2308 2234 Recovery (%) 9.58 9.87 9.62 9.05 8.63 8.70 9.24 Sugar production 0.21 0.26 0.10 0.07 0.14 0.19 0.16 Molasses production 0.09 0.11 0.05 0.03 0.07 0.09 0.08 Capacity utilization (%) 58.13 70.67 27.73 20.00 42.13 57.07 45.96 Duration of season (days) 88 55 47 70 93 77 107 77 Sugar sold (`Lakh) 2824.48 2488.00 2126.92 4585.67 3838.91 1782.86 2941.14 On an average, recovery of sugar estimated by the mill was 9.24 per cent. The recovery of sugar has been showing declining trend over the years. It was 9.87 per cent in 2007 which declined to 9.62 and 8.63 per cent in 2008 and 2010 respectively. This shows that mill was technically inefficient and also found that the mill was getting cane that have lower sucrose content. The results presented in Table 4.17 revealed that average production of sugar was estimated to be 0.16 lakh tonnes. The highest quantity of sugar (0.26 lakh tonnes) was produced in 2007 which was due to high per cent recovery of sugar, large quantity of cane crushed by the mill along with longer duration of crushing season in 2007. The lowest quantity of sugar was realized in 2009 with production of 0.07 lakh tonnes due to shrinkage in sugarcane supply lead to lowest duration of cane crushing season. Similarly, the same picture emerged for molasses production with average production of 0.08 lakh tonnes. The highest production of molasses (0.11 lakh tonnes) was obtained in 2007 and lowest production (0.05 lakh tonnes) in 2009. The wide fluctuation of capacity utilization of the mill was observed over the years with average capacity utilization of 45.96 per cent. The average capacity utilization over the periods showed that the mill had experienced erratic trends. It was found to be ranging from 20.00 to 70.67 per cent. The reason could be possible shrinkage in the sugarcane acreage and hence squeezed supply of cane to the sugar mill. This implies that the sample sugar mill was not enjoying the benefit of economies of scale. In the case of present study, duration of cane crushing was below 100 days in all the years except in 2007 that adversely affected the performance of the mill. The mill had operated on an average of 77 days per year. The longest duration of crushing season was found to be 107 days in 2007 and shortest (55 days) in 2008. The average revenue earned by the mill was `2941.14 lakh whereas the highest revenue was `4585.67 lakh in 2009 and minimum revenue earned was `1782.86 lakh in 2011. The study of physical performance of cooperative sugar mills revealed that mills were not performing satisfactorily. In most of the time, the mills were operating under capacity due to factors such as shrinkage of sugarcane acreage, shortage of cane supply and used of obsolete machineries restrict the mills to fully utilize their capacity. Comparison of Physical Performance of Cooperative and Private Sugar Mills The comparison of physical performance between cooperative and private sector sugar mills was studied. The comparison between the two sectors is presented in Table 4.18. The results revealed that there was a significant difference in duration of cane crushing between the two sectors at the overall level. The private sectors have operated 78 for longer duration than the cooperative sector in most of the time. The private sector have a crushing duration more than 100 days during the study periods except in 2007 (79 days). While in cooperative sector duration of cane crushing was below 100 days during the study periods. This indicate that the sugar mills in cooperative sector were not getting sufficient raw materials as cane growers were reluctant to supply sugarcane to the mills for they were not getting payment in time. Moreover, private mills were taking advantage of relative price owing to demand and supply of cane in the state. The results of overall total sugarcane crushed show that there has been significant difference in the average crushing capacity of the sugar mills in both sectors. It has been observed from Table 4.18 that during the periods under study, the private sector had crushed comparatively higher quantity of sugarcane than that in the cooperative sector. But, in 2006, difference between the two sectors was higher by 2. 6 lakh tonnes in terms of total sugarcane crushed where private mills crushed 5.4 lakh tonnes of cane and the figure for the cooperative mills was 2.8 lakh tonnes. The perusal of Table 4.18 revealed that per cent recovery of sugar was significantly higher in private sector than the cooperative sector. The private sector had recorded higher per cent recovery of sugar than that of cooperative sector during the study period. But in the year 2008, both the sectors obtained same level of sugar recovery (9.41 per cent). This implies that sugar mills under private sector were technically efficient with regards to conversion of sugarcane into sugar. Further, the results presented in Table 4.18 indicate that the private sectors produced significantly higher quantity of sugar and molasses than the cooperative sectors. In the case of sugar production, the private sector had produced sugar almost double the quantity produced in the cooperative sector. It was estimated that 0.26 lakh tonnes of sugar was produced in cooperative while 0.54 lakh tonnes of sugar was produced in private sectors. Similarly, production of molasses in private sector was estimated to be twice the quantity produced in the cooperative sectors. The private sector had produced 0.27 lakh tonnes of molasses and 0.12 lakh tonnes of molasses was produced in cooperative sector. This was mainly due to the lower quantity of cane crushed and low recovery of sugar in the cooperative sectors. It is important to note that longer duration of mills’ operation, high sugar recovery and high average crushing capacity together determined the total quantity of finished products during the operating season. Nevertheless, the capacity utilization in both the sugar mills showed non-significant differences. At the overall level, it was recorded to be 58.02 and 59.13 per cent in cooperative and private sectors respectively. During the study, both the sectors utilized less than 60 per cent of their potential crushing capacity utilization. 79 The findings revealed that there is scope to increase crushing capacity in both the sectors in the state only if substantial increase in sugarcane availability of cane is there for crushing. The expansion of crushing capacity will help in revitalization of sick cooperative sugar mills and stimulating the cane growers to bring more area under sugarcane cultivation. This showed that comparatively sugar mills under private sector have better performance than the cooperative sector in terms of sugar recovery, average crushing capacity, number of operating days, production of sugar and molasses. The capacity utilization in both the sectors was not the optimum one. 80 Table 4.18: Comparison of physical performance of Private and Cooperative sector sugar mills in Punjab (Lakh tonnes) Particulars 2006 2007 2008 2009 2010 2011 Overall t-values C P C P C P C P C P C P C P Duration of season (days) 117 147 131 143 72 101 58 79 85 107 101 113 94 115 1.770* Total Sugarcane crush 2.8 5.4 3.1 5.7 1.7 3.6 1.2 2.7 2.0 3.9 2.4 4.3 2.2 4.2 4.056*** Recovery (%) 9.42 9.83 9.46 9.56 9.41 9.41 9.01 9.12 8.62 9.12 8.75 9.69 9.14 9.45 1.988* Sugar production 0.26 0.54 0.29 0.53 0.15 0.33 0.11 0.27 0.17 0.37 0.21 0.42 0.20 0.41 4.218*** Molasses Production 0.12 0.27 0.14 0.27 0.07 0.18 0.05 0.12 0.08 0.19 0.10 0.20 0.09 0.20 4.009*** Capacity utilization (%) 74.67 75.61 82.40 77.48 41.73 50.19 32.13 37.66 52.80 54.23 64.40 59.58 58.02 59.13 0.129NS ***, ** and * signifies significant at 1, 5 and 10 per cent level NS: Non-significant Note: C and P indicate Cooperative and private respectively 81 Financial Performance of the Sugar Mills in Punjab The financial performance of the sugar mills can be measured in terms of financial strength of the mill. The financial strength of the mill was measured by the ratio analysis for various financial indicators such as profitability, operating, solvency and liquidity ratios. The measurement of financial viability of the selected sugar mills were studied in detail. Private sector sugar mills in Punjab The ratio analysis of various financial indicators of the private sector sugar mills were discussed as under: Profitability Ratios The profitability of the sugar mills in a long-run is important for the survival of the sugar mill and benefit of the shareholders. The study of profitability ratios signifies the amount of profit that mills able to generate from the sale of manufactured products and give an insight into the effectiveness in generating the income from their resources. The various profitability ratios of the two private sugar mills were estimated for the period of seven years (2006-07 to 2011-12) and presented in Table 4.19. Indian Sucrose Limited, Mukerian The gross profit margin ratio of the mill has been found decreasing from 29.16 per cent in 2006 to 16.58 per cent in 2011. The quite erratic trend was observed over the years with lowest margin (13.76 per cent) in 2008. The continuous decrease in gross profit margin ratio indicates inconsistent in the earning of mill due to increase in manufacturing expenses. The positive gross profit margin ratio revealed an efficient management of its resources. The efficient management decision of the mill was revealed by the operating profit margin. The results presented in Table 4.3.6 indicate a positive margin but a declining trend over the years. The operating profit margin was found to be highest in 2006 (24.43 per cent) and adversely declined to 6.26 per cent in 2011 due to considerable increase in operating expenses made on salary and wages, repair and maintenance, trading, administrative, etc. (Appendix-III). The pretax profit margin was found to be fluctuating through time. The higher pretax margin was found to be 24.43 per cent in 2006 indicating efficient management of taxable income and ability of the management to keep operating cost low. While the lowest and negative pretax margin was recorded in 2010 (-2.20 per cent) indicating inefficiency in management of operating expenses especially payment of interest. The net profit margin of the mill showed a mixed trend during the periods under study. The positive net margin was obtained in four periods and negative margin in two periods. The net profit margin was declined from 8.77 per cent in 2006 to -5.00 per cent in 2010. The same has increased to 14.33 per cent in 2011. The higher net profit margin implies efficiency in processing of sugarcane to produce sugar and its by-products, administration, selling of products and financing of the sample sugar mill. The higher net loss of the sugar mill and minimum earning left for shareholders was found in 2010 with a net loss of 5.00 per cent (Table 4.19). 82 The relationship of the profits and investment of the mill was highlighted by the rate of returns ratios. These ratios showed effectiveness in generating income from resources of the mill. The results presented in Table 4.19 showed declining and fluctuating trend of returns on assets of the mill over the periods. This indicated that the efficiency in management of assets by the mill was deteriorating over time. The highest returns was estimated to be 8.80 per cent in 2006 and highest negative returns were observed in 2010 (-1.78 per cent). It is important to note the productivity of the ownership or equity capital employed in the sugar mill which was reflected by the values of the returns on equity. Table 4.19: Profitability analysis based on different ratios of private sectors through 2006-07 to 2010-11 (Per cent) Particulars 2006 2007 2008 2009 2010 2011 Gross profit margin ratio 29.16 20.51 13.76 16.74 20.97 16.58 Operating profit margin ratio 24.43 16.82 9.10 10.44 13.15 6.26 Pretax profit margin ratio 14.25 8.08 0.96 1.94 -2.20 14.15 Net Profit margin ratio 8.77 4.06 -0.09 1.03 -5.00 14.33 Returns on assets 8.08 3.00 -0.06 0.44 -1.78 5.58 Returns on equity 32.08 12.98 -0.31 2.88 -10.85 33.76 Returns on capital employed 10.01 4.06 -0.09 0.75 -3.05 7.41 Indian Sucrose Limited, Mukerian Wahid Sandhar Sugar Limited, Phagwara Gross profit margin ratio 22.02 12.03 16.85 15.88 20.33 25.51 Operating profit margin ratio 18.56 8.76 13.27 13.11 17.67 21.48 Pretax profit margin ratio 10.83 2.23 2.20 2.96 5.51 6.46 Net Profit margin ratio 9.61 1.31 1.15 1.26 3.22 4.11 Returns on assets 10.04 0.96 0.70 0.79 1.92 1.70 Returns on equity 27.06 4.36 3.91 3.17 7.31 6.04 Returns on capital employed 12.06 1.05 0.91 0.93 2.18 2.07 The returns on equity was increasing from 32.08 to 33.76 per cent and showing fluctuating trend during the study period. The mill had highest productivity of capital employed by owners in 2011 (33.76 per cent) and lowest (10.85 per cent) in 2010. The lowest returns on equity indicated inefficient in the management of equity capital. The return on capital employed by the mill presented in Table 4.19 showed consistent decreasing of the same from 10.01 per cent in 2006 to -3.05 per cent in 2010 and showing fluctuation trend 83 over time. This revealed that the management was failed to utilize its capital efficiently. It was, however, observed that if management makes good efforts, there is possibility of improving the ratio, as the ratio was improved to a greater extent in 2011 (7.41 per cent). Wahid Sandhar Sugar Limited, Phagwara The perusal of Table 4.19 showed that the gross profit margin of the Wahid Sugar Mill Limited has been increasing from 22.02 to 25.51 per cent over the study period due to reduction in manufacturing expenses on raw materials, labour and other manufacturing costs. This indicated that the mill had an efficient management in the production of sugar. The operating profit margins over time revealed management has efficient control over operating expenses than its cost of sales outlay. The margin has been increasing from 18.56 per cent in 2006 to 21.48 per cent in 2011. The pretax profit margin of the mill was decreased but showing positive trend over the period under reference. The highest margin was worked to be 10.83 per cent in 2006 showing low operating cost and lowest margin (2.20 per cent) in 2008. The bottom line sugar mill profitability was found a positive trend in all the study period which indicated that the mill had never in loss during the period under study. The mill had an overall efficient in production, administration, selling, and tax management. The highest efficiency was found in 2006 with net profit of 9.61 per cent and lowest (1.31 per cent) in 2007. The positive return on assets was observed during the periods under study which indicate consistent efficiency in management of assets. The ratio was substantially decreased from 10.04 to 1.70 per cent over time. However, the highest return on assets was worked to be 10.04 per cent in 2006 and lowest (0.96 per cent) in 2007. The results of return on equity and returns on capital employed were positive, decreased and showing fluctuation over the periods. This revealed positive return of investment of the mill over time but the management of equity and capital was inefficient. The highest return of equity was estimated to be 27.06 per cent in 2006 which drastically declined to 3.17 per cent in 2009. Whereas, the return on capital employed was found to be highest (12.06 per cent) in 2006 and lowest (0.91 per cent) in 2008. Operating Performance or Efficiency Ratios of the Sugar Mills The operating performance ratios or efficiency ratios measures the managements’ ability to keep overhead costs low and indicates efficiency in converting assets into revenue. The various efficiency ratios of the two private mills presented in Table 4.20 and discussed as under: Indian Sucrose Limited, Mukerian The fixed assets turnover ratio has been decreasing from 2.00 to 1.32 over time and showing instable trend during the study period. It was highest (2.09) in 2008 indicating investment of one rupee on fixed assets realized revenue of two rupees and revealed efficiency in fixed assets utilization. Thereafter, the ratio has been declined up to 2010 at 1.15 84 indicating decrease in sale of mills’ products and slightly increased to 1.32 in 2011. The declining trend shows inefficient management of fixed assets over time. The total asset turnover ratio presented in Table 4.20 showed decreasing trend over the study periods indicating sluggish sales of the mill, increases in inventories and holding an obsolete assets through time (Appendix-III). It was found highest (0.92) in 2006 which implies efficiency in utilizing total assets by the mill in generating income. The lowest total assets turnover ratio was estimated to be 0.36 in 2010 indicating the mill was operating under capacity. The working capital turnover ratio of the mill over time was declining from 1.85 to 0.74. This revealed inefficiency in managing short-term assets and liabilities of the mill in funding for sales. Moreover, the declining trend of working capital turnover ratio implies slow speed of sales, as it was controlled by the government and not freed to sell by the mill. The current turnover ratio indicates the capability of the mill to achieve maximum sales with the minimum investment in current assets. Table 4.20: Operating performance or efficiency ratios of private sugar mills during a period from 2006-07 to 2011-12 Particulars 2006 2007 2008 2009 2010 2011 Fixed assets turnover ratio 2.00 1.80 2.09 1.88 1.15 1.32 Total assets turnover ratio 0.92 0.74 0.71 0.43 0.36 0.39 Working capital turnover ratio 1.85 1.69 1.78 1.10 1.02 0.74 Current asset turnover ratio 1.74 1.27 1.09 0.57 0.52 0.57 Inventory turnover ratio 2.45 1.76 1.89 1.64 1.51 1.06 Debtor turnover ratio 1.66 1.46 1.51 0.99 0.85 0.66 Indian Sucrose Limited, Mukerian Wahid Sandhar Sugar Limited, Phagwara Fixed assets turnover ratio 3.31 1.42 1.49 1.01 0.91 0.70 Total assets turnover ratio 1.04 0.73 0.61 0.63 0.60 0.42 Working capital turnover ratio 2.87 1.17 1.13 1.14 1.08 0.82 Current asset turnover ratio 1.53 1.52 1.03 1.67 1.73 1.03 Inventory turnover ratio 1.78 2.06 2.00 2.39 2.40 1.30 Debtor turnover ratio 2.26 1.05 1.03 1.04 0.97 0.76 The current turnover ratio was highest at 1.74 in 2006 indicating efficient utilization of current assets and lowest at 0.52 in 2010 revealing increased current assets due accumulation of high inventories. The inventory turnover ratio was showing decreasing trend over the period. This implies slow speed of converting inventories into sales. It signals 85 inefficiency in the management of inventories due to overstocking of inventories by the mill (Appendix-III). The highest inventory turnover ratio was 2.45 in 2006 which signified strong sales and better liquidity and less cost incur in sales. Whereas, the lowest turnover was estimated to be 1.06 in 2011 indicating excess inventories due to slow uplift of sugar by the state government. The debtor turnover ratio was fluctuating during the study period. It varied from 1.66 to 0.66 indicating inefficiency in collecting outstanding sales. Wahid Sandhar Sugars Limited, Phagwara The fixed assets turnover ratio of Wahid Sugar Mill showed decrease from 3.31 to 0.70 during the study period (Table 4.20). This indicates decrease in productivity of fixed assets of the mill in generating sales. The total assets turnover ratio of the mill decreased from 1.04 to 0.42 and was observed fluctuating over the period. It was mainly due to fluctuation in sale of the mill. The working capital turnover ratio was highest (2.87) in 2006 which indicate efficient management of working capital and lowest ratio (0.82) was in 2011 revealing failure in utilization of short-run assets and liabilities. The current asset turnover showed quite erratic trend over the period because piling up of inventories block the fund of the mill. It was found to be highest at 1.73 in 2010 and lowest (1.03) in 2008 and 2011. The inventory turnover ratio of the mill varied from 1.78 to 2.40 and showed fluctuating trend during the study period. The ratio was found to be more than the standard ratio of 2:1 (Talekar, 2005) in 2007 up to 2010 which showed that the mill sells through its stock of inventory twice in year. This indicates speedy in sales and utilization of stores and spares and efficient in managing of inventories. The debtor turnover ratio of the mill showed inefficiency in management of debtor/receivable account and slow in collection of credit from debtors. It decreased from 2.26 in 2006 to 0.76 in 2011. The operational performance was found to be inefficient during the study period. Inefficiency in the operation of the mill revealed that there is a need to control huge stock of inventory and speedy sales of the mill’s inventories. Solvency or Leverage Ratio of the Sugar Mill The solvency ratio was worked out to determine the overall level financial risk of the mill and its shareholders. Greater the amount of debt held by the mill, greater is the financial risk of economic failure. The debt-equity ratio of the mills was estimated and is presented in Table 4.21. Indian Sucrose Limited, Mukerian The perusal of Table 4.21 showed increasing trend of debt-equity ratio during the period under reference. The equity position of the mill was very weak and less protection against the risks in using debt finance. The ratio provide vantage point on the mill’s leverage position. The ratio was highest at 3.55 in 2011 indicating the mill used large debt to finance its 86 operation. It also showed the claim of the creditors was greater than the shareholders. The lowest leverage ratio (2.20) was estimated each in 2006 and 2007 showing higher protection enjoyed by the mill during these periods. However, the ratio was more than the standard ratio of 1:1 (Ladha and Shah, 2012) which indicates the increase in debt was more than the increase in equity. Table 4.21: Analysis of solvency ratios of private sugar mills for the periods of 2006-07 to 2011-12 Years Debt-equity ratios Indian Sucrose Limited, Mukerian Wahid Sandhar Sugar Limited, Phagwara 2006 2.20 1.24 2007 2.20 3.14 2008 2.36 3.29 2009 2.83 2.42 2010 2.56 2.35 2011 3.55 1.92 Wahid Sandhar Sugar Limited, Phagwara The debt-equity ratio of the mill is presented in Table 4.21 and showed relatively larger contribution of creditors than the shareholder in financing of the mill in most of the periods. The highest ratio was come out to be 3.14 in 2008 and lowest (1.24) in 2006. The ratio was found to be decreasing from 3.29 in 2008 to 1.92 in 2011. The decreased in leverage ratio indicated that the mill had improved their equity position and reduced its dependency on leverage for financing. Liquidity Ratios of the Sugar Mill Liquidity ratio measures the ability of the mill to pay off its current obligations (liabilities). In fact analysis of liquidity was done by comparing most liquid assets of the mill with its short-term liabilities. The greater coverage of liquid assets to short-term liabilities signal an ability of the mill to pay its debts and able to fund to its ongoing operations. Otherwise, low coverage rate signal raising a red flag for the mill to meet its short-term obligations and running its operation. The important liquidity ratios were calculated for the private sugar mill for the period of seven years and are presented in Table 4.22. Indian Sucrose Limited, Mukerian The current ratio of Mukerian Sugar Mill showed that the ratio has decreased from 2.74 to 1.64 in the year 2006 and 2010. It again increased to 2.75 in 2011. The current ratio in 87 2006 (2.74), 2007 (2.22) and 2011 (2.75) was found to be greater than the ideal current ratio (2:1). It implies that the mill was in good liquidity position to cover its current liabilities and ongoing operations of the mill. The Quick/Acid test ratio was found highest (1.26) in 2011 and lowest (0.62) in 2007. The results further revealed that the Quick test ratio was lower than the ideal ratio (1:1) in the first three years (2006 to 2008). During these years, major share of current assets was made from inventory (Appendix-III). The same was found to be the higher than the ideal ratio in the remaining periods under reference (2009-2011). This showed an increasing trend over the period indicating improvement in the liquidity position of the mill through time. The cash ratio of the mill was found to be decreased from 0.36 in 2006 to 0.04 in 2008. The ratio was again increased (0.31) in 2009 which further decreased (0.13) in 2011. This showed that cash ratio was fluctuating over the periods under study. Table 4.22: Analysis of liquidity ratios of private sugar mills through periods from 2006-07 to 2011-12 Particulars 2006 2007 2008 2009 2010 2011 Indian Sucrose Limited, Mukerian Current ratio 2.74 2.22 1.96 1.86 1.64 2.75 Quick /Acid test ratio 0.80 0.62 0.83 1.21 1.08 1.26 Cash ratio 0.36 0.24 0.04 0.31 0.19 0.13 Wahid Sandhar Sugar Limited, Phagwara Current ratio 4.07 5.67 2.56 2.60 2.83 2.31 Quick /Acid test ratio 0.56 1.49 1.23 0.78 0.80 0.48 Cash ratio 0.14 0.65 0.52 0.16 0.14 0.12 Wahid Sandhar Sugar Limited, Phagwara The current ratio of Wahid Sugar Mill presented in Table 4.22 shows good liquidity position of the mill in meeting short-term debt obligations. The ratio was found to be more than the ideal ratio of 2:1 in all the study periods. It was highest (5.67) in 2007 and lowest (2.310 in 2011. However, fluctuating trend of current ratio was observed over the period under reference. The Quick/Acid test ratio decreased from 0.56 in 2006 to 0.48 in 2011 but fluctuating trends was observed through periods (Table 4.22). The ratio was estimated to be highest (1.49) in 2007 and lowest (0.48) in 2011. The results revealed that the Quick test ratio was lower than the ideal ratio (1:1) in most of the time. This indicated a huge stocking of inventory and poor holding of most-liquid assets to cover the debt obligations. The cash ratio revealed that the mill had poor cash holding to meet immediate debt obligations of the mill. It was found highest (0.65) in 2007 and lowest (0.12) in 2011. 88 Therefore, the results of the liquidity ratios revealed that the liquidity position of the private sugar mills was not showing a good sign. Cooperative sector sugar mills in Punjab The ratio analysis of various financial indicators of the cooperative sector sugar mills were discussed as under: Profitability ratios The various profitability ratios of the two cooperative sugar mills were estimated for the period of seven years (2006-07 to 2011-12) and are presented in Table 4.23. Nawanshahr Cooperative Sugar Mill Limited, Nawanshahr The perusal of Table 4.23 exhibit different profitability ratios of Nawanshahr sugar mill. The gross profit margin shows erratic trend over period. The margin was found to increase from 15.99 per cent in 2006 to 23.04 per cent in 2010. But, it adversely declined to 2.59 per cent in 2011 due considerable increase in manufacturing cost as well as decrease in net sales of the mill. The operating profit margin was highly fluctuating over the periods. It decreased from 10.10 per cent in 2006 to -17.81 per cent in 2008. But it considerably increased to 18.73 per cent in 2010 and was found to be highest. This was due to inconsistent management of operating expenses and moreover it was due to simultaneous declined in gross profit of the sugar mill. Further, the operating profit margin drastically declined and negative margin was recorded in 2011 (-7.00 per cent). The pretax profit margin and net profit margin shows fluctuating trend and was found to be negative in three periods (Table 4.23). The pretax profit margin was highest in 2010 (18.73 per cent) which attributed efficient management of operating expenses including payout interest. The lowest pretax margin was estimated to be -17.81 per cent in 2008. The lowest pretax margin during this period was due to negative gross profit and high cost of sale. The net profit margin of the mill increased from 5.13 to 17.85 per cent over time. This implies an overall efficiency in operation of the mill and utilizing its resources. The negative net profit was found in 2007 (-13.21 per cent), 2008 and in 2011 (-6.89 per cent). The large negative margin (-22.87 per cent) was found in 2008 which indicated higher net loss in the operation of mill and declined in net sales of the product. The return on assets, equity and capital employed showed irregular trend over the periods under study. All the three rates of return ratios was found to be highest in the same period 2010 with the estimation of 12.68, 95.44 and 72.29 per cent of return on assets, equity an capital respectively. The mill during 2010 was found to be most effective in generating income from its resources (assets, equity shareholder and debt). But the negative and lowest return ratios were found in different period. In the case of return on assets, higher negative return (-5.65 per cent) was found in 2007 due to net loss and inefficiency in management of assets during this period. The lowest return on equity was observed to be highest in 2008 with 89 -44.45 per cent as the net loss of the mill. The ability of the mill to generate income from the pool of capital employed was found to be lowest (-17.35 per cent) in 2007. Table 4.23: Profitability analysis based on different ratios of Cooperative sectors through 2006-07 to 2010-11 (Per cent) Particulars 2006 2007 2008 2009 2010 2011 Nawanshahr Cooperative Sugar Mill Limited, Nawanshahr Gross profit margin 15.99 -5.01 -5.74 17.83 23.04 2.59 Operating profit margin 10.10 -11.41 -14.36 13.39 18.49 -7.00 Pretax profit margin 8.60 -12.08 -17.81 9.68 18.73 -5.86 Net Profit margin 5.13 -13.21 -22.87 5.26 17.85 -6.89 Returns on assets 4.29 -5.65 -4.93 5.33 12.68 -2.60 Returns on equity 30.76 -41.78 -44.45 47.35 95.44 -15.90 Returns on capital employed 12.38 -17.35 -12.80 13.07 72.29 -5.77 Morinda Cooperative Sugar Mill Limited, Morinda Gross profit margin 0.16 -25.72 -22.49 17.98 12.38 -14.54 Operating profit margin -4.27 -27.42 -24.52 16.34 10.52 -17.83 Pretax profit margin -7.39 -29.98 -32.21 10.84 7.36 -18.67 Net Profit margin -12.84 -34.49 -40.23 5.22 4.36 -26.60 Returns on assets -3.16 -9.77 -7.46 6.48 4.44 -3.93 Returns on equity -7.74 -25.90 -25.28 21.14 11.45 -13.59 Returns on capital employed -3.58 -10.93 -8.83 6.82 4.96 -4.17 Morinda Cooperative Sugar Mill Limited, Morinda The profit margins of the mill are presented in Table 4.23 showing a fluctuating trend over the periods under reference. The highest negative margins were observed in most of the periods. The gross profit margin of the mill decreased from 0.16 to -14.54 per cent over the period. But, highest margin was found to be 17.98 per cent in 2009 and lowest (-25.72 per cent) in 2007. This indicates a gradual increase in cost of goods sold and declined in net sales of the mill. The operating profit margin exhibited mixed trend over periods. It was highest (16.34 per cent) in 2009 and thereafter it decreased continuously to -17.83 per cent in 2011. This indicated that the management needs to control its operating costs which adversely affect the profitability of the mill. The pretax profit was lowest (32.21 per cent) in 2008 and highest 90 (10.84 per cent) in 2009 but thereafter it decreased continuously to -18.67 per cent in 2011. The declining trend of pretax profit margin revealed that the mill was heading towards losses for there is a need an efficient and timely management of operating and non-operating expenses. The results of net profit margin of the mill showed negative margin in most of the years under study. The mill incurred continuous net losses over the period up to 2008. Thereafter, the net profit margin was found highest (5.22 per cent) in 2009 and again continuously declined to -26.60 per cent in 2011. Therefore, looking to this fact, the profitability of the mill has decreased continuously which did not augur good for the mill. The Morinda Sugar Mill shows poor returns on assets, equity and pool capital employed in the operation of the sugar mill. It was found that the return on assets was highest (6.48 per cent) in 2009 and gradually decreased to -3.93 per cent in 2011. It indicates increase in cost of goods sold, operating expenses and inefficient management of total assets of the mill. The return on equity of the mill over the period show decreasing trend which indicate losses on investment of shareholder equity. It was highest at 21.14 per cent in 2009 and further decline to -13.59 in 2011. The return on capital employed was found highest (6.82 per cent) in 2009 indicating increase in debt for financing the mill operation. Therefore, the profitability of the mill has been declining over the periods and in most of the periods under study losses was incurred. Operating performance or Efficiency ratios The operating performance or efficiency ratios of the cooperative sugar mills are discussed for the period of seven years under the following heads: Nawanshahr Cooperative Sugar Mill Limited, Nawanshahr The perusal of Table 4.24 represents the operating performance of Nawanshahr sugar mill. The fixed asset turnover ratio revealed efficiency in productivity of the mill’s assets in generating sales. The highest turnover was estimated to be 3.23 in 2010 indicating efficient management of fixed assets in generating income. During 2008 the mill had failed to utilize fixed assets as the turnover was very low (1.59 times). The total assets turnover ratio was showing a fluctuating trend over the study period. It was highest (0.68) in 2010 and lowest (0.28) in 2008. The sales of the mill during 2008 were lower and the total assets were found to be highest in this period which shows inefficiency in total assets management by the mill (Appendix-II). The working capital turnover ratio has increased from 2.06 to 4.58 and showing mixed trend over the years. It has increased up to 2010 at 4.58 and thereafter it decreased to 0.44 in 2011. This shows that the mill was inconsistent in the management of working capital to carry out the operation and sales of the mill. The reasons for inconsistency were excess stock of sugar, government regulation on sales, no internal sources of capital and depend upon bank finance for working capital every year. The current assets turnover ratio of the mill shows fluctuation and declining trend in the study period. It indicates uneven 91 decrease in sales of the mill leading to less realization of income over time. The current assets turnover ratio was estimated to be 1.72 in 2010 and lowest (1.02) in 2006. Table 4.24: Operating performance or efficiency analysis based on different ratios of cooperative sectors through 2006-07 to 2010-11 Particulars 2006 2007 2008 2009 2010 2011 Nawanshahr Cooperative Sugar Mill Limited, Nawanshahr Fixed assets turnover ratio 2.32 2.24 1.59 3.11 3.23 1.71 Total assets turnover ratio 0.50 0.47 0.28 0.55 0.68 0.44 Working capital turnover ratio 2.06 2.79 1.36 1.99 4.58 1.14 Current asset turnover ratio 1.02 1.04 0.56 1.13 1.72 0.63 Inventory turnover ratio 1.26 1.27 0.65 1.43 2.28 0.75 Debtor turnover ratio 2.00 2.55 1.06 1.52 11.42 1.48 Morinda Cooperative Sugar Mill Limited, Morinda Fixed assets turnover ratio 1.44 1.33 1.21 2.43 1.89 0.88 Total assets turnover ratio 0.43 0.33 0.23 0.60 0.60 0.21 Working capital turnover ratio 1.86 1.26 0.84 1.66 2.32 0.49 Current asset turnover ratio 1.23 0.89 0.54 1.46 1.88 0.43 Inventory turnover ratio 1.38 0.98 0.57 1.56 2.21 0.47 Debtor turnover ratio 0.90 0.79 0.52 0.76 1.04 0.37 The inventory turnover ratio indicates poor performance in management of inventory and slowed in converting it into revenue. The turnover was highest (2.28) in 2010 indicating sales of sugar twice in a year and lowest (0.65) in 2008. The debtor turnover ratio was increased from 2.38 to 14.84 indicating efficiency in collecting outstanding sales. The highest efficiency (14.84) was found in 2010 which was attributing to high debt in the same period (Appendix-II). The lowest efficiency (1.06) was found in 2008 revealing inefficiency in collecting outstanding sales of the mill. Morinda Cooperative Sugar Mill Limited, Morinda The fixed assets turnover ratio of the mill decreased from 1.44 to 0.88 during the study period. The fixed assets of the Morinda sugar mill were not managed properly over the years. However, the highest turnover of the mill was (2.43) in 2009 indicating that the mill was efficiently utilizing the fixed assets to generate income and the lowest was at 0.88 in 2011. The total turnover ratio shows that the mill was operating sub-optimally as the 92 turnover ratio was below one in all the study periods. The turnover ratio decreased from 0.43 to 0.21 and showing mixed trend during the study period. The highest asset turnover ratio (0.60) was in 2009 and 2010 while the lowest (0.21) was in 2011 indicating the assets were not optimally utilized. The working capital turnover showed poor performance of the mill in managing working capital. It was decreasing from 1.86 in 2006 to 0.49 in 2011. This was due to slow and lengthy process in sales of sugar as it was totally regulated by the State and Central Government. The current assets turnover ratio increased from 1.23 in 2006 to 1.88 in 2010 and thereafter it decreased to 0.43 in 2011. The highest turnover ratio was (1.88) in 2006 indicated the efficient management of current assets in generating revenue and lowest (0.43) was in 2011 indicating decrease in sales of sugar. The inventory turnover ratio showed weak performance of the mill in controlling the inventory. It was found to be below standard (2:1) in the all study periods except in 2010 where it was slightly above norm. The lowest turnover (0.47) was in 2011 indicating failure in management of inventory as stock of sugar was beyond the control of the mill as the sale of sugar was directed by the government. This restriction slowed the speed of sale of sugar which made the mill to maintain huge inventory throughout the year and led to management inefficiency. The debtor turnover ratio shows declining trend over the years which reveal inefficiency of the mill in collecting its proceeds sales. It was highest (1.19) in 2010 indicating efficient management of credit and lowest (0.32) in 2011 indicating inefficient collection of accounts receivable by the mill. Solvency ratios of the sugar mill The detection of the sugar mill operation and financial difficulties is a subject which has been particularly amenable with debt-equity ratio. The debt-equity ratio of the selected cooperative sugar mills were worked out and presented in Table 4.25. Nawanshahr Cooperative Sugar Mill Limited, Nawanshahr The debt-equity ratio of Nawanshahr Sugar Mill increased from 1.49 to 1.76 and showing fluctuating trend during the study period. The ratio was found to be lowest (0.32) in 2010 which is a satisfactory level where the mill enjoyed greater financial protection and used less leverage for financing its operation. But, overall long-term liquidity position of the mill was weak as the ratio has been above the standard ratio (1:1). This showed that more leverage has been used for financing the operation of the mill that is the portion of assets provided by creditors was greater than the portion of assets provided by stockholders. Morinda Cooperative Sugar Mill Limited, Morinda The perusal of Table 4.25 showed that the debt-equity ratio of Morinda Sugar Mill was substantially increased from 1.16 to 2.26 as the year progress. This revealed that the risk for increased leverage and operation of the mill was financed largely by the money borrowed from bank and cooperative society. 93 Table 4.25: Solvency analysis for cooperative sugar mills in Punjab for period of seven years Years Debt-equity ratios Nawanshahr Cooperative Sugar Mill Limited, Nawanshahr Morinda Cooperative Sugar Mill Limited, Morinda 2006 1.49 1.16 2007 1.41 1.37 2008 2.47 1.86 2009 2.62 2.10 2010 0.32 1.31 2011 1.76 2.26 Liquidity ratios of the sugar mills The liquidity position of the mill signifies the ability of the mill to meet the financial obligation as and when required. The liquidity ratios measure the relationship between current assets and current liabilities of the mill in meeting short-term debt obligation. In order to test the liquidity of the cooperative sugar mills, current ratio, quick ratio and cash ratio were calculated for a period from 2006-07 to 2011-12 and is presented in Table 4.26. Table 4.26: Liquidity analysis based on different ratios of cooperative sector through period 2006-07 to 2011-12 Particulars 2006 2007 2008 2009 2010 2011 Nawanshahr Cooperative Sugar Mill Limited, Nawanshahr Current ratio 1.96 1.58 1.69 2.30 1.58 2.21 Quick /Acid test ratio 0.38 0.28 0.22 0.48 0.39 0.35 Cash ratio 0.06 0.04 0.03 0.04 0.11 0.06 Morinda Cooperative Sugar Mill Limited, Morinda Current ratio 2.96 3.41 2.77 8.25 5.32 8.52 Quick /Acid test ratio 0.32 0.30 0.16 0.54 0.79 0.65 Cash ratio 0.17 0.17 0.09 0.37 0.47 0.37 Nawanshahr Cooperative Sugar Mill Limited, Nawanshahr The ideal standard of Current ratio is 2:1 (Talekar, 2005). The Nawanshahr Sugar Mill had current ratio more than ideal standard (2.30) only in 2009 and 2011 (2.21). During 94 these years current assets increased due to increase in cash and account receivable which indicated better liquidity position of the mill to meet its current liabilities (Appendix-II). The lowest current assets were (1.58) in 2007 and 2010 indicate poor liquidity position of the mill. This was mainly due to decrease in cash and account receivable leading to decline in current assets. The Quick/Acid test ratio is more stringent test which focused on most liquid assets of the mill as the test exclude inventory of the mill. The ideal Quick/Acid test ratio is 1:1 but it was found that the mill had Acid ratio less than ideal ratio during the study periods. It implies the mill did not have greater liquidity position to cover the short-term liabilities. The estimation of cash ratio show weak maintaining of cash assets of the mill to cover current liabilities. The cash ratio was highest (0.11) in 2010 and lowest (0.03) in 2008. Morinda Cooperative Sugar Mill Limited, Morinda The current ratio of the mill was found increasing from 2.96 to 8.52 and showing fluctuating trend during the study period. But the ratio was found to be more than the standard ratio of 1:1 in all the study period. It is clear from the Table 4.26 that the mill had better liquidity position to meet the short-term debt obligation when they become due. Nevertheless, the Quick/Acid test ratio was found less than norm ratio in all the periods. This revealed that the mill has failed to equalize its liquid liabilities to liquid assets. It has decreased from 0.79 in 2010 to 0.16 in 2008. It implies that the current asset of the mill depend on its inventory. The cash ratio was found varying over the period under study. It was highest at 0.47 in 2010 and lowest at 0.09 in 2008 which revealed poor cash assets position of the mill. Therefore, the results of the liquidity ratios revealed that the cooperative sugar mills have poor liquidity position to meet their short-term debt obligation when they become due. Comparison of Financial Ratios between the Private and Cooperative Sugar Mills The comparison between private and cooperative sectors was studied for financial ratios and is discussed as under: Profitability ratios The comparative study was followed between the two sectors on profitability ratios to determine efficient and financially sound sector in the operation of sugar mill. The perusal of Table 4.27 exhibit that the two sectors have significant difference on account of gross, operating, pre-tax and net profit margins. The non-significant difference between the two sectors was observed for returns on assets, equity and capital employed. The average gross profit margin for private and cooperative sectors was estimated at 19.19 and 1.37 per cent respectively. This showed that the private sector has higher gross profit margin revealing more efficient management in per unit production of sugar and in controlling production cost than the cooperative sector. The operating profit margin of the private sector was found to be higher (14.42 per cent) than that of the cooperative sector (-3.16 percent). This revealed that 95 the private sector have good control over the operating expenses indicating low-cost operation of the mill. The private sector had higher (5.61 per cent) pre-tax profit margin than the cooperative sector (-5.73 per cent) indicating efficiency of the private mills to keep low operating cost. This further indicates that private sector was heading towards higher profit in the process of conversion of sugarcane into sugar. The net profit margin is the profit left with the shareholder after meeting all the expenses in the operation of the sugar mill. It was found to be higher in private sector (3.65 per cent) than the cooperative sector (9.94 per cent). This brings into light that private sector was more efficiently managed in terms of cost structure, production and higher margin of safety. Nevertheless, the two sectors were not differing on the rate of returns on investment. At the overall, the private sector was more efficient in the utilization of their resources in generating profit. Table 4.27: Comparison of profitability ratios of private and cooperative sector sugar mills in Punjab (Per cent) Particulars t-values P-values Averages of Averages of private sugar mills cooperative sugar mills Gross profit margin 19.19 (1.413) 1.37 (4.769) 3.583** 0.002 Operating profit margin 14.42 (1.583) -3.16 (4.732) 3.524** 0.002 Pretax profit margin 5.61 (1.527) -5.73 (4.872) 2.222* 0.037 Net profit margin 3.65 (1.481) -9.94 (5.264) 2.485* 0.021 Returns on assets 2.61 (1.016) -0.36 (1.960) 1.346NS 0.192 Returns on equity 10.20 (3.971) 2.62 (11.781) 0.609NS 0.549 Returns on capital employed 3.19 (1.281) 3.84 (6.837) -0.093NS 0.926 Figures in the parentheses indicates standard-error ** and *significant at one and five percent level respectively NS: Non-significant Operating performance or efficiency ratios The comparative analysis of operating performance of the sugar mill under private and cooperative sectors is presented in Table 4.28. The results showed that the total assets turnover ratio and inventory turnover ratio of the two sectors differ significantly. The total assets turnover ratio was significantly higher in cooperative sector while inventory turnover ratio was higher in private sector. The total assets turnover ratio of the private and cooperative sectors was worked out to be 0.631 and 1.132 respectively. The sugar mills under cooperative 96 sector were managing their total assets efficiently and effectively in converting it into revenue while the private sector was operating below their full capacity. The inventory turnover ratio of private sector was estimated to be 1.853 which higher than that of cooperative sector (1.234). It indicates greater efficiency of inventory management by the private sugar mills. Table 4.28: Comparison of operating performance/efficiency ratios of private and cooperative sector sugar mills in Punjab Particulars Averages of private sugar mills Averages of cooperative sugar mills t-values Pvalues Fixed assets turnover ratio 1.590 (0.202) 1.948 (0.213) -1.221NS 0.235 Total assets turnover ratio 0.631 (0.061) 1.132 (0.327) -2.260* 0.034 Working capital turnover ratio 1.961 (0.173) 1.861 (0.309) 0.282NS 0.781 Current asset turnover ratio 1.189 (0.133) 1.044 (0.136) 0.763NS 0.454 Inventory turnover ratio 1.853 (0.127) 1.234 (0.594) 2.904** 0.008 Debtor turnover ratio 1.187 (0.131) 2.368 (1.152) -1.019NS 0.319 Figures in the parentheses indicates standard-error ** and *significant at one and five percent level respectively NS: Non-significant The low inventory turnover ratio in cooperative sector was mainly due to stringent government intervention and restriction in the disposal of sugar. The sugar mills were not free to sell the stock of finished goods according to their financial needs. This often makes the sector to carry huge stock of finished goods continuously for a longer period and leads to poor management of inventories. The other turnover ratios that signifies operating performance was found to be indifference between the two sectors. Solvency ratio of sugar mills in Punjab The solvency ratio of private and cooperative sectors was compared and is presented in Table 4.29. The result indicated that there was a significant difference in debt-equity ratio between the two sectors. The ratio (2.505) in the private sector was found to be higher than cooperative sector (1.686). The result revealed that the sugar mills in private sector have greater claim of creditors than the owners indicating higher leverage for financing the mill’s operation and facing less degree of protection against debt obligation. The lower debt-equity ratio of cooperative sector indicated that the mills were largely dependent on internal sources of finance more efficiently and effectively to maximize the profitability. 97 Table 4.29: Comparison of solvency ratios of private and cooperative sector sugar mills in Punjab Particulars Debt-equity ratio Standard Errors Averages of private sugar mills 2.505 -0.183 Averages of cooperative sugar mills 1.686 -0.185 t-values 3.149** P-values 0.005 ** and *significant at one and five percent level respectively NS: Non-significant Liquidity ratios of sugar mills in Punjab The perusal of Table 4.30 indicated comparative study of liquidity ratios for private and cooperative sectors. The results showed significant difference in Acid/Quick test ratio between the two sectors. The private sector had higher (0.928) Acid test ratio than cooperative sector (0.406). It shows that the sugar mills under private sector have better liquidity position to meet short-term current liabilities than the sugar mills under cooperative sector. This was due to dumping of inventories for longer period of time in cooperative sector. The current and cash ratio were not showing significant differences between the two sectors. Table 4.30: Comparison of liquidity ratios of private and cooperative sector sugar mills in Punjab Particulars Averages of private sugar mills Averages of cooperative sugar mills t-values P-values Current ratio 2.768 (0.319) 3.523 (0.719) -0.961NS .347 0.928 0.406 4.936** .000 (0.092) (0.525) 0.250 0.165 0.227NS 0.227 (0.052) (0.044) Acid / Quick test ratio Cash ratio Figures in the parentheses indicates standard-error ** and *significant at one and five percent level respectively NS: Non-significant Therefore, it can be concluded from the results that financial performance of the sugar mills under private and cooperative sectors was not sound. The financial position of the sugar mills had been deteriorating over time which was more pronounced in cooperative sector. Hence, proper and efficient management of assets and liabilities is needed to check further deterioration of financial position of the sugar mills. 98 Constraints Perceived by the Cane Growers and the Sugar industry The various constraints faced by the cane growers were studied for the selected respondents of the study area in Punjab. In order to have indebt knowledge about the problems in sugarcane cultivation, information about the cane growers needs to be studied. Socio-economic aspects of the respondents The socio-economic aspects of the respondents determine the type and nature of their livelihood as well as their social life. It helps in making sure that both women and men of every socio-economic group in a community or a particular location have the opportunity to participate in a decision making process. The socio-economic analysis and focus group helps in separating groups of people from different socio-economic categories by wealth, occupation, farming experience, age, ethnicity, education, marital status. Socioeconomic studies by Wegener (1997) revealed that it was often necessary to ascertain, information about the respondent and their associated families. This was because the information will provide good understanding of the characteristic of the sugarcane farmers. The socio-economic characteristic of the cane growers was studied with respect to their age, educational background, and occupation, farming experience, family size, source of income and farm size. Age of the respondent The results presented in Table 4.31 showed distribution of the respondents according to their age. The majority of the respondents (57.33 per cent) who were engaged in the sugarcane cultivation fall into the age group of 43 to 57 years. Table 4.31: Distribution of the respondents according to age in Punjab (Number) Category (Years) Frequency Percent respondent < 43 20 26.67 43- 57 43 57.33 57 12 16.00 Total 75 100 This could be considered as productive age group. This is followed by those in the age group of less than 43 years which constituted 26.67 per cent of the total respondents, while the remaining 16 percent of the respondents fall into the age group of greater than and equal to 57 years. Haruna and Kushwaha (2003) in their study opined that age group ranging from 30-50 years is the active and productive age group which is important for the processors to optimally utilize their labour for maximum productivity. 99 The analysis further revealed that the minimum group of the respondents was 30 years while the maximum was 70 years. Therefore, the sample famers in the study area were mostly medium age group and hence in productive age. This age group of farmers was more innovative and active in the adoption of new production techniques and mechanization in sugarcane cultivation. Girei and Giroh (2012) reported that this age group of the sugarcane farmers may have much energy to work for a longer period of time. The younger and middle age farmers were more active in the adoption of new farming techniques and always willing to change for better than the older ones who are somehow conservative, adamant to change and vulnerable to change involving the adoption and application of modern farming implements and other technologies. Educational level The educational level of the farmers has direct impact on the perception and understanding of the activity in the adoption of new techniques and any changes in the existing farming system. The present study analyzed the educational status of the sample cane growers and the results are presented in Table 4.32. Table 4.32: Distribution of the respondents according to educational level in Punjab (Number) Category Frequency Percent respondent Illiterate 1 1.33 Primary (1-5 class) 10 13.33 Middle (5-8 class) 9 12.00 High school 35 46.67 Higher secondary 8 10.67 Graduate 10 13.33 Post-graduate 2 2.67 Total 75 100 It was found that all the sample farmers were literate and majority of them (51.66 per cent) had an education up to high school level. The results also show that 16.67 and 15 per cent of the respondent were educated up to graduation and primary level. While 8.33, 6.67 and only 1.67 per cent of the total respondents have higher secondary, middle and post graduation education respectively. The study revealed that all the farmers in the study area were literate and in addition majority of the respondents was high school educated and graduated respectively. Hence, mobilization and sensitization of the sugarcane farming in the study area could be easy because flexibility in their perception and ability to decide with minimum guidance will impact positively in their livelihood. 100 Occupation The occupation of the respondents in the study area was studied and the results are presented in Table 4.33. It was found that 93.33 per cent of the respondents were absorbed in agricultural and allied activities while 6.67 per cent of the respondents in non-agriculture. It can deduced from the results that majority of the farmers devote their time in crop cultivation and animal rearing. Table 4.33: Distribution of the respondents according to occupation in Punjab (Number) Occupation Frequency Percent respondent Agriculture and allied activities 70 93.33 Non-agriculture 5 6.67 Total 75 100 Income level The income of the farmers enhances a farmer’s ability to farm. High income of the farmers has a higher probability to adopt improved sugarcane varieties and go for mechanization as the problem of labour scarcity prevails in the state. The distribution of the respondents based on income level is presented in Table 4.34. Table 4.34: Distribution of the respondents based on income level in Punjab (Number) Frequency Percent respondent < 6.33 60 80.00 6.33 to 12.67 11 14.67 12.67 4 5.33 Total 75 100 Income level (`lakh) The results show that majority of the farmers (83.33 per cent) in the study area have annual income less than `6.33 lakh. This was followed by seven and three per cent of the farmers having annual income of `6.33 to `12.67 lakh and more than `12.67 lakh respectively. Therefore, the analysis of the results revealed that most of the famers were having less annual family income. This brings hindrance in mechanization of the sugarcane farming and could not able to adopt new techniques to improve the production 101 of crop. On other hand, low family income of the farmers indicates low standard of living and less credit worthiness of the farmers. Family size The distribution the respondents based on family size is presented in Table 4.35. The results show that majority of the respondents (55 per cent) has a family size between three to five persons, followed by those with the family size greater than five persons constituting 43.33 per cent. Table 4.35: Distribution of the respondents according to family size in Punjab (Number) Size Frequency Percent respondent <3 1 1.33 3 to 5 41 54.67 5 33 44.00 Total 75 100 Similarly respondents with family size less than three persons constituted only 1.67 per cent of the total respondents. Family size in traditional agriculture determines the availability of labour depending on the type of activity to be performed. Therefore, the analysis of the results revealed that some of the respondents use family labour. Hence most of the respondents have labour problem as much it could not be supplied within the family. Welsh (1991) in his study stressed that a farmer incurs less production cost if family labour is being fully utilized for farm production. Operational holding The distribution of respondents based on operational holding is exhibited in Table 4.36. The results show that majority of the farmers in the study area were operating on 2.0-4.0 hectares of land that come under the medium famers (49.33 per cent). Table 4.36: Distribution of the respondents according to operational holding in Punjab (Number) Operational holding Frequency Percent respondent (hectares) Marginal 1 1.33 Small 2 2.67 Semi-medium 17 22.67 Medium 37 49.33 Large 18 24.00 Total 75 100 102 This was followed by large farmers constituting 24.00 per cent for owned land and semi-medium farmers (22.67 per cent). There were meager 2.67 and 1.33 per cent of respondents under small and marginal farmers. Experience in sugarcane production The person who could gain experience in sugarcane production and cultivation pattern enhances in specialization in cane production and by implication will help to reduce unemployment and poverty among the respondents. The perusal of Table 4.37 shows the distribution of the respondents based on an experience in sugarcane production. It was found that 38.33 per cent of the respondents gained an experience of between 15-22.5 years in sugarcane production followed by those with experience greater than 22.5 years, constituting 31.67 per cent. Also, 23.33 and 6.67 per cent of the respondents had experience in sugarcane production of between 7.5-15 and less than 7.5 years respectively. The results revealed that farmers Therefore, it can be deduced from the analysis that the respondents have keen interest and was gradually increase in sugarcane production as shown by the level of experience recorded in Table 4.37. Table 4.37: Distribution of the respondents based on experience in sugarcane production Category (years) Frequency (Number) Percentage < 7.5 7 9.33 7.5-15 20 26.67 15-22.5 26 34.67 22.5 23 30.67 Total 75 100 Contact with cane experts The distribution of the respondents based on the contact with cane experts is presented in Table 4.38. The results show that majority of the farmers (80.00 per cent) have regular contact with the cane experts of nearby mills and experts of Punjab Agricultural University (PAU), Ludhiana. Table 4.38: Distribution of the respondents based on contact with cane experts (Number) Category (Years) Frequency Percentage Yes 60 80.00 No 15 20.00 Total 75 100 103 The percentage of the respondents that were not having contact with the can experts was found to be 20.00 per cent. Therefore, the analysis of the results revealed that majority of the farmers was aware about package and practices of cane production adopted in research station and recommendations of PAU in the cultivation of sugarcane. Constraints Perceived by the Respondents in Sugarcane Cultivation Sugarcane is an annual crop which remains in the field for almost a year before harvesting. The crop does not yield any returns during this period. But most of the sugarcane growers were in immediate need of money. The farmers faced various kind of constraints right from the time of sowing till the marketing of the crop. No doubt, the farmers are wellexperienced in the cultivation of sugarcane. Nevertheless, either due to lack of scientific knowledge or ignorance of the ongoing information about the crop, the state witnessed a decline in production of sugarcane in recent period. As such some of the cooperative sugar mills have closed down, due to inadequate sugarcane supply to the mill. Moreover, the area under sugarcane has been squeezed over years and most of the farmers have allocated their area to wheat and paddy cultivation. Sugarcane is only crop which is under the control of government for processing, pricing and its disposal. Any change in the government policy affects the operation of the sugar mills as well as supply of cane to the mills to a large extent. Therefore, the sugarcane growers who supply their produce to the sugar mills were interviewed to ascertain the problems faced by them in cultivation of sugarcane. Their points of view regarding different constraints were analyzed and discussed as under. Technological constraints The constraints perceived by the sugarcane growers regarding the technology of sugarcane production are depicted in Table 4.39 and discussed under the following sub-heads. Seed and seed treatment At the overall, 48 per cent of the sugarcane growers were using the recommended rate of seed and spacing. It was estimated that 26.67 per cent of the farmers in cooperative sugar mill were following the recommended rate of seed and spacing while the figure for private sugar mill was estimated to be 70 per cent. As per recommendation the seed should be treated before sowing. The results presented in Table 4.39 revealed that 51.67 per cent of the farmers treated seeds before sowing. It was found that 26.67 per cent farmers in cooperative sugar mill treated seeds. The figure for private sugar mill was estimated to be 76.67 per cent. It was noticed that the reasons for not treating the seeds were ignorance about treating the cane sets and high cost of chemicals that were used in treatment. Seed sowing time Most of the farmers in the study area were not sowing sugarcane in the recommended time. The late sowing of sugarcane reduces sucrose content of the cane which lower the 104 recovery per cent of the crop. The perusal of Table 4.39 depicts that 50 per cent of the farmers have not sown sugarcane in time. The segregation of the results revealed that 60 and 40 per cent of the farmers of private and cooperative sugar mill respectively have not sown the seeds in time. The important reason for not sowing sugarcane in the recommended time as reported by 26.67 per cent of the farmers was unavailability of land as the same land was used to grow other crops such as wheat, paddy, maize, etc. during that time. The figures for cooperative and private sugar mill were estimated to be 16.67 and 36.67 per cent respectively. The other important reasons which have been reported by the farmers were lack of assured irrigation, insufficient moisture in the soil and scarcity of labour. The lack of assured irrigation and scarcity of labour was reported by 15 and 11.67 per cent of the farmers which caused delayed in sowing of the crop. Use of old variety of sugarcane The sugarcane growers were interviewed to ascertain the reasons for using the old variety of sugarcane. At the overall level, 58.33 per cent of them used old variety seeds such as CoJ 64, CoJ 767, CoJ 1181, and Co 1148. The use of old variety of cane seeds was reported by 86.67 and 30 per cent farmers from the cooperative and private sugar mill respectively. On interviewing the farmers, it was noticed that low income of the cane growers, ignorance about the release of new variety and no released of new variety of sugarcane were the main reasons for using old variety of sugarcane. It was reported by 26.67 per cent of the total respondents and 53.33 per cent of the farmers from the private sugar mill that no release of new variety of cane having high sugar content and give higher yield was also other an important reason for that compelled them to used the old variety of sugarcane. Further, 30 per cent cooperative sugar mill farmers believed that low income was a reason for using an old variety of sugarcane seed. It can be noted that usage of old variety of sugarcane hinder sugarcane production leads to degradation of sugar content and decreases the recovery per cent. Fertilizers The results of the study indicate that only 51.67 per cent of the farmers applied recommended doses of fertilizer. The recommended doses of nitrogen by the PAU are 60 kg per acre (130 kg per acre of urea) for a new crop and 90 kg per acre (195 kg per acre of urea) for ratoon crop. The application of phosphorus recommended as per the soil fertility status (Anonymous, 2009). While 48.33 per cent of the farmers used lower than the recommended dose of fertilizer. The figures estimated for cooperative and private sugar mill that used recommended dose of fertilizer were 63.33 and 40 per cent respectively. The reasons for not following the recommendations were high price of fertilizers, its unavailability and lack of credit. An increased in price of fertilizer leads to raise the cost of cultivation of sugarcane. And the other important reasons were found to be ignorance about the recommended dose and unsuitability of recommended dose of fertilizers. The importance of fertilizers was identified 105 by Chidoko et al, (2011) as an input in sugar cane farming but farmers do not always get it when they need it. Sometimes they apply the fertilizers long after it was due or in short quantities because of its unavailability or its high price. Without adequate fertilization and timely applications at cutting at four weeks and at eight weeks productivity cannot be improved. Irrigation Irrigation was one of the important inputs which enhance the productivity of sugarcane. It was found that 51.67 per cent of the farmers have not been confined to recommended number of irrigation, of which 63.33 and 40 per cent of the farmers of private and cooperative sugar mills respectively. It was mentioned in the report of PAU for the year 2009-10 that the efficient number of the irrigation to be followed was 15-18 times. It was recommended that the crop should be irrigated at 7 to 12 days interval during April into June and a month interval during November to January (Anonymous, 2009). The reasons for not applying recommended number of irrigations were mainly due to non-availability of irrigation water in time as reported by 38.33 per cent and high charges of electricity by 8 per cent of the farmers. Girei and Giroh (2012) reported that inadequate water supply was most important factor which militates against the high yield. Since, the sugarcane cultivation highly dependent on water availability especially during growing period, if these constraints are not addressed, definitely the farmers output could not give the desired output and hence will result in low yield and eventually may occur losses in the long run. The water supply should not only be readily available and timely but should be subsidized the fuel rate by the component so as to sensitize the farmers to participate more actively and effectively. In addition, the duration of electricity supply per day need to be lengthen. Interculture operation Intercultural operation in sugarcane cultivation increases the productivity and production of the cane. The results revealed that intercultural operation in sugarcane cultivation was not followed in the study area indicated by the response of 63.33 per cent of the farmers. The analysis farm per hectare indicated that 83.33 and 43.33 per cent of the farmers of private and cooperative sugar mill respectively were not following the intercultural operation. However, high cost of labour was perceived by 58.33 per cent of the farmers as the main reason for not indulging in intercultural operation. The other reasons such as low income of the cane growers and non-availability of labour were also reported as constraints by the farmers. The high price of labour and its unavailability made the intercultural operation expensive and thus, perceived as unprofitable by the farmers. Plant protection measures The proper plant protection measures such as application of herbicides, weedicides, insecticides, pesticides, etc. in time with accurate dose enhance the growth and productivity of 106 sugarcane. It was found that 53 per cent of the farmers did not adopt the proper plant protection measures. The important reasons were found to be paucity of labour, high cost of chemicals and its non-availability, lack of knowledge about the measures and lack of timely identification of diseases or pests. However, paucity of labour and high cost of chemicals were the main reasons for improper plant protection as it was constituted by 25 and 23.33 per cent farmers respectively. Table 4.39: Technological constraints faced by the respondents of the sugar industry in Punjab (Per cent) Particulars Do you use the recommended rate of seed and spacing? Do you treat the seed before sowing? If No, what are the important reasons? Ignorance/do not know High cost of inputs Reasons for late sowing Land not free on time Lack of assured irrigation Insufficient moisture in soil Labour scarcity Reasons for using old variety Low income Unaware of new variety released No new variety released Reasons for not applying recommended doses of fertilizerNot known Recommendation not suitable Costly fertilizer Unavailability of fertilizer Lack of money Reasons for not applying recommended number of irrigation Sources not available on time High charges Not sufficient electricity Reasons for not doing inter-cultural operations Costly labour Low income Labour not available Reasons for not adopting proper plant protection method Lack of knowledge Lack of timely identification of diseases/pests Non-availability of chemicals High cost Paucity of labour Reasons for improper harvesting of cane High cost of labour Non-availability of labour Unskilled labour to undertake the job Reasons for poor management of ratoon crop Non-availability of labour for operation Time taking in filling the gappy area Large number of labour required for trash mulching Plants are more prone to disease 107 Cooperative sectors (n1=30) 26.67 26.67 Private sectors (n2=30) 70.00 76.67 Overall (n=60) 16.67 16.67 40.00 16.67 30.00 6.67 3.33 86.67 30.00 63.33 10.00 20.00 23.33 26.67 40.00 - 8.33 8.33 50.00 26.67 15.00 3.33 11.67 58.33 16.67 18.33 26.67 51.67 5.00 5.00 31.67 18.33 13.33 51.67 33.33 10.00 6.67 43.33 40.00 26.67 3.33 40.00 13.33 6.67 6.67 20.00 23.33 63.33 33.33 43.33 6.67 83.33 70.00 6.67 3.33 60.00 36.67 20.00 30.00 3.33 36.67 53.33 40.00 10.00 43.33 13.33 63.33 43.33 6.67 83.33 76.67 20.00 66.67 3.33 16.67 26.67 26.67 83.33 23.33 40.00 43.33 86.67 63.33 63.33 46.67 33.33 48.33 51.67 38.33 8.33 3.33 63.33 58.33 13.33 11.67 53.00 8.33 3.33 11.67 23.33 25.00 73.33 28.33 41.67 25.00 85.00 66.67 31.67 26.67 18.33 Not profitable Reasons low productivity of sugarcane Inability of to apply the necessary farm inputs Solely dependent from rain water for irrigation High cost starting capital and production inputs Lack of technology/knowledge and facilities on proper land preparation technique and methods Labour not available 10.00 46.67 10.00 16.67 20.00 3.33 63.33 6.67 46.67 13.33 6.67 55.00 3.33 5.00 31.67 16.67 - 6.67 3.33 Improper harvesting of cane It was observed that mechanization in sugarcane cultivation particularly harvesting was far behind. In the study area sugarcane was harvested manually. The farmers experienced that improper harvesting of cane gave rise to lower production which made them to attain low returns. The results presented in Table 4.39 highlighted that the reasons for improper harvesting were high cost of labour, not easily availability of labour when needed and if available the labour were unskilled to undertake the job. All the reasons were equally important but non-availability of labour was found to be the main reason as it was perceived by 41.67 per cent of the farmers. The same finding was reported by Murali and Balakrishina (2012) and Kaur and Saran (2011). The figures estimated for both cooperative and private sugar mills were 43.33 and 40 per cent respectively. Poor management of ratoon crop The cultivation of ratoon incurred lower cost; therefore, proper management of ratoon ensured higher returns to the farmers than the planted crop. The results presented in Table 4.39 revealed that the ratoon has been poorly managed which was perceived by 85 per cent of the farmers. It was estimated that 83.33 and 86.67 per cent farmers from cooperative and private sugar mills respectively reported poor management of the ratoon crop. The main reason was found to be non-availability of labour in time for its operation as it was reported by 66.67 per cent of the farmers. The other important reasons were taking a longer time period in filling gappy area (31.67 per cent of the farmers) and requirement of large number of labour for trash mulching (26.67 per cent of the farmers). Low productivity of sugarcane The low productivity of sugarcane in the study area was also an important problem face by 55 per cent of the farmers and, 46.67 and 63.33 per cent farmers from cooperative and private sugar mill respectively. The various reasons were realized by the farmers; however, high cost incurred in the starting of capital and production inputs (31.67 per cent of the respondents) was the main important reason. Arulraj (1998) reported in his study that the constraint affecting sugarcane planting productivity was high fertilizer cost. The other important reasons were lack of technology or knowledge and facilities on proper land preparation technique and methods. Abdel-Maksoud and El-Sharabassy (2007) observed that 108 sugarcane production problems perceived by the farmers and extension personnel were spread of different kinds of weeds and insects, weak role of agricultural extension, shortage and high costs of fertilizers and labor, high costs of production, insecticides and irrigation. The different constraints faced by the farmers were studied and the important reasons were analyzed. It was found that scarcity of labour and its high wage rate has been the important reasons for the constraints. The same finding was reported by Rao (2012), who stated that the labour shortage was the most important constraint in sugarcane cultivation during crucial operation. Socio-economic constraints The socio-economic constraints perceived by the respondents are exhibited in Table 4.40. The results revealed that scarcity of labour and non-availability of labour when needed was the most important socio-economic constraints which were reported by 83.33 per cent of the cane growers. The high cost of inputs incurred in sugarcane production was another important constraint perceived by 71.67 per cent of the respondents. The said constraint was reported by 56.67 and 86.67 per cent farmers of cooperative and private sugar mills respectively. On an average, 45 per cent of the farmers were not getting payment in time. It was found that 90 per cent farmers of cooperative sugar mill were not getting payment timely. But, cent per cent farmers of private sugar mill reported that they received payment in time. Ramaiah (2011) also reported that the farmers after supplying the cane to the factory have to wait for 15 days or more to receive the payment that leads the farmers to heavy financial hardship. Some farmers under cooperative, who were in dire need of finances seek to divert their cane to other mills or organization like gur and khandsari. The results presented in Table 4.40 further indicated that 61.67 per cent farmers revealed sugarcane production to be a profitable enterprise. Similarly, 56.67 and 66.67 per cent farmers of cooperative and private sugar mill respectively were of the opinion that sugarcane production is profitable. It was reported that 43.33 per cent of the respondents revealed that the price of sugarcane fixed by the state government was not remunerative. The farmers want the price of the sugarcane to be increased with respect to the competing crops (rice and wheat). Wawire (2005) identified the complaints of the cane farmers as low price of sugarcane. The low cane price translates to reduced profit margins for the farmers. Farmers demanded that as price of sugar and farm inputs rise there should be an equal adjustment in cane prices. In addition, the cultivation of sugarcane was not fetching enough margins to the cane growers. This was evident from the result in Table 4.4.10 that only 16.67 per cent of the total respondents were getting enough margins from the sugarcane cultivation. Similarly, the figures estimated for cooperative and private sugar mill were 20 and 13.33 per cent farmers 109 respectively. Besides, poor linkage with extension agencies (perceived by 20 per cent) and lifting the sugarcane by the mills not in time (perceived by 13.33 per cent) were the other constraints faced by the farmers. 110 Table 4.40: Socio economic constraints perceived by the respondents of the sugar industry in Punjab (Per cent) Cooperative sectors (n1=30) Particulars Private sectors (n2=30) Overall (n=60) Is sugarcane production a profitable enterprise? 56.67 66.67 61.67 Do you think that price of sugarcane is not remunerative? 36.67 50.00 43.33 Are you getting enough margin of profit for continuing sugarcane cultivation? 20.00 13.33 16.67 Labours are not readily available when required 73.33 93.33 83.33 The mill lift the sugarcane in time 80.00 93.33 86.67 Mill pay dues in time 10.00 100.00 55.00 Inability of sugar factories to procure the produce 36.67 63.33 50.00 High cost of inputs for sugarcane production. 56.67 86.67 71.67 Poor linkage with extension agencies. 13.33 26.67 20.00 Poor linkages with field/extension staff of mills 23.33 - 11.67 Infrastructural constraints The infrastructural constraints faced by the respondents are presented in Table 4.41. Most of the roads in the villages were connected with metallic road so there was smooth transportation of sugarcane to the mills. The study brings out complaints made by 40 per cent of the farmers that they were not getting inputs such as high yielding variety varieties, fertilizers, plant protection chemicals, etc. for sugarcane production in time and at local level. The high transportation cost impedes the regular and timely supply of sugarcane to the mills. Transportation has become a significant factor affecting the production costs of the commodities. The cost of transporting sugar cane from the farm gate to the mills was quite high, owing to the multiple transport facilities and time-consuming activities involved in the delivery process (Chetthamrongchai et al, 2001). This was mainly attributed to the prevailing mode of transportation which incurred higher cost. It was found that almost all the farmers (88.33 per cent) transported their products only by tractor. There was no other means of transportation through which it could reduce the transportation charges. It was reported, that the transportation charges were high which absorbed larger share of their income, by 61.67 per cent of the respondents. The other important infrastructural constraints were insufficient and untimely availability of electricity. Insufficient availability of electricity caused inconvenience which 58.33 per cent of the farmers were facing in the 111 sugarcane cultivation while the figures estimated for cooperative and private sugar mills respectively were 80 and 36.67 per cent farmers. The untimely availability of electricity hindered the cane production, as the cane crop is water loving crop, and requires timely irrigation. This hindrance was faced by 41.67 per cent of the cane growers in the study area. Moreover, the available source of irrigation was reported unsatisfactory by 65 per cent of the cane growers and they wanted the source to improve and expected there should be regular supply of electricity. Table 4.41: Infrastructural constraints faced by the respondents of the sugar industry in Punjab (Per cent) Cooperative sectors (n1=30) Particulars Private sectors (n2=30) Overall (n=60) Village connected with i. Metallic/Pucca road 33.33 93.33 63.33 ii. Kacha road 40.00 6.67 23.33 Are the inputs available locally in appropriate time? 66.67 53.33 60.00 Tractor is the only means of transportation of sugarcane to the mill 76.67 100.00 88.33 High 43.33 80.00 61.67 ii. Low 43.33 16.67 30.00 10.00 5.00 Do you think transportation charges are i. Electricity availability is i. Sufficient ii. Insufficient 36.67 80.00 58.33 iii. Timely 6.67 10.00 8.33 iv. Untimely 46.67 36.67 41.67 Unsatisfied source of irrigation 66.67 63.33 65.00 If no, regular supply of electricity is expected 26.67 70.00 48.33 Is there any provision for extension programmes like information support, TV, computer, SMS, Training, etc.? 83.33 10.00 46.67 Harvesting of cane not done by mill 80.00 83.33 81.67 112 The provision of extension programmes such as information support, television, computer, SMS, trainings, etc. were received by 46.67 per cent of the farmers. The cane growers should have a regular contact with the extension personnel for the update of the knowledge. The extension contact of sugarcane grower had a significant contribution with the variation of technologic gap in adoption of sustainable cultivation of sugarcane. Frequent contact with extension experts of sugarcane factory was attributed to the fact that these were the main liaison persons between farmers and the sugar factories. They are the main source of information regarding availability of inputs like planting material, fertilizers, harvesting time, etc. (Maraddi, 2006). Lastly, 81.67 per cent of the farmers viewed that the harvesting of cane should be done by the sugar mill so that losses accrued during harvesting could be minimized through mechanic harvesting. The same finding was reported by Marathe (2009). Financial constraints The financial constraints faced by the respondents of the sugar industry in Punjab are exhibited in Table 4.42. The results depict that the credit facilities provided by the sugar mills were enjoyed by 78.33 per cent of the sample cane growers. The proportion of farmers who were getting such facilities has been 100 per cent in private sugar mill and 56.67 per cent in cooperative sugar mill. The major sources of credit were cooperative societies and commercial banks which have been reported by 38.33 and 21.67 per cent respectively. It was also found that 50 and 26.67 per cent farmers from cooperative and private sugar mill depend on cooperative societies for their credits requirement. While 16.67 and 33.3 per cent of the farmers for cooperative and private sugar mills finds that the availability of credit was adequate .it was found that 15 per cent of the farmers reported timely availability of credit. The figures for cooperative and private sugar mills were found to 6.67 and 23.33 per cent. The 40 per cent of the farmers revealed that rate of interest was very high which make them to snag in proceeding for credit to the banks. Further, the results presented in Table 4.42 indicate that 63.33 per cent of the farmers know about Kisan Credit Card and 43.33 per cent of the farmers possess them. But 3 per cent of the total respondents and 26.67 per cent of the farmers from cooperative sugar mill were taking loan through this card. While none of the famers of private sugar mills availed the advantage of Kisan Credit Card. The reason cited for not availing the facility of Kisan Credit Card was the lengthy procedure in getting loan. However, 10 per cent of the farmers feel that they do not require credit through the Kisan Credit Card. Besides, the farmers revealed that they do not have much knowledge about the Kisan Credit Card facility and its importance and were reluctant to take any loan through this card. The interview of the farmers revealed that the financial problems either for subsistence or for the farm operations was compounded by delayed payment of cane by the mills. The same finding was reported by Wawire (2005). 113 Table 4.42: Financial constraints faced by the respondents of the sugar industry in Punjab (Per cent) Cooperative sectors Private sectors Overall Particulars (n1=30) (n2=30) (n=60) 56.67 100.00 78.33 i. Co-operatives 50.00 26.67 38.33 ii. Commercial Bank 40.00 3.33 21.67 16.67 33.33 25.00 ii. Timely 6.67 23.33 15.00 Rate of interest is high 53.33 26.67 40.00 Know about Kisan Credit Card 66.67 60.00 63.33 Possess Kisan Credit Card 50.00 36.67 43.33 Loan taken from Kisan Credit Card 26.67 - 13.33 Lengthy procedure 6.67 3.33 5.00 ii. Credit not required 6.67 13.33 10.00 Credit facilities given by sugar mill If no, what is your major source of credit? Do you think credit is available i. Adequately If no, what is the reason? i. Marketing constraints During the disposal of sugarcane farmers faced various problems. The marketing constraints faced by the respondents of the sugar industry are presented in Table 4.43. The cane growers supplied their products to the mills. Though no middlemen were involved in the marketing of sugarcane, yet the farmers (63.33 per cent) were not satisfied with the prevailing marketing system. They have to wait for longer period for their turn with loads of sugarcane at the mill’s gate. Sometimes, they have to stay overnight to unload their produce. Moreover, there were no regulated markets for sugarcane similar to that of wheat and rice. However, only 11.67 per cent of the farmers revealed that there should be regulated market for sugarcane in Punjab. The sorting of crop based on their shape and size before sale has enables the farmers to get higher price for their produce. Only 33.33 per cent of the farmers sorted the cane before selling. The reason for not sorting the cane was indifference in the price of sorted and unsorted sugarcane as reported by 26.67 per cent of the respondents. The figures estimated for cooperative and private sectors sugar mill were 50 and 3.33 per cent respectively. Nonavailability of labour for sorting was another reason which was reported by 15 per cent of the farmers. The other important reasons for not grading cane were purchase of cane by the mills 114 based on maturing stage and no grading of sugarcane was operated in Punjab which was reported by five per cent. Table 4.43: Marketing constraints faced by the respondents of the sugar industry in Punjab (Per cent) Cooperative Private Overall Particulars sectors (n1=30) sectors (n2=30) (n=60) Satisfied with marketing facilities 56.67 70.00 63.33 If no, regulated market is expected 6.67 16.67 11.67 Sort the produce before selling 6.67 60.00 33.33 Price difference not much 50.00 3.33 26.67 Labour not available 26.67 3.33 15.00 Mill purchase sugarcane based on maturing stage 3.33 6.67 5.00 - 10.00 5.00 10.00 90.00 50.00 10.00 5.00 If no, why? No sorting of sugarcane in Punjab No availability of storage facility (cane and jaggery) Selling during lean season Unloading of sugarcane in the mill took longer time period 23.33 - 11.67 Discourteous behavior of mill workers. 3.33 6.67 5.00 Delay in Purchase of crops by mills 20.00 3.33 11.67 Availability of large quantity of non-mill able cane 20.00 13.33 16.67 The results revealed that 11.67 per cent of farmers reported that mills take longer period of time for unloading the cane. Discourteous behaviour of the mill workers, gate keepers and other administrative staffs of the mills were reported as one of the constraint faced by the farmers during unloading of sugarcane. It was found that five per cent of the farmers reported that the workers of the mill do not behave properly with them. The study was in line with the findings of Kaur and Saran (2011). The farmers claimed that the large quantity of sugarcane supply to the mills was unfit for processing due to immature cane reported by 16.67 per cent and 11.67 per cent of the farmers informed that the sugar mill delayed the purchase of sugarcane as disburse of quota slip to the farmers was late. 115 Constraints Faced in the Operation of Sugar Industry in Punjab The sugar industry in India is totally under the controlled of Central and State Government. Moreover, sugar is the only commodity where burden for purchase of cane and processing of sugar was borne by the producing industry and not by the government (Saraogi, 2010). The various constraints were discussed briefly under the following heads: Low sugar recovery The per cent recovery of the sugarcane determines the amount of sugar to be produced by the sugar mills. The study found that the per cent recovery of the sample sugar mills was lower as compared to the state average. It was estimated to be 8.76 and 9.69 per cent for cooperative and private sugar mill respectively. Upon analysis of the reasons for low recovery, it was found that poor quality of sugarcane which was used by the mills for processing leads to low recovery. The use of obsolete machines for processing and underutilization of machines was important reasons. In addition, climatic constraints such as chill temperature during harvesting and transportation of cane to the sugar mills results in low recovery of sugarcane. The Government fixed zonal prices on weighted average sugar recovery and simple average duration of the season (Somaiya, 1971). As such, the price of the cane will lower which in turns affect the acreage under sugarcane. Shortage of sugarcane supply Sugarcane was the only raw material used for sugar production in the country unlike other countries which uses sugar beet in the sugar industry. Irregular or decline in supply of sugarcane adversely affect not only sugar production but also cost of production. The mills official revealed that lower availability of cane has led to steep decline in the capacity utilization of the mills. This problem was localized to individual mill and industry as a whole. The declined in area under sugarcane leads to lower production of sugarcane which in turn brings shortage in supply of cane to the sugar mills. The cane growers in the study area have incurred a high cost in sugarcane production and at the same time margins were not realized by the farmers. The incentive to grow sugarcane is affected in the next season and hence, the farmers shift their area to paddy and wheat cultivation. Moreover, gap in communication of the cane growers with the sugar mill often leads to shortage of cane to the mills. Since, harvesting of cane by the farmers depends on the quota slip issued by the mills. Inability to pay arrears to the cane growers This was problem where shareholders, farmers of the mills and government policy makers were concerning about. The millers were not able to pay in time to the farmers for their cane. As such the farmers squeezed the area under sugarcane and shifted to paddy and wheat cultivation for which the price was assured and received in time. On the other side, the millers claimed that the price fixed by the state government was high and no parity is maintained 116 between the prices of the sugar and sugarcane. The SAP for sugarcane in Punjab was `230 per quintal and price for levy sugar was `1795 per quintal. However, the price for free sugar was `3500 per quintal which depends on the market force for demand and supply. In cooperative sugar mills, the cost of sugarcane incurred for the production of one quintal sugar was estimated to be `2625.57 (per cent recovery of 8.76). While in private sugar mill, the figure was work out to be `2373.58 (per cent recovery of 9.69). The reduction in sugar production also incorporated to the problems of mill’s inability to pay. Moreover, the excise duty imposed on the sugar mills was `97.85 per quintal for both levy and free sugar, which was reported to be high by the respective mills. Therefore, imposition of high tax on sugar makes the sugar mills unable to pay in time. In addition, irregular and slow inflow of funds to the sugar mills was another reason for untimely payment to the farmers for their products. Nevertheless, Nawanshahr Cooperative Sugar Mill was the only mill that paid the sale proceeds to the farmers in time who supply sugarcane. Low sugar production The sugar mills experienced the low sugar production in the period under study. It was estimated to be 2.63 lakh quintals in 2006 and declined to 2.05 lakh quintals in 2011 in case of the selected cooperative sugar mills. The figures estimated for private sugar mills for the above paid years were 4.22 lakh quintals and 5.63 lakh quintals respectively. The reasons for low sugar production were found to be the lack of supply of sugarcane and lower recovery of sugar. Further, it was revealed that obsolete technology used in sugar processing and increasing losses during the processing of sugar gave rise to low sugar production. Low level of profitability of the sugar mills Some of the sugar mills under cooperative sector in the state have been under liquidation. These could not afford the expenses for running the mills. The decline in profit of the sugar mills was the main reason. The low level of profitability was brought out by many factors such as under utilization of the capacity, low production of sugar, forced sale of the levy sugar at low price, poor quality of sugarcane used in crushing and shortage of labour. Non-viability of the sugar mills The excessive government interference on sugar mills operation often lead to nonviability of sugar mills. The policy of partial decontrol on sugar in which 10 per cent of the total sugar produced has to sold to the government as levy sugar. The remaining 90 per cent as free sugar has to be sold in the market. Further, the quota was imposed on the release of free sugar for the disposal in open market on monthly basis. The price for the free sugar has been highly fluctuated and price for levy sugar has been discounted by the government. 117 Therefore, the realization from both levy and free sugar has been low which in turn makes the mill financially non-viable. In sugar mills, either cooperative or private sectors, there has been no provision for investment on Research and Development for sugarcane production technology. Other problems Besides the above discussed constraints, the other operational constraints of the sugar mills were examined. The sample sugar mills produced only white sugar and its by-products such as bagass and molasses. There was no provision for subsidiary units like production of alcohol and co-generation plant which added more income of the mills. The huge funds were needed for the installation of the subsidiary plants which the mills could not be afforded. Moreover, there has been dearth for skilled and technical staffs. Limitation was that area under sugarcane covered by the particular sugar mills could not be increased as the zonal requirement has been fixed by the Central Government. This was one of the important reasons for shortage of cane supply. At the end the problems have intertwine relationship with each other which falls under string of Government control. 118 CHAPTER V A CASE STUDY FOR LIQUIDATED ZIRA COOPERATIVE SUGAR MILL LIMITED, ZIRA Introduction Indian sugar industry has been facing problems on supply of raw material, resource as well as infrastructures. Globalization has brought a number of opportunities but at the same time posed certain challenges before sugar industry. Most of sugar units in India utilize production capacity below 50 per cent. Low capacity utilization and inadequacy of raw material led to closer of 100 sugar factories in India. Mounting losses and decreasing networth of sugar factories have been responsible for sickness of sugar industry. Sickness in sugar industry has reached to an alarming proportion. Indian sugar industry has been cash striven for decades. Low cash inflow due to piling stocks lead to serious financial crisis and finally to closing down of the sugar factories. Sugar prices have been a political issue rather than economical issue. Many times it worsens economy of sugar factories (Pandey, 2007). The Punjab State Federation of Cooperative Sugar Mills Limited, Chandigarh, has under its purview, 15 Cooperative Sugar Mills and 3 distilleries in the State of Punjab. Out of these 15 Cooperative Sugar Mills, nine sugar mills at Ajnala, Fazilka, Bhogpur, Morinda, Budhewal, Batala, Gurdaspur, Nawanshahr and Nakodar are in running condition. The remaining six sugar mills at Patiala, Budhlada, Jagraon, Zira, Tarn Taran and Faridkot are under liquidation and three distilleries at Gurdaspur, Nakodar and Nawanshahr are laying closed (Anonymous, 2012). The sugar mills under liquidation has been mainly due to scarcity of raw materials and delayed payment of cane to the farmers. Among six liquidated sugar mills, Zira Cooperative Sugar Mill have been selected purposively for the case study. The Zira Co-operative Sugar Mill Limited is situated on NH 15 on Tarn Taran, Faridkot Road. The factory was located at a distance of five kilometer of town Zira. The mill was established in 1978 as one of the two units of Punjab Khand Udyog Limited registered on 3rd November 1977 under the Companies Act, 1956. The Zira Cooperative Sugar Mill was a cooperative society registered on 30th November 1987 under the Punjab Cooperative Society Act, 1961. The mill started crushing operation on 1st January 1981 for the first time during the crushing season of 1980-81. The approximate cost of the plant and machinery was `674.36 lakh. 119 The mill was set with a licensed capacity of 1250 TCD and started commercial production in 1980-81. The factory capacity was subsequently enhanced in 1989-90 by 2500 TCD with estimated cost of `8.00 crores. But due to financial and administrative problems, the expansion of crushing capacity extended till 1990-91 with increase cost of `1036.00 lakh. The capital of the mill has been shared different stakeholders such as Punjab Government, Sugarfed Punjab, Cooperative Societies and individual share holders including sugarcane growers. The Zira Cooperative Sugar Mill is the major industrial unit in the Zira subdivision of Ferozpur district, giving employment to about 600 persons directly and 1000 persons indirectly. It also provides subsidiary employment to transporters, contractors, and agricultural labour. There were 320 villages in the operational area of the mill. Even after the closing down of the mill, the staffs who worked under the factory, constituting 191 permanent and 269 seasonal members comprising of supervisors, clerical, skilled labour, unskilled labour, etc. were still on the factory rolls. The mill requires about 38 lakh tonnes of sugarcane annually to run on its full capacity. As per the data available from the factory, it was suggested that the capacity utilization was well above 100 per cent (maximum being 122 per cent) from 1984 to 1989 when the installed capacity was 1250 TCD. However, after the expansion of installed capacity, the capacity utilization remained below 100 per cent (minimum being 63.82 per cent in 1999-00). The maximum cane crushed by the factory was 31.82 lakh quintals in 1995-96. The sugar recovery was in the range of 8.5-9.0 with best recovery of 9.71 per cent in 1991-92. The mill was not getting sufficient quantity of sugarcane to run at its full capacity. Nonavailability of sufficient quantity of cane along with other economic factors such as delayed payment of cane to the farmers, inability to cover the cost of production, etc. give rise to the closing down of the sugar mill. The Zira Sugar Mill was closed by the government in 2004 and the mill has liabilities of more than `50 crore. The plant and machinery was lying idle and has not been overhauled ever since the factory has stopped operation. The growing incidence of sickness has been one of the persisting problems faced by the industrial sector of the country (Anonymous, 1989). The sickness of the sugar industry causes not only wastage of resources but also affect the growth of the Punjab industry. Analysis of Financial Health of the Mill The financial health of the mill was assessed from the various financial documents such as balance sheets, working results of the firm, etc. The Zira Sugar Mill has not become sick overnight. It took a year for a mill to become sick and roots of sickness could be visualized at an early stage in the life cycle of the mill. Therefore, the incidence of sickness 120 has passes through several stages from healthy stage to sickness stage. If sickness of the mill continues for several years without any treatment it may become chronic. The appropriate treatment should be given to mill at the initial stage so that the sickness must not go beyond the control. Hence, the various stages of sickness, symptoms and causes have been identified by analysis of financial ratios and economic parameters. Stages of sugar mill sickness The perusal of Table 4.44 brings forth the different stages of sickness occur in the Zira Cooperative Sugar Mill. Due to limitation of the data and related information, only few parameters have been considered for the study of different stages of the sickness. Stage-I (Normal/Healthy) The Zira Cooperative sugar mill was normal and healthy during a period ranging from 1980-81 to 1987-88. The average annual loss during this period was `30.70 with average production of 1.62 lakh quintal of sugar and 0.89 lakh quintals of molasses. The average annual capacity utilization of the mill was 96.54 per cent during the period. According to Bidani and Mitra, “A unit is called normal when all its functional areas like production, marketing, finance and personnel are functioning efficiently. Stage-II (Tending towards sickness) The Zira Sugar Mill starts tending towards the stage of sickness. The stage ranges from 1988-89 to 1995-96 with average annual loss of `234.15 lakh (Table 4.44). The average sugar and molasses production declined to 1.55 and 0.87 lakh quintal as compared to the production in Stage-I. The average capacity utilization of the mill was 82.86 per cent lower than that in Stage-I. The negative annual profit of the mill has been increased gradually. The stage conveys the warning signal for the mill which should be cautiously taken care of and close monitoring of the mill financial status should be taken up immediately. It was noticed during the stage-II of the industrial sickness, preventive measures with close monitoring and follow up actions should be launched promptly by the management and other associated agencies (Singh, 2011). Stage-III (Incipient sickness) Once the mill passes through the Stage-II, in no time the Stage-III would arrive if necessary measures were not taken up in time. The stage start commenced from 1996-97 till 2004-05, maximum cash losses of `1267.2 lakh was recorded in 2002. The annual average loss during this period was `729.86 lakh with annual production of 1.15 and 0.66 lakh quintal of sugar and molasses respectively. Comparatively the production of sugar and molasses were 121 lower than that in Stage-II. Similarly, the average capacity utilization of the mill was 66.83 per cent, also lower than that in Stage-II. This manifested that overall review of financial performance of the mill should be done. Stage-IV (Final stage/ closure of firm) The mill becomes sick when the capacity utilization is less than 20 per cent of installed capacity. The same finding was reported by Singh (2011). When the appropriate and suitable remedial measures were not taken in the Stage-III, various adverse factors affect the financial status, production performance and mill operation. Hence, the mill as a whole breaks down in every sphere of mill operations which finally leads to sickness and closing of the mill. The initiation of Stage-IV begins in 2001 when the mill incurred heavy losses of `1267.2 lakh. Hence, the mill closed down and run into liquidation after the crushing season of 2004 (Table 4.44). Table 4.44: Different stages of Zira Cooperative Sugar Mill sickness Year Profit (` lakh) 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 -103.55 -58 -89.23 -40.48 -90.32 61.51 35.83 30.67 -25.5 -161.25 -632.01 -325.89 -178.21 -99.22 -401.1 -49.99 -677.48 -347.01 -761.45 -812.17 -925.35 -698.11 -1267.2 -845.36 -234.65 -24.22 Stages Stage I (Normal/Healthy) Average profit of `-31.70 lakh Average production of Sugar = 1.62 lakh quintal Molasses= 0.89 lakh quintal Average capacity utilization of 96.54 per cent Stage II (Tending towards sickness) Average profit of `-234.15 lakh Average production of Sugar =1.55 lakh quintal Molasses = 0.87 lakh quintal Average capacity utilization of 82.86 per cent Stage III (Incipient sickness) Average profit of `-729.86 lakh Average production of Sugar = 1.15 lakh quintal Molasses= 0.66 lakh quintal Average capacity utilization of 66.83 per cent Stage IV (Final stage/ closure of firm) Average 122 profit of `-443.47 lakh Average production of Sugar = NIL Molasses= Nil Average capacity utilization of 0.00 per cent 2006 2007 2008 2009 2010 2011 -109.13 -313.89 -323.46 -313.24 -369.16 -151.16 Therefore, sorting out the different stages of the Zira Cooperative sugar mill’s sickness undoubtedly would help the policy maker to frame the appropriate measures and plan to uplift the mill into profitable and efficient venture. This brings into limelight the proper time and stage in which suitable preventive measures could be taken so that the mill must not deteriorate their health. Symptoms and Causes of Mill Sickness The symptoms and causes of the mill sickness are discussed under the following subheads: Symptoms of the sugar mill sickness Financial Ratios A financial statement was like the financial temperature of the business. The properly analyzed of the financial statements of the mill provide valuable insights into the mill’s performance. The study of ratios helps in the comprehensive assessment of the strengths and weakness of the mill. The different financial ratios were analyzed briefly to shows clear pictures of financial performance of the Zira Cooperative sugar mill. Profitability ratios The ratios reflect the final result of the mill’s operations. It shows how profitably and efficiently the mill was operated. Higher the ratios better is performance of the mill. In the case of Zira Cooperative Sugar Mill, the returns of investment over a period of four years prior to liquidation were negative except in the year 2002, it was positive (Table 4.45). Table4.45: Profitability ratios of Zira Cooperative Sugar Mill, 2001-02 to2004-05 (Per cent) Profitability ratios 2001 2002 2003 2004 Returns of investment (ROI) -0.12 0.04 -0.11 -0.34 Returns on sales (ROS) -61.04 -69.48 -40.73 -12.62 0.1 0.23 0.28 0.31 -0.00082 -0.38489 -0.13718 -0.00031 -1.06 -0.88 -0.57 -0.22 Capital turnover (CT) Gross profit margin Net profit margin 123 The negative returns of investment indicate the negative profitability performance of the mill. Ronan (1998) stated that primary profitability ratio is the return of investment (ROI). Higher the ROI better the profitability performance of the mill. The returns on sales (ROS) were estimated to be negative all throughout the study period which indicated negative profitability. The ROS indicates how well the mill has been able to generate profit from profitable sales. The negative ROS reveals that the mill has not been able to generate profit from the sales of sugar and molasses (Table 4.45). The capital turnover ratio of the mill indicates the conversion of assets into profitable sales and it increases from 0.1 in 2001 to 0.31 in 2004 (Table 5.2). Further, the gross profit margin of the mill shows negative in all the four years same as the net profit margin having negative value 1.06 to 0.22 in the year 2001 and 2004 respectively. The negative net profit margin indicates that the mill have no control over its cost of production. Liquidity ratio The perusal of Table 4.46 shows the liquidity ratios of the mills. The ratios have been declining over the years prior to liquidation of the mill. The current ratio was estimated to be 1.10 in 2002 as the highest which eventually declined to 0.32 in 2004. The low current ratio indicated smaller investment on current ratio and interrupted production and sales, as result of frequent stock out and inability to pay the creditors and the farmers in time (Vijayakumar and Tamizhselvan, 2010). Acid Test Ratio was estimated to be 0.03 in 2001, slightly increase to 0.05 in 2004 but still less than one which indicates the Zira sugar mill had liquidity problems (Table 4.46). The Acid Test Ratios revealed that the Zira sugar mill was not able to pay the short term obligation. The Quick Ratio was less than 1.0 which leads the mill to sell inventory to meet short-term debt, which is not a good position for the mill to be. But the Current Ratio was higher than Acid/Quick Test Ratio which was the clear indication of sole dependent of the mill current assets on inventory. The Cash Ratio was considerably smaller as it was 0.006 in 2001 and declined further to 0.005 in 2004. The cash and cash equivalent of the sugar mill was insufficient to pay its current financial obligation. Therefore, the small liquidity ratios indicate poor liquidity position of the mill which could create hindrance in smooth functioning and operation of the mill. The decline in liquidity level of the mill leads to decline in profitability. Table 4.46: Liquidity ratios of Zira Cooperative Sugar Mill, 2001-02 to 2004-05 Liquidity ratios 2001 2002 2003 2004 Current ratio 0.73 1.10 0.75 0.32 Quick/Acid test ratio 0.03 0.05 0.03 0.05 Cash ratio 0.006 0.023 0.006 0.005 124 Non-Financial Symptoms Besides the financial symptoms, non-financial symptoms also have confirmatory evidence that suggest the failing of the sugar mill. Argenti (1976) in the empirical test suggests that non-financial symptoms have some confirmatory value in predicting failures. The important characteristic symptoms of the Zira Cooperative sugar mill were described briefly which bring into notice the symptoms for failures. 1. Inability of the mill to pay arrear to the sugarcane farmers in time. The high price of sugarcane as raw materials was reported to be a main reason. 2. Non-viability of the mill as a result of low and highly fluctuation price of sugar in open market. 3. Under utilization of capacity for a quite long period brings drastic malady in the function of the mill. This was one of the reasons for low profitability of the firm. 4. Use of old machines for processing and crushing of pre matured cane was reported. For the very reasons the recovery of sugar and efficiency of the mill has been declined. Table 4.47: Inventories of the Zira Cooperative Sugar mill, 2001-02 to 2004-05 Year Inventories (`lakh) Inventory turnover ratio 2001 328.66 0.32 2002 3409.81 0.71 2003 2263.83 1.00 2004 821.45 2.30 5. Inefficient management of inventories was observed from Table 5.4. It was increased from `328.66 lakh in 2001 to `821.45 lakh in 2004 in absolute term. However, the Inventory Turnover Ratio was decreased from 0.32 in 2001 to 2.30 in 2004 which indicates the mill has been selling off old stock of inventories to finance the mill operation which was not a good sign. Therefore, the mill was not managing its buying of raw materials and having difficulty in administrating its inventory. 6. The decline in number of days of mill operation was observed in Table 4.48. The crushing season of the mill was an important indicator which has direct impact on the efficient operation of the mill. The norm of the duration of cane crushed by the sugar mills in Punjab was 150 days per year (Anonymous, 2010). The crushing days of the mill was fluctuating over the years (1990-91 to 2003-04). The maximum days were found in 1996 (170.19 per cent) while the minimum crushing day in 2004 with 18.27 per cent. 125 7. Decline in capacity utilization and cane crushed of the mill: The capacity utilization and cane crushed of the mill has been declined from 122.83 per cent in 1985 and 31.83 lakh quintals in 1995 to 30.59 per cent and 1.40 lakh quintals in 2004 respectively. This shows that the average crushing of the mill has been declined to 10.19 per cent in 2004. In the case of capacity utilization of the mill, high fluctuation was observed with significant decline to 36.88 per cent in 2004 (Table 4.48). Table 4.48: Trend analysis of the Zira Cooperative sugar mill working results, 1990-91 to 2004-05 (Per cent) Seasons Capacity Cane Sugar Molasses Year days utilization crushed production production 1990 100.00 100.00 100.00 100.00 100.00 1991 91.35 91.57 131.21 153.50 118.19 1992 120.19 98.28 111.52 207.44 165.20 1993 70.19 102.80 76.62 117.78 103.76 1994 59.62 83.29 76.99 78.57 72.19 1995 146.15 101.48 231.38 221.78 225.77 1996 170.19 84.92 226.45 225.51 211.24 1997 70.19 84.64 93.15 93.83 82.67 1998 44.23 82.10 5.72 47.00 51.69 1999 49.04 76.94 57.53 50.39 53.36 2000 56.73 82.29 72.57 79.50 66.45 2001 115.38 95.02 170.76 187.48 165.43 2002 95.19 100.33 149.02 154.72 141.37 2003 46.15 82.03 58.38 60.46 57.86 2004 18.27 36.88 10.19 10.43 11.06 8. Decline in production of sugar and molasses: The production of sugar and molasses have declined from 2.57 lakh quintal in 1996 and 1.58 lakh quintals in 1995 to 0.12 and 0.08 lakh quintals in 2004 respectively. The perusal of Table 5.5 revealed that fluctuation in production of sugar and molasses was quite often but eventual decline was observed from 2001 with187.48 per cent and 165.43 percent to 10.43 and 11.06 per cent of sugar and molasses in 2004 respectively. Causes of the Zira Cooperative sugar mill sickness The causes of sugar mill sickness may arise due to different factors which may be under the purview of the management or beyond the purview. Sickness may be in born or acquired during the growth of the unit. In the case of Zira Cooperative Sugar Mill, sickness starts right from the beginning of implementation of the sugar mill operation. Basically, the root causes of the sickness were the poor management and resultant poor financial ratios. The prolong persistence of 126 the mill sickness resultant into wear and tear of the existing assets and liabilities of the mill, which will enhance the deterioration of the mill liquidity and profitability performance. In many studies, the causes of sickness was broadly classified into two categories such as external which was beyond the control of the management and internal causes originating within the mill and can be controlled by the management. But based on the Argenti model (1976) and Ronan (1994) causes of the sugar mill sickness were discussed as under: External cause of sickness Non-availability of inputs It was reported that non-availability of sugarcane was the key factors for the closure of the mill. When the supply of raw material was short, the breakdown of the sugar mill is evitable. The sugarcane farmer residing within a radius of 15 km of the mill supplies cane to the Zira Co-operative Sugar Mill. The perusal of Table 4.49 indicates insufficient supply of cane for crushing during the crushing season. The total cane crushed was highest in 1995 with 31.83 lakh quintal and least in1998 with total cane crushed of 0.79 lakh quintal. Quite a large fluctuation in cane crushed was observed over the last 24 years. Similar observation was found in the recovery of sugarcane. The highest recovery (10.47 per cent) was observed in 1982 and lowest (7.32 per cent) in 1999. Table 4.49: Cane crushed and recovery of sugarcane of the Zira Cooperative sugar mill (Lakh quintal) Year Cane crushed Recovery (%) 1980 1.42 8.5 1981 19.74 9.16 1982 16.98 10.47 1983 16.62 9.83 1984 15.48 10.12 1985 17.66 9.43 1986 27.37 9 1987 19.48 9.92 1988 18.90 9.01 1989 8.45 7.57 1990 13.76 8.3 1991 18.05 9.71 1992 15.34 9.41 1993 10.54 8.77 1994 10.60 8.47 1995 7.96 31.83 127 1996 1997 1998 1999 2000 2001 2002 2003 2004 31.15 12.81 0.79 7.91 9.98 23.49 20.50 8.03 1.40 8.26 8.36 6.87 7.32 9.09 9.13 8.62 8.6 8.5 Therefore, fluctuation in cane crushed by mill revealed that the supply of cane has been highly at random in each of crushing season of the mill. The main reasons for shortage of cane supply were attributed to following reasons: i. Delayed in payment of cane price: The undue delay in payment of cane often leads to switching over from sugarcane to other competing crops which have relatively higher and assured price. The switching over of cane cultivation cause the reduction in quantity supply sugarcane crop to the mill. ii. Mismanagement in cane purchasing: It was reported that there was no control over issuing cane purchasing tickets to the cane growers. This cause haphazard in the management of unloading cane for crushing and make the farmers to wait for many hours at the mill gate. Before making any bill for cane purchase, the recovery per cent was checked and then payment was made based on recovery percentage. This often discourages the farmers to grow sugarcane in the subsequent season. iii. Low returns from sugarcane: The profitability of sugarcane crop was comparatively lower than wheat and paddy. This strengthened farmers to shift their area under cane to wheat and paddy. Contraction in area under sugarcane reduces the production of cane which in turn brings shortage in supply of cane to the mill. The estimation of returns from sugarcane, wheat and paddy made by the mill, it was observed that paddy-wheat-legumes/ Fodder crop cycle yields a return of Rs 46000 per acre in one year as compared to Rs 49800 per acre obtained in two years for plant cane-ratoon-wheat crop cycle (Anonymous, 2009). Competition The mill has poor competition strength with private sugar mill. In private sugar mill, on spot cane payment in cash was made to the cane farmers while such facility was not available in Zira Corporation Sugar mill. Hence, the cane farmers diverted their cane to nearby private mills which leads to cane scarcity to the mill. Nevertheless, the establishment of sugar mill in every district of the state exhausted the resources which increase the competition between the mills for raw materials. The existence of mills in an area where 128 cultivation of cane was not conducive give rises to shortage of cane which brings problem in firm operation. Government policies The sugar industry was the only sector which is highly regulated by the Government in every facet of mill operations. A single change in government policies greatly affects the mill performance. The dual pricing policy by Central and State government put an extra hand to the sugar mills. The huge gap between the SMP (Statutory Minimum Prices) and SAP (State Advised Price) hinder the mill to make payment in time to the farmers. The sugar mill has been under the clutch of the Government policies which can’t move in either way to make free decision to improve the health of the mill. The Government policies were of provincial Government and federal government controls. The provincial government control comprises of minimum distance criteria between the mills, cane area reservation and dual cane pricing. And the Federal government controls consists of Levy Sugar obligation on mills, regulated release mechanism (release of white sugar quota for every month has been regulated by Government), compulsory sugar packing in jute bag only. Regulation and minute supervisions were essential for the better performance but too much stringent in the mill operations gives rise to deterioration of the mill leading to sickness. Lack of infrastructure facilities The infrastructure facilities of the sugar mill comprise of banking, finance, research and development and firm machineries and different stations of the mill such as clarification and filtration station, milk of lime and sulphur station, juice treatment section, juice treators and evaporators, graining and crystallization, plant, centrifugal station, sugar handling station, condensing station, etc. As per report of the mill, no investment was made on the R&D and finance position of the mill has been very weak. The information retrieved from the mill revealed that the Government of Punjab has waved off the loan of `4019.61 lakh given from Rural Development Fund Amount. Moreover, the Government of Punjab has also given `544.31 lakh for one time settlement with IDBI and IFCI which has helped the mill in saving interest payable on the loans from these institutions during 2002-2003. Further, the report of the mill indicates that the efficiency of the machines and different stations has been deteriorated and their performance was not satisfactory. The conditions of the machines in the mill were not good and need repairing. Labour problems The problems related to labour were scarcity and demand of higher wages. The labourers claimed higher wages which increased the cost of production which consequently reduced the profitability of the mill. Non-availability of skilled labor was also one of the problems which hindered the production of sugar. 129 Poor working capital management The importance of working capital management was reflected in the fact that financial managers spent a great deal of time in managing current assets and current liabilities. The working capital of the mill was influenced by a number of factors. The sugar mill being seasonal nature in operations was usually marked by highly fluctuating working capital requirement. The sugar mill required 60 to 70 percent investment in current assets and 30 to 40 percent in fixed assets (Chandra, 2010). The working capital of Zira Co-operation Sugar Mill was analyzed for four years (2001 to 2004), it was estimated to be `1303.04 lakh in 2001 and `2126.48 in 2004. The investment of the mill increased from `6.21 lakh in 2001 to `13.13 lakh in 2004, but no improvement in total asset was observed. Therefore, the negative working capital revealed that the mill had poor management of the working capital. Internal causes of sickness Bad management structure The correct management structure ensures an organization continued growth, content employees and profit returns for the shareholders. The management structure includes understanding the working relationships with their manager, subordinates and peer groups. Any deviation from correction management structure of the mill gave rise to sickness. The administrative control of the mill is under the elected Board of Director under Punjab Cooperation Societies Act. The organizational structure of the Zira Co-operative Sugar Mill was given in following Figure VII. 130 Fig.VII: Organizational Structure The board meetings were held irregular; it took place whenever it was needed. The frequency of the Board meeting has been uncertain as there is no limit for calling a Board meeting. On the other side, general body meeting was held once in a year. It was reported that one-third of the members should be present in meeting. The decisions taken either in Board meeting or in general body meeting seem to remain as management information. The information regarding the decisions was not reached to peers groups of the mills, who were the main manpower for the operation of mill. This was evidence from the report of the mill in which it was mentioned that discussion with the available factory staff revealed that there was no major breakdown during the factory operations. Similarly, no major bottleneck at any stations in the factory was informed. There was no Human Resources Department in the mill to harness the full potential of their employees for attaining the excellence of the mill (Figure VII). There were 191 permanent and 269 seasonal members which have been categorized into supervisor, clerical, skilled labour, and unskilled labor. The analysis and assurance of cordial and harmonious relationship between the employees and the mill could bring sustainability and competitiveness of the mill. For the improvement of knowledge and technical know-how of the ongoing modern technologies, training needs must be identified to develop the knowledge 131 and skill of the factory employees. This could be enabling to happen through systematic manner by human resource development. Low quality of sugar The mill produces white sugar over last two decades. It was informed that the quality of sugar was not able to maintain the standard quality followed in other sugar producing states like U.P and Maharashtra. The negligence of product quality and increased volume product might cause piling up of inventories. The inventory turnover ratio of the mill rose from 0.35 times to 2.41 times in 2004, which unnecessary blocked the capital. The findings were in line with the study of Laddha and Shah (2012). Therefore, lack of quality control for sugar significantly induces the mill sickness. Poor marketing efforts An efficient marketing technique was considered to be an important ingredient to increase profitability of the mill. An interview with the concerned authority revealed that the market research was not adequate and information regarding the market situation was not getting in time. The demand for free sugar in the market could not able to forecast accurately based on which the production can adjust and increased. Under utilization of capacity The Zira Co-operative Sugar Mill initially started with crushing capacity of 1250 TCD later, the mill expand its capacity by 2500 TCD by selective equipment addition. The technical potential of the mill after up-gradation and modernization, could reach its capacity up to 5000 TCD. The perusal of Table 4.50 indicates that the capacity utilization of the mill has been more than 100 per cent during the period (1980-81 to 1988-89) when crushing capacity was 1250 TCD. After the expansion of capacity up to 2500 TCD in crushing season of 1989-99, the capacity utilization never reaches 100 per cent rather declined to 30.59 per cent in 2004. This brings into notice that the mill required more quantity of sugarcane to operate efficiently under full capacity utilization. Table 4.50: Working results of the Zira Cooperative Sugar Mill, 1980-81 to 2004-05 (Per cent) Year Capacity utilization Year Capacity utilization 1979 - 1992 81.52 1980 36.98 1993 85.27 1981 78.17 1994 69.09 1982 97.03 1995 84.18 1983 101.47 1996 70.44 132 1984 110.57 1997 70.21 1985 122.83 1998 68.1 1986 115.23 1999 63.82 1987 110.04 2000 68.26 1988 112.4 2001 78.82 1989 71.54 2002 83.22 1990 82.95 2003 68.04 1991 75.96 2004 30.59 Analysis of Financial Performance of Zira Cooperative Sugar Mill The financial performance of Zira Cooperative Sugar Mill was analyze using various financial ratios and is discussed briefly under the following: Ratios analysis The ratio analysis has been used extensively to examine the financial performance of the mill. The results presented in Table 4.51 indicate the negative gross profit margin of the mill increased over the years. Similar result was observed in the case of net profit margin, returns on assets and equity and working capital turnover ratios. The positive ratios were observed for operating profit margin, fixed assets turnover ratio, total assets turnover ratio, current ratio, quick current ratio, cash ratio and debt-equity ratio. However, these ratios were showing a declined over the years (Table 4.51). The current ratio was not in the ratio of 2:1 which considered being unsatisfactory for running a mill since it clearly indicates the mill was not able to meet the short term obligations. The debt-equity ratio of the mill increased from 0.07 in 2001 to 0.17 in 2004. This revealed that the mill was not using their retain revenue appropriately. And the mill was not to able to pay off their debts with the income retained by it. The return of investment was showing continuous decline over the years. It was -0.12 per cent in 2001 which was further declined to -0.34 per cent in 2004. The financial ratios indicate that the mill has been under stress long before the liquidation. The continuous negativity of return of investment landed the mill into liquidation state. Table 4.51: Ratio analysis of the Zira Cooperative Sugar Mill, 2001-02 to 2004-05 Particulars 2001 2002 2003 2004 -0.00082 -0.38489 -0.13718 -0.00031 Operating profit margin (%) 0.22 0.15 0.13 0.12 Net Profit margin (%) -1.06 -0.88 -0.57 -0.22 Gross profit margin (%) 133 Returns on assets (%) -0.11 -0.21 -0.16 -0.07 Returns on equity (%) -2.74 -3.53 -2.57 -0.94 Fixed assets turnover ratio 0.45 0.71 0.81 0.77 Total assets turnover ratio 0.10 0.23 0.28 0.31 Working capital turnover ratio -0.88 5.87 -2.57 -0.93 Current ratio 0.73 1.10 0.75 0.32 Quick /Acid test ratio 0.03 0.05 0.03 0.05 Cash ratio 13.65 8.96 8.29 5.77 Debt-Equity ratio 0.07 0.11 0.12 0.17 Capital gearing ratio (%) -6.21 -16.29 -11.39 -3.97 Return of investment (ROI) (%) -0.12 0.04 -0.11 -0.34 Working capital / total assets (%) 0.00013 0.00018 0.00019 0.00023 Retained earnings/total assets (%) -0.00082 -0.38489 -0.13718 -0.00031 Trend Analysis of financial statements of the mill The trend analyses of the financial statements of the mill were presented in Table 4.52. It was observed that the sale of the sugar and molasses shows a fluctuating trend over the years. Taking the year 2001 as a base year, sales have increased by 59.46 and 21.98 per cent in 2002 and 2003 respectively, and declined by two per cent in 2004. The cost of goods sold and cost of production shows a fluctuating pattern over the years. The cost of goods sold was 120.65 per cent in 2002, much higher than the base year. In the case of cost of production, it was estimated to be 33.34 per cent in 2001 which declined to 40 .70 per cent in 2004. The gross profit of the mill was showing a negative trend during the period under study (Table 4.52). Table 4.52: Trend analysis of sales and cost of production for period prior to liquidation (Per cent) Year Values (`lakhs) Trend Per cent change 2001 1143.76 100 - 2002 1823.83 159.46 59.46 Sales 134 2003 2075.29 181.44 21.98 2004 1977.63 172.90 -8.54 2001 1144.70 100 - 2002 2525.80 220.65 120.65 2003 2359.97 206.16 -14.49 2004 1978.24 172.82 -33.34 2001 4525.47 100.00 - 2002 6047.11 133.62 33.34 2003 4738.30 104.70 -28.92 2004 2896.33 64.00 -40.70 Cost of goods sold Cost of production The perusal of Table 4.53 revealed that the gross profit margin has been stagnant for the years while it declined in 2004. The net growth profit shows negative trends and it was reduced by about 61.88 per cent. The trend for return of investment shows considerable decline over the years which were more prominent in 2004 (-57.29 per cent). An inventory turnover ratio shows increasing trend over the years. It was estimated to be 111 per cent in 2002 more than the base year and further increased by 86 per cent in 2003 than 2002. The ratio was increased in 2004 by more than the double in 2003. Table 4.53: Trend analysis for financial ratios for period prior to liquidation (Per cent) Year Ratios Trend Per cent change 2001 -0.00082 100 - 2002 -0.38489 99.79 -0.21 2003 -0.13718 99.40 -0.39 2004 -0.00031 62.20 -37.20 Gross profit margin Net profit margin 135 2001 -1.06 100 - 2002 -0.88 83.02 -16.98 2003 -0.57 64.77 -18.25 2004 -0.22 38.60 -26.17 2001 -6.21 100 - 2002 -16.29 61.88 -38.12 2003 -11.39 45.48 -16.40 2004 -3.97 -57.29 -102.77 2001 0.35 100 - 2002 0.74 211.43 111.43 2003 1.04 297.14 85.71 2004 2.41 688.57 391.43 2001 0.73 100 - 2002 1.10 150.68 50.68 2003 0.75 102.74 -47.94 2004 0.32 43.84 -58.84 Returns of investment Inventory turnover Current ratio The increase in ratio was mainly because of decline in sales over the years. Further, the results present in Table 5.11 revealed that the current ratio was declining over the years prior to liquidation of the mill. The ratio was worked out to be 51 per cent in 2002, more than the base year. In the consecutive years 2003 and 2004, it was decreased by 48 and 59 per cent respectively. Why there was a failure? The failure of the Zira Cooperative Sugar Mill was mainly attributed to inefficient management of the expenditure incurred in production and processing of sugar and its allied products. In order to bring a clear picture of the failure of the Zira Sugar mill, a comparison was made with the successful Nawanshahr Cooperative Sugar Mill. The results presented in Table 4.54 exhibit the comparison of cost of production between the sick and successful Cooperative Sugar Mills. There has been a non-significant difference between the costs of production of the two sugar mills. Because of large variation in the cost of production incurred by Zira mill during the period under reference. The cost of production per quintal 136 was highest at `5759.50 in 2004 while lowest at `1506.99 in 2001in Zira mill. In Nawanshahr sugar mill variation of cost of production was lower, where the highest cost of production per quintal was estimated at `2732.34 in 2004 and lowest at `1341.87 in 2002 (Table 4.54). The cost of production consists of different cost elements, of which cost on raw materials was an important cost element. At the overall, the cost of raw materials contributed 79.98 per cent of the total cost in Nawanshahr Cooperative Sugar mill while in Zira; it was estimated to be 45.68 per cent. Similarly, the manufacturing expenses and employee salaries and wages were showing non-significant difference between the two sugar mills. The proportion of manufacturing expenses to the cost of production was estimated to be 15.61 and 7.85 per cent in Zira and Nawanshahr sugar mills respectively. The contribution of employees’ expenses to the cost of production was worked out to be 34.98 and 10.97 per cent in the above said sugar mills respectively. Hence, the manufacturing expenses and employees’ salaries of Zira sugar mill contributed maximum to the cost of production of the mill. This indicates that Zira sugar was hiring labour and staff more than requirement leading to unproductive labour and rise in cost of production. However, the proportion of expenditure on administrative, selling and distribution and other expenditure were also estimated to be higher in Zira mill than Nawanshahr mill. As far as above mentioned parameters there has been non-significant difference between the two sugar mills. Further, the results presented in Table 4.54 show increase in total cost of production of Zira mill but decline in cost on raw materials over the years. The cost of raw material was lowest in 2004 which constituted 25 per cent of total cost though total cost was drastically increased (`5759.50 per quintal) in the same period. The remaining major portion was contributed by others an expense of which 49.41 per cent was covered by employees’ cost. Due to this very reason Zira mill become inefficient in management of mills’ operation. Therefore, the results revealed that Nawanshahr sugar mill had followed ratio of 80 per cent raw material expenses to 20 per cent other manufacturing expenses (80:20). But in Zira sugar mill, it was in the ratio of 45:55 indicating relatively less investment on purchase of sugarcane and more on employment and manufacturing expenses. 137 Table 4.54: Comparison of cost of production between the sick and non-sick mill in Punjab (`q-1) Particulars 2001 2002 2003 2004 Overall t-values Z N Z N Z N Z N Z N Cost of production 1506.99 (100) 1454.87 (100) 1599.62 (100) 1341.87 (100) 2027.25 (100) 1781.08 (100) 5759.50 (100) 2011.78 (100) 2732.34 (100) 1647.40 (100) 0.89NS Raw materials 1122.59 (74.49) 1173.99 (80.69) 1191.05 (74.46) 1065.14 (79.38) 1225.14 (60.43) 1426.37 (80.08) 1453.92 (25.09) 1604.77 (79.77) 1248.17 (45.68) 1317.57 (79.98) 0.18NS Manufacturing expenses 166.93 113.69 145.30 113.03 188.32 142.33 1205.17 148.22 426.43 129.32 1.14NS (11.08) (7.81) (9.08) (8.42) (9.29) (7.99) (20.79) (7.37) (15.61) (7.85) 14.57 (0.97) 10.25 (0.70) 18.38 (1.15) 9.81 (0.73) 50.45 (2.49) 14.68 (0.82) 189.67 (3.27) 16.17 (0.80) 68.26 (2.50) 12.73 (0.77) 1.35NS 5.36 1.30 8.03 3.53 2.42 9.79 75.50 8.07 22.83 5.67 0.97NS (0.36) (0.09) (0.50) (0.26) (0.12) (0.55) (1.30) (0.40) (0.84) (0.34) 196.00 154.87 135.02 149.36 528.16 186.76 2863.83 232.67 955.75 180.77 (13.01) (10.60) (14.69) (11.13) (26.05) (10.49) (49.41) (11.57) (34.98) (10.97) 1.55 1.35 1.84 0.98 7.04 1.15 7.42 1.88 4.46 1.34 (0.10) (0.09) (0.11) (0.07) (0.35) (0.06) (0.13) (0.09) (0.16) (0.08) Administrative Expenses Selling and distribution expenses Employee expenses Other expenses Figures in parenthesis indicate percentage to total ** and * significant at one and five percent level respectively NS: Non-significant Note: Z and N stands for Zira and Nawanshahr 138 1.21NS 1.94NS CHAPTER VI SUMMARY India is the largest consumer of sugar in the world. The sugar industry in India is key driver of rural development, supporting economic growth of the country. It occupies an important place among the agro-based industries in India after textile industry. The industry has been a focal point for socio-economic development in the rural areas as about 50 million sugarcane growers and a large number of rural labourers depend on sugarcane and sugar industry for their livelihood. The industry provides employment to about two million skilled and non-skilled workers and other employed in ancillary activities mostly in the rural areas. Besides, employment generation they also holds the potentialities of developing other industries related to its by-products. The sugar industry in Punjab has co-existence of different ownership and management structure. Like the other industries, the sugar industry in Punjab passes through a large number of hurdles. It was believed that the financial, infrastructural problems such as shortage in sugarcane supply, obsolete technologies, low capacity utilization and discriminating government policies were the main reasons for the failure of some of the sugar mills in Punjab. The factory owners were facing the problems of high cost for manufacturing of sugar as a result some of the mills engaged has been under liquidation. The farmers on the other side were not getting the payment in time for their product. Thereby, the farmers made the choice to shift from sugarcane cultivation to rice and wheat cultivation whose price and disposal is assured under Minimum Support Price (MSP). The area, yield and production of sugarcane at the national and state level have been declining considerably over the last decades, largely due to shifting of cropping pattern in favour of rice and wheat. The sugarcane acreage and production cycles are driven largely by policy interventions, including sugarcane support price policies set by the central and state governments as well as disposal of sugar and trade policies set by the central government. The acreage response to price is highly sensitive as the price of the crop depict the income of the farmers on which investment on crop cultivation depend. Besides, non-price factors also affect the allocation of area under sugarcane. An attempt has been made in the present study to answer uncertainties faced by the sugarcane farmers and sugar industry in the state. An increase in failure of sugar industry greatly affects the economy of the state. In order to ascertain the roots and causes of such failures, case study was also taken up. In the backdrop of these facts the present study was taken up with following objectives: i. to study the trends in production of sugarcane in Punjab and India, ii. to determine the factors affecting sugarcane acreage in Punjab, 139 iii. to examine the physical and financial performance of sugar industry in cooperative vis-à-vis private sector in the state, iv. to examine the various socio-economic problems faced by the cane growers and sugar mills and v. to carry out a case study of a cooperative sugar mill under liquidation and suggest policy measures to build up an efficient base industry in the state. To accomplish the stipulated objectives, simple random sampling technique was used to select sugar mills and cane growers. On the basis of highest crushing capacity of the sugar mill, two mills each from cooperative and private sectors were selected randomly. In addition, Zira Cooperative Sugar Mill was randomly selected for the case study which was under liquidation. Thus, five mills comprised the final sample. From each selected sugar mills 15 sugarcane farmers were selected randomly, thus, sample of 75 farmers was selected. Both secondary and primary data were collected. The secondary data pertaining to area, productivity, production, assured prices (SAP and MSP) of sugarcane, price of gur and its competing crops such as paddy and wheat, total cane crushed, sugar recovery and production of sugar of the country and Punjab for 61 years were collected from various issues of Statistical Abstract of Punjab, Economic Survey of India, Agricultural Statistics at a Glance, Indian Sugar and other sources. For financial and physical performance, information regarding crushing capacity, sugar recovery, sugar and molasses production, capacity utilization, duration of seasons, etc. were retrieved from Punjab State Federation of Cooperative Sugar Mills Limited and from selected sugar mills. The primary data and relevant information of the present study collected through pre-tested well structure interview schedule. The data were analyzed by using various statistical tools such as compound growth rate, decomposition growth analysis, multiple regression analysis (OLS), coefficient of variation, analysis of capacity utilization, ratio analysis, trend analysis and tabular analysis to meet the objectives of the present study. The findings of the study revealed that the trend in area under sugarcane has been increasing over last six decades at the national level and declining at the state level. The sugarcane production and productivity showed increasing trend over the years both at national and state level. The growth analysis showed that growth rate of area under sugarcane and its production in the state was comparatively lowers than that at the national level. While the yield growth for the state was higher as compared to national productivity. The growth of sugar production and total cane crushed at state level was comparatively higher than at national level. The growth of per cent recovery of sugar was non-significant at state level but higher than the country’s growth rate. The estimation of coefficient of variation for area, production and productivity of sugarcane in Punjab showed year to year fluctuation. However, larger variation was observed 140 for sugarcane acreage than yield and production of sugarcane at the state level. The variation was higher in sugarcane production than area and yield at the national level. The decomposition of growth analysis indicated that the change in sugarcane production over the years was due to area and its interaction effect at the national level as well as in Punjab. While, the decomposition of sugar production showed that total cane crushed was the important factor which brings changes in sugar production over the years both at national and state level. An analysis of acreage response of sugarcane revealed that both price and non-price factors explained 84.4 per cent of the total variation in sugarcane acreage in the study area. The farmers responded positively to the lagged sugarcane area, price of cane and its relative income in the allocation of area under sugarcane for current season. While an increase in yield of sugarcane in the previous year brings contraction of area under sugarcane for current season. An adjustment coefficient shows rapid adjustment of area under sugarcane by the farmers. It was further revealed that adjustment of sugarcane acreage was higher in the longrun than in short-run. An analysis of physical performance of the sugar mills under private sector showed that the mills were operating under capacity. The trends of total cane crushed by the mills were fluctuating over the years and the lowest cane was crushed in 2009 in both the private sugar mills due to shortage of cane supply. This was due to lowest production of sugarcane (3.7 lakh tonnes) in the state during 2009. The per cent recovery of sugar which signified the technical efficiency with regards to conversion of sugarcane to sugar was found to be higher than the state average in most of the years. This showed that private sugar mills were technically sound. The capacity utilization was below 100 per cent over the years in both the mills but not much pronounced in Wahid Sandhar Sugar Limited, Phagwara. Moreover, the duration of cane crushing was below the state average of 150 days. The physical performance of the sugar mills under cooperative sector revealed that the mills were not performed efficiently over the years. The total cane crushed of the mills was fluctuating over the years and the lowest cane was crushed in 2009 in the both cooperative sugar mills. The average actual cane crushed per day has been constant in the periods under study. The per cent recovery of sugar has been declining in both the sugar mills which signified declining technical efficiency of the mill. This indicated that the cooperative sugar mills were using obsolete crushing machines and not properly managed which results into lower recovery of sugar. The capacity utilization was below 100 per cent over the years in both the mills but more lower in Morinda sugar mill. However, the capacity utilization was found to be satisfactory as, in most of the years it was more than 90 per cent. Moreover, the duration of cane crushing was below the state average of 150 days in almost all the periods. The comparative analysis of cooperative and private sectors revealed that private sector was 141 performing better than cooperative sector. Underutilized capacity of the sugar mills in both sectors was due to acute shortage of sugarcane-the basic raw materials which was accounted due to shrinkage in sugarcane acreage in the state. Above all, excessive government intervention in fixing the price of sugarcane brings inability of plants and machinery of the mills to operate efficiently. Further, the low recovery of sugar of the mill induces technical inefficiency of the sugar mills. Besides, the government policy of partial decontrol on mills operation and limited sugarcane zonal area restrict the mills to expand its capacity that unable the mill to avail the economics of scale. The cooperative sugar mills showed higher capacity utilization than the private sector, but the total number of days of crushing was least in cooperative sector. Thus, the private sector was enjoying the advantage of mismatch between the demand and supply of sugarcane in cooperative sector. Moreover, the private sector has been paying the cane suppliers in time which initiates the cane growers to supply sugarcane in time to the private sugar mills. The financial performance of the sugar mills revealed that the overall profitability was not satisfactory in both sectors. But, comparatively the private sector has incurred higher profit than the cooperative sector. The sugar mills in private sector found to manage their resources efficiently in generating income than that of cooperative sugar mills. Comparatively, the private sector was more efficient in controlling manufacturing cost. The overall operating performance was not satisfactory in cooperative sector as that of private sector. In regards to inventory of the mill, there was huge stocking of inventory in both the sectors which lead to poor management of inventory but it was more pronounced in cooperative sector. The total assets turnover ratio was comparatively higher in cooperative sugar mills and working capital turnover ratio was found to be higher in private sector. These indicate that cooperative sector was operating in full capacity and private sector had greater potential in selling of sugar than converting of inventory into revenue. The overall solvency ratios were unsatisfactory in both the sectors. The cooperative sector was enjoying higher degree of protection as less debt was used to finance the mills operation. The overall liquidity position was poor and declining in both the sectors over time. It was noticed that private sector has better liquidity position to meet short-term obligations as compared to cooperative sector. The results revealed that the farmers were unaware of the package of practices for sugarcane cultivation accompanied by the problems of labour scarcity and high wage rate. These were the technological constraints faced by the cane growers. The farmers were not satisfied with infrastructural facilities available to them. Unsatisfactory source of irrigation and insufficient electricity, high transportation cost and non-availability of factors of sugarcane production in time and at local level were the important infrastructural constraints. The financial constraints faced by the cane growers were high interest rate, inadequate and 142 untimed credit available. It was found that lack of marketing and storage facilities for cane were main marketing constraints faced by the cane growers. Further, the study indicated that non-availability of labour when needed and lower profit margins were an important socioeconomic constraint. The study brought out that the sugar mills were facing problems due to low sugar recovery, shortage of sugarcane supply, inability to pay arrear to the cane growers in time, low level of profitability and non-viability of sugar mills. The other important problems were provision of no subsidiary units like production of alcohol and co-generation plant, dearth of skill and technical staffs, etc. In the case study, different stages of sickness were studied. It was found that health of the mill was not good right from the start. The prolong persistence of sickness resulted into wear and tear of existing assets and liabilities of the mill. The root causes of the sickness of the mill were poor management and resultant poor financial ratios. The comparative study with efficient cooperative sugar mill indicated that the sick mill was facing a higher cost in per quintal manufacturing of sugar (45:55 of cost of raw material: other manufacturing expenses against 80:20 ratio of efficient Nawanshahr Cooperative Sugar Mill). The problem of shrinkage in sugarcane acreage, irregular supply of sugarcane to the mills and liquidation of cooperative sugar mill in the state could be solved if appropriate measures are taken up timely and accurately. On the basis of findings from the present study the following suggestions were made. 1. Deceleration in area, production and productivity of sugarcane in the state was the main concern. Therefore, the Research and Development efforts have to aim at development of high yielding variety and high sucrose content of cane and improved production technology. 2. In order to stabilize the sugarcane acreage, there should be fair and remunerative price for sugarcane relative to competing crops and timely payment is an utmost important. 3. Efforts should be made to ensure regular and sufficient supply of sugarcane to the mill. This could happen when sugar mills ensure timely payment to the farmers. 4. Mechanization in the harvesting of sugarcane could minimize production losses to some extent. It required a huge investment which is beyond the capacity of the farmer. So, the state government should provide such facilities through sugar mills. 5. Dual pricing of sugarcane should be modified because the SMP was relative lower than the SAP which put extra burden to the state government. This wide gap between the two prices slow down the payment to cane growers and thus paralyzed the functioning of sugar mill. 6. Zonal area should be extending in order to increase the volume of sugarcane supply to the respective mills. 143 7. Expansion of average crushing capacity of the sugar mills at both cooperative and private sectors. Thus, there will be possibility of increasing area under sugarcane as demand for sugarcane will increase. 8. Adopt low cost sugar production technology and used of modern machinery to improve percent recovery of sugar. 9. Need to improve infrastructural facilities such as timely and regular supply of electricity, irrigation in sugarcane growing areas. 10. There should be easy availability of credit to the sugarcane farmers and sugar mill at cheapest rate of interest. 11. Decontrolling of sugar industry might improve the financial status of the sugar mills. 12. The parity between open market price and levy price of sugar should be maintained to reduce the financial stress of the sugar mill. 13. Mills should concentrate more on efficient management and utilization of plant through timely supervision and monitoring of the operation of the mills. 14. The sugar industry should use technique of efficient utilization of working capital by managing cash, account receivables and inventory. And efforts should be made to reduce current liabilities to improve current ratios. The current and Quick Test ratios should maintain standard ideal ratio to improve liquidity position of the mills. 15. Provision of subsidiary units such as production of alcohol and co-generation in the mill to generate more income from same raw material. 16. There is an urgent need to adoption of a tie-up arrangement among the sugarcane grower, the sugar factory and the bank for ensuring better loan recovery. Specifically the case study undertaken in the present study, the following suggestions were made; 1. There is a need for revitalization of the sugar mill by improving sugarcane production and by improving its proper management. 2. Close monitoring of the financial status should take up immediately. 3. There should be provision of easy credit availability at lowest rate of interest. 4. There is a need to increase capacity utilization of the mill and use of modern machinery to crushed cane in order to improve technical efficiency of the mill. 5. Human Resources Department should be appointed in the mill to harness the full potential of their employees for attaining the excellence of the mill. 6. The sick mill should be leased-out to efficient private sector till the mill become economically and financially viable which will help to rejuvenate the sick mill. 7. Contract farming for sugarcane should be adopt to ensure regular supply of sugarcane. 144 8. The cost of production is higher since the sugar mill is a labour extensive. Therefore, mechanization and automation in mill operation should be adopted. 9. The Zira sugar mill should follow low cost model of efficient sugar mill. Therefore, the mill should maintain to utilize their capacity efficiently and effectively to consistence with the financial health. Lesser the government intervention in the operation of sugar mill better the ability of the mill owners to tackle investment and pricing decisions based on economic viability of the mill. An adoption of technology that reduces cost of manufacturing of the mill would enable competition with the private sugar mills. In addition, mechanization in sugarcane cultivation will reduce the cost of production which made the farmers to realize better returns and will solve the problems of labour scarcity. Besides, there should be sufficient and timely availability of electricity and irrigation in the state. 145 REFERENCES Abdel-Maksoud B M and El-Sharabassy A B E (2007) Production and marketing problems facing sugar cane growers in Qena Governorate. African Crop Science Society. African Crop Science Conference Proceedings 8:1301-1306. Abrar S, Oliver M And Rayner T (20040 Crop-Level supply response by agro-climatic region in Ethiopia. J. Agric. Econ.. 55 (2):289-311. Acharya S S and Bhatia S (1974) Acreage response to price, yield and rainfall changes in Rajasthan. Agric. Situ. India. 29 (4):209-217. Ahmed F A (1972) Government and the sugar industry. Coop. Sug. 3 (11): 509-10. Alagh Y K and Sharma P S (1980) Growth of crop production: 1960-61 to 1978-79-is it decelerating? Indian J. Agric. Econ. 35 (2):104-118. Alagh M (2004) Aggregate agricultural supply function in India. Econ. Political Wkly. 39 (2): 202-206. Alcudia L A, Rosado O R, Garcia S S, Lopez F G, Tablada M E N and Lopez J F J (2011) Socioeconomic and technological factors in sugar cane (saccharum officinarum l.) agroecosystems production in Chontalpa, Tabasco. Tropical and Subtropical Agroecosystems 13(3): 261-269. Anonymous (2011) CARE www.cariratings.com research’s outlook on sugar industry, culled from Anonymous (2007) Statistical Abstract of Punjab. Cane Commissioner, Punjab, Economic Adviser to Government, Punjab. Anonymous (2009) Annual Report 2009-10. Department of Agriculture and Cooperation. Ministry of Agriculture, Government of India retrieved from Website: www.agricoop.nic.in. Anonymous (2009) Package of Practices for crops of Punjab. Kharif 2009. Punjab Agricultural University, Ludhiana: 92-110. Anonymous (2010) Statistical Abstract of Punjab. Economic Adviser to Government, Punjab. Anonymous (2011) Annual Report, Indian Institute of sugarcane research, Lucknow. Anonymous (2012) Statistical Abstract of Punjab. Cane Commissioner, Punjab, Economic Adviser to Government, Punjab. Arega M (2000) Suply response of maize in Karnataka state-An econometric analysis. M. Sc. (Agri.) Thesis, University of Agricultural Sciences, Dharwad. Argenti J (1976) Corporate collapse: The causes and symptoms. Mcgraw-Hill, London. 146 Arora R and Sood S K (2003) Fundamentals of entrepreneurship and small business. Kalyani publishers, Ludhiana. Arularaj S (1998) Integrated technology transfer package for sugarcane development. Indian J. Extn. Educ. 34 (3&4): 81. Attwood D M and Baviskar B S (1987) Why do some co-operatives work but not others? A comparative analysis of sugar co-operatives in India. Econ. Political Wkly. 22 (26):A38-A49+A51-A56. Azad M P, Yadav R N, Singh H and Kaushik D C (1990) Comparative analysis of processing of sugar under public, cooperative and private sector in UP. Indian J. Agril. Mktg. 4 (1): 55-59. Bahl R R (1972) Problems of the sugar industry. Coop Sug. 3 (11):511-12. Bapna S L, Binswanger H P and Quizon, J B (1981) System of Output Supply and Factor Demand Equations for the Semi-Arid Tropical India. Indian J. Agric. Econ. 39 (2):179213. Basavaraja H (1982) Supply Response of Cotton in Karnataka state: An Econometric Analysis. M.Sc. (Agri.) Thesis, University of Agricultural Science, Dharwad (India). Batra M M (1976) Supply response of a subsistence crop under traditional and newtechnologies. Indian Econ. Rev. 11 (2): 133-158. Behrman J R (1966) Price Elasticity of the Marketed Surplus of a Subsistence Crop. J. Fm. Econ. 48: 875-893. Behrman J R (1968) Supply Response in Underdeveloped Agriculture: A Case Study of Four Major Annual Crops in Thailand 1937-63, Amsterdam: North Holland Publishing Corporation. Bhagat S K (2010) Capacity utilization in Nepalese Sugar industry. Tribhuvan Uni. J. 27 (1-2). Retrieved from http//www.tujournal.edu.np. Bhalla G S and Singh G (2010) Final reporton Planning commission project growth of Indian agriculture: A district level study. Centre for the study of regional development, Jawaharlal Nehru University, New Delhi 1-277. Bhowmick B C and Ahmed A U (1993) Behaviour of trend and growth of area, production, productivity and supply response of major oilseed crops in Assam. Agric. Situ. India 48 (1): 3-7. Brauw, Alan De, Huang J and Rozelle S (2003) Sequencing and the Success of Gradualism: Empirical Evidence from China’s Agricultural Reform. Presented at JUNU-IFPRI workshop on The Dragon and the Elephant: A Comparative Study of Economic and Agricultural Reforms in China and India. Bura H S S (1979) Scope of sugar industry. Coop. Sug. 10 (10): 483-84. 147 Candler (1957) An aggregate supply function for New Zealand wheat. J. Fm. Econ. 36 (5): 1732-41. Chahal S S, Kataria P and Kaur H (2003) Growth analysis of maize in Punjab. Productivity 44 (1): 120-127. Chandra D B (2003) Fundamentals of financial management. Prentice-Hall of India private limited. Delhi. Chandra P (2010) Financial management-Theory and Practice. Tata McGraw-Hill Publishing Company Limited. West Patel Nagar, New Delhi. Chetthamrongchai P, Auansakul A and Supawan D (2001) Assessing the transportation problems of the sugar cane industry in Thailand. Transport and Communications bulletin for Asia and the Pacific. 70: 31-39. Chidoko C and Chimwai L (2011) Economic challenges of sugar production in the Lowveld of Zimbabwe. Int. Econ. Res. 2 (5): 1-13. Cummings J T (1975) The supply responsiveness of Indian farmers post independence period: Major cereals and cash crops. Indian J. Agric. Econ. 30 (1): 24-40. Dandekar (1980) Introduction, seminar on data and methodology for the study of growth rates in agriculture. Indian J of Agric Econ. 35 (2): 1-2. Dawar K R (1990) Returns to scale and factor productivity in the cooperative sugar industry in Punjab and Haryana. Indian J. Ind. Relations 26 (2): 166-174. Deb S (2003) Terms of trade and supply response of Indian agriculture: Analysis in cointregation framework. Working Paper No.15: 1-39. Centre for Development Economics, Delhi school of Economics. Deshpande S V (1994) Supply Response of Chilli in Karnataka state-An Econometric Analysis. M.Sc. (Agri.) Thesis, University of Agricultural Science, Dharwad (India). Desai B M and Namboodiri N V (1997) Government expenditure on agriculture under planning era, in B M Desai (Ed.). Agricultural development for the Ninth Plan under New Economic Environment. Oxford and IBH publishing company, New Delhi. Dhanuka O P (1990) Problems and prospects of sugar industry. Indian Sug. 40 (6): 371-76. Dhindsa K S and Sharma A (1997) A regional analysis of growth and supply responses of pulses-A study of Punjab. Indian J. Agric. Econ. 52 (1): 87-100. Dixit P K., Hiremath K C and Singh R J (1998) Production behivour of groundnut farmers in Karnataka. Indian J. Agric. Econ. 53 (2): 163-68. El-Batran M M (2003) Supply response for wheat in Egypt. Bulletin of Faculty of Agriculture, Cairo University 54 (1): 21-39 148 El-Sharif L M, El-Eshmawiy K H, Awad K A M and Barghash R M (2009) Economic potentialities achieve self-sufficiency from Egyptian sugar under the international variables. Am.-Eurasian J. Agric. Env. Sci. 5 (5): 655-663. Gajja B L, Kalla J C and Vyas D L (1983) Supply response of groundnut in Rajasthan. Agric. Situ. India 38 (6): 403-406. Gallant A (1992) Three stage Least Square Estimation for a System of Simultaneous Non linear Implicit Equations. J. Econometrics 5: 71-88. Girei A A and Giroh D Y (2012) Analysis of the Factors affecting Sugarcane (Saccharum officinarum) Production under the Out growers Scheme in Numan Local Government Area Adamawa State, Nigeria. J. Edu. Practice 3 (8): 195-200. Goel A (2002) Problems and prospects of the sugar industry. Indian Sug. 52 (9): 651-656. Goel V abd Kaur T (2000) Performance analysis of Bhogpur and Jagraon Sugar mills in Punjab. Ind. J. Agril. Mktg. 14 (2): 73-76. Goel V (2009) Problems and prospects of sugar industry in Punjab. Research Report. Department of Economics and Sociology, Punjab Agricultural University, Ludhiana. Gohil D (2000) Analysis of profitability in sugar industry- A case study of Bardoli cooperative sugar mill. Coop. Sug. 31 (7): 541-545. Grewal S S and Rangi P S (1982) Sugar industry in Punjab – problems and prospects. Indian Sug. 31 (1): 807-10, 739-42. Grover D K (1987) An economic analysis of fluctuations in sugar industry with particular reference to Punjab. Ph.D (Thesis), Department of Economics and Sociology, Punjab Agricultural University, Ludhiana Grover D K (1991) A sugarcane supply model-An econometric study. Productivity 32 (2): 267-271. Grover D K (1993) Sugar price model-A system approach. Indian J. Agril. Mktg. 7 (2): 186192. Grover D K (1994) Acreage response of sugarcane in Punjab. Indian J. Agril. Mktg. 8 (1): 134-38. Gulati, Ashok and Tim Kelley (1999) Trade Liberalization and Indian Agriculture, Oxford University Press. Guledgudda S S, Hiremath G K and Shripad V (2001) Trend analysis of tea production in India. J. Plantation Crops 29 (2): 64-69. Haruna U and Kushwaha S (2003) Fadama farmers characteristics and adoption of agricultural technology in Bauchi state. Nigerian J. of Agril. Tech. 11: 99-104. 149 Hazell P B R, Soliman I, Perez N and Siam G (1995) Impacts of the Structure Adjustment Program on Agricultural Production and Resource Use in Egypt. International Food Policy Research Institute (IFPRI), EPTD, Paper No. 10, Washington, D.C. Herdt R W (1970) A disaggregate approach supply. American J. Agric. Econ. 52 (4): 512520. Hickman B G (1964) On a method of capacity estimation. J. Am. Statist. Ass. 59: 529-549. Jaforullah M (19920 Sugarcane area response in the mill zones of Bangladesh, 1947/481981/82. The Devel. Economies. 30 (3): 236-258. Jakhade V M and Mujumdar N A (1964) Response of agricultural producers to prices: The case of jute and rice in India. Indian J. Agric. Econ. 19 (3): 204-209. Janaiah A, Krishnaiah J and Raju K S (1991) An econometric analysis of farm supply response-A case study of cotton in Andhra Pradesh. Indian J. Agril. Mktg 5 (1): 163171. Jha (1970) Acreage response of sugarcane in factory areas of North Bihar. Indian J. Agric. Econ. 25 (1): 79-84. Kahlon A S, Johl S S and Dwivedi H N (1965) Structure of farm prices in the Punjab. Indian J. Agric. Econ. 20 (1): 35-40. Kale P V, Kakad B S, Aher T D and Sale D L (1999) Costs and return structure of sugarcane in Western Maharashtra. Indian Sug. 49 (10): 713-721. Kanoria B K (1982) Sugar policy. Indian Sug. 31 (11): 737-42. Kaur A and Saran S K (2011) Status and constraints of sugarcane cultivation in Punjab. Indian J. Agril. Mktg. 25 (1): 78-87. Kaur J, Singh B and Rangi P S (2000) Sugarcane cultivation in Punjab: Growth performance & future prospects. Productivity 40 (4): 653-660. Krishanan M, Vasisht A K and Sharma B M (1991) Growth and instability in Kerala agriculture. Agric. Situ. India 46 (1): 21-25. Krishna R. (1982) Some aspects of agricultural growth, price policy and equity in developing countries. Food Research Institute Studies 18 (3): 219-260. Krishana J and Rao M S (1965) Dynamic Acreage Allocation for Wheat in Uttar Pradesh. Indian J. Agric. Econ. 22 (1): 37-52. Krishana J and Rao, M S (1967) Price Expectation and Acreage Response for Wheat in Uttar Pradesh. Indian J. Agric. Econ. 20 (1): 20-25. Krishna R (1963) Farm supply response in India-Pakistan: A case study of Punjab region. Econ. J. 73 (2): 477-487. 150 Krishna, R (1962) A Note on the Elasticity of the Marketable Surplus of a Subsistence Crop. Indian J. Agric. Econ. 17: 79-84. Krishnan T N (1965) The marketable surplus of food grains, Is it inversely related to price? Econ. Wkly. 17 (4): 18-20. Kumar P and Rosegrant M (1997) Dynamic Supply Response of Cereals and Supply projections: A 2020 Vision. Agric. Econ. Res. Rev. 10 (1): 3-22. Kumawat L and Prasad K (2012) Supply response of sugarcane in India: results from all-India and state level. Indian J. Agric. Econ. 67(4): 585-599. Ladha R L and Shah R S (2012) A study of ratios analysis of Siddeshwar Sugar Factory, Solapur. Mahmul. 1 (9) retrieved from www.aygrt.isrj.net Lahiri A K and Roy P (1985) Rainfall and supply response-A study of rice in India. J. Dev. Econ. 18 (3): 315-334. Lahoti S R, Chole R R and Rathi N R (2010) Constraints in Adoption of Sugarcane Production Technology. Agric. Sci. Dig. 30 (4): 270-272. Lal J (1987) Response of sugarcane producers to price and non-price factors. Agric. Situ. India 41(10): 817-822. Lal J and Singh K (1981) Determinants of sugarcane acreage fluctuations in Uttar Pradesh. Indian J. Agric. Econ. 36 (1): 101-109. Lathika M and Kumar C E A (2005) Growth trends in Area, Production and Productivity of coconut in India. Indian J. Agric. Econ. 60 (4): 686-697. Madhavan M (1972) Acreage response of Indian farmers: A case study of Tamil Nadu. Indian J. Agric. Econ. 27 (1): 67–86. Mahajanashetti S B, Basavaraja H, Mundinamani S M and Hiremath, K C (1990) Area response of jowar in Karnataka-an econometric analysis. Agril. Situ. in India, 45 (1): 19-22. Mahlangu I and Lewis F (2008) Social and Institutional constraints to the production of sugarcane by small-scale growers in the Amatikulu catchment. Proceedings of the South African Sugar Technologists Association 81: 128-132. Maji C C, Jha D and Venkatraman L S (1971) Dynamic supply and demand models for better estimations and projections-An econometric study for major food grains in Punjab region. Indian J. Agric. Econ. 26 (1): 21-34. Mangahas M, Recto A E and Ruttan V W (1966) Price and market relationships for rice and corn in Philippines. J. Fm. Econ. 48 (3): 685-703. Maraddi G N (2006) An analysis of sustainable cultivation practices followed by sugarcane growers in Karnataka. University of Agricultural sciences, Dharwad (Ph.D thesis) retrieved from http://etd.uasd.edu/ft/th9347.pdf. 151 Marathe M S (2009) Sugar cooperatives. Pp. 1-108. Indian society for studies in cooperation, Pune Mishra V N (1998) Economic reforms, terms of trade, supply and private investment in agriculture: Indian experience. Econ. Political Wkly. 33 (31): 2105-09. Mohammad T A S (2008) Estimating growth rates and decomposition analysis of agricultural production in Iran (1970-2000). Trens in Agric. Econ. 1 (1):14-26. Mohanty B C (1995) Groundnut prices in Orissa market and its impact on area and production. Indian J. Agric. Mktg. 9 (1-2): 136-142. Mungekar B L (1997) Terms of Trade, Technology and Agricultural Development”, in B. M. Desai (Ed.) Agricultural Development Paradigm for the Ninth Plan Under New Economic Environment, CMA Monograph No. 179, Oxford and IBH Publishing Company, New Delhi. Murali P and Balakhrishna R (2012) Labour scarcity and selective mechanization of sugarcane agriculture in Tamil Nadu, India. Sug. Tech. 14 (3): 223-228. Murthy S C, Prasad E Y and Satyanarayana G (1992) Supply response of turmeric in Guntur district of Andhra Pradesh. Indian J. Agric. Mktg. 35 (1): 16-18. Mushtaq K and Dawson P J (2002) Acreage response in Pakistan: a co-integration approach. Culled from http://www.dx.doi.org Mythili G (2008) Acreage and yield response for major crops in the pre-and post-reform periods in India: A dynamic panel data approach, PP Series 061, Indira Gandhi Institute of Development of Research, Mumbai. Naik D and Patnaik S C (1984) Impact of price changes an area, output and productivity of potato in Orissa. Agric. Situ. India 39 (6): 425-429. Nain N, Khatkar R K and Singh V K (2002) Role of sugarcane processing industry and efficiency of processing in Hrayana. Indian J. Agric. Mktg. 16 (3): 92-96. Nair P R and Gopinanthan (1982) Some economic aspects of coconut in Kerala. In Pillai (ed). Agricultural Development in Kerala :187-203Agricole Publishing Academy. New Delhi. Nandhini M, Usha M and Palanivelu P (2012) Effectiveness of performance appraisal system in sugar mills at Erode district – Tamil Nadu. Int. J. Physical Social Sci. 2 (8): 51-66. Narayana N S S and Parikh K S (1981) Estimation of farm supply response and acreage allocation: A case study of Indian agriculture Research Report: 81-1, International Institute for Applied systems Analysis. Narayana N S S and Shah M M (1982) Farm Supply Response in Kenya: Acreage Allocation Model. Working Paper: 82-103. International Institute for Applied Systems Analysis. Nerlove M (1958) Distributed lags and estimation of long-run supply and demand elasticities: Theoretical considerations. J. Fm. Econ. 40 (2): 301-311. 152 Niamatullah, M and Khair-uz-Zaman (2009) Production and acreage response of wheat and cotton in NWFP, Pakistan. Pakistan J. Agric. Res. 22 (3-4): 101-111. Nikam G A (1988) General efficiency of sugar cooperative. A recovery approach. Indian Coop. Rev.26 (1): 105-12 Nosheen M and Iqbal J (2008) Acreage response of major crops in Pakistan (1970-71 to 2006-07). ARPN J. Agric. Biol. Sci. 3 (5&6): 55-64. Omezzine A (1996) An application of price expectation models on supply response of agricultural products. Direst, Series B, Pure and App. Sci. 23 (1): 29-32. Palanivel T (1995) Aggregate Agricultural Supply Response in Indian Agriculture Some Empirical Evidence and Policy Implementation. Indian Econ. Rev. 30 (2): 251-263. Pandey A P (2007) Indian Sugar Industry-A Strong Industrial Base for Rural India. MPRA Paper No. 6065, retrieved from www. mpra.ub.uni-muenchen.de/6065/ Parikh A (1967) Farm supply response: A distributive lag analysis. Oxford Institute of Statistics Bulletin 33: 57-72. Parthasarthy G (1984) Growth rates and fluctuations of agricultural production: A districtwise analysis in Andhra Pradesh. Econ. Political Wkly. 19 (26): A74-A77+A80-A84. Patil S M (1995) Yield gaps and constraints in groundnut production in Karnataka-An economic analysis. M.Sc (Agri.) Thesis. (Unpublished), UAS, Dharwad (India). Pervez W M (2001) Dynamics of food grains production in Pakistan. The Asian Econ. Rev. 2 (3): 438-446. Puri D D (1963) Sugar industry in Punjab. Indian Sug. 13 (7): 121-423. Rahman, S H and Yunus, M (1993) Price Responsiveness of supply of major crops in Bangladesh. The Bangladesh Development Studies, Working Paper No.8, June 1993. Pp 1-57. Rais M and Rath B (1990) Problems and Prospects of Sugar Industry in Uttar Pradesh. Indian Sug. 40 (9): 665-668. Raj (1963) Farm supply response in India-Pakistan-A case study of Punjab region. Econ. J. 73 (291): 477-487. Raju K V and Luckos C K (1991) Trends in area, production and exports of chillies from India. Agric. Situ. India 45 (11): 767-72 Ramaiah N A (2011) The Indian sugar industry: the decade past and the decade ahead. Indian Sug. 60 (10): 11-20. Ramasamy C, Uma K and Manimegalai S (1999) An analysis: Price relationship in sugarcane production in Tamil Nadu. Indian J. Agric. Mktg. 13 (2):15-23. 153 Ramasamy K, Kailasam C and Geethalakshmi V (2001) Area, production and productivity of sugarcane. Productivity 42 (2): 318-320. Ramulu M (1996) Supply response of sugarcane in Andhra Pradesh. Finance India. 10 (1): 116-122. Rao, I V Y (2012) Efficiency, yield gap and constraint analysis in irrigated vis-à-vis rainfed sugarcane in North Coastal Zone of Andhra Pradesh. Agric. Econ. Res. Rev. 25 (1): 167-171. Ravi K, Kumar K N and Raju V T (1996) Marketing of jaggery-A case study from Andhra Pradesh. Indian J. Agric. Mktg. 10 (3): 93-96. Ray S (2012) Reviewing performance of Indian sugar industry: An economic analysis. Food Science and Quality Management. 3: 35-53. Rehman F U, Saeed I and Salam A (2011) Estimating growth rates and decomposition Analysis of agriculture production in Pakistan: pre and post sap analysis. Sarhad J. Agric. 27 (1): 125-131. Ronan N J (1994) Predicting finance for mining and metal industry, minerals industries international. A bulletin for the institute of mining and metallurgy No. 1020 September 1994. Ronan N J (1998) Accounting for managers: Principle and practices. Mission Press Ndola. Sahay K K (1971) Acreage response of groundnut in major groundnut zones: A study in dynamics of supply. Agric. Situ. India, 26 (7): 477-481. Sangwan S S (1985) Dynamics of Cropping Pattern in Haryana: A Supply Response Analysis. The Developing Economies 23 (2): 173-186. Saraogi V (2010) Problems and prospects of the sugar industry. Indian Sug. 60 (9): 15-16. Sawant S (1978) Supply Behaviour in Agriculture-An Econometric Analysis, Himalaya Publishing House, Bombay. Shinde H R, Pagire B V, Kapase P M and Kasar D V (2002) An evaluation of cooperative sugar factory’s performance in Ahmednagar district. Indian J. Agric. Mktg. 16 (3): 108-109. Shinde N A, Patil B L, Murthy C and Desai N R M (2009) Profitability analysis of sugarcane based intercropping systems in Belgaum district of Karnataka. Karnataka J. Agric. Sci. 22 (4): 820-23. Shinde U R (2011) An analysis of pre and post of a leased out Cooperative sugar factory (CSF) n Maharashtra. Asian J. Mgmt. 2 (4): 173-177. Shrivastava A K, Srivastava A K, Solomon S, Sawnani A and Shukla S P (2011) Sugarcane cultivation and sugar industry in India: Historical perpectives. Sug. Tech. 13 (4): 266274. 154 Siju T and Kombairaju S (2001) Rice production in Tamil Nadu: A trend and decomposition analysis. Agric. Situ. India. 58 (4): 143-145. Sinha A R, Sinha H C and Thakurta J R G (1934) The Indian cultivators response to price. Sankhya 2 (3): 155-165. Singh J P (1982) An analytical study of marketing of sugarcane in Punjab state. M.Sc thesis, PAU, Ludhiana. Singh, A and Mehra, S P (1995) Yield and economics of various sugarcane autumn based intercropping systems. J. Research, Punjab Agricultural University. 32 (3): 259-264. Singh A and Srivastava R S L (2003) Growth and Instability in Sugarcane Production in Uttar Pradesh: A Regional Study. Indian J. Agric. Econ. 58 (2): 279-282. Singh N (2011) Industrial sickness: Causes & remedies. Annals of Mgmt. Res. 1 (2): 14-29. Singh N P, Singh P and Pal S (2007) Estimation of economic efficiency of sugar industry in Uttar Pradesh: A frontier production function approach. Indian J. Agric. Econ. 62 (2): 232-243. Singh O P (1998) Growth and supply response of oil seeds in Uttar Pradesh. Agric. Situ. India 55 (1): 3-6. Singh R D, Singh D and Rao P R (1974) Estimation of agricultural acreage response relationships: some methodological issue. Indian J. Agric. Econ. 29 (1): 26-38. Somaiya S K (1975) Problems and prospects of sugar industry. Indian Sug. 21 (3): 115-124. Surekha K (2005) Modeling Nonlinear Autoregressive Distributed Lag Models: A New Approach. J. Quantitative Econ. 21(1-2):101-114. Talekar S D (2005) Management of working capital: 126-175. Discovery publishing house, New Delhi. Tarimo A J P and Takamura Y T (1998) Sugarcane production, processing and marketing in Tanzania. African Study Monographs 19 (1): 1-11. Thamarajakshi R (1977) Role of price incentives in stimulating agricultural production in a developing economy. In Food Enough or Starvation for Millions Tata, ed. Douglas Ensmings. New Delhi: McGraw Hill. Townsend R and Thirtle C (1994) Dynamic acreage response: An error-correction model for maize and tobacco in Zimbabwe. Occasional Paper No. 7, International Association of Agricultural Economics. Townsend R F and Thirtle C (1997) Production incentives for small-scale farmers in Zimbabwe: The case of cotton and maize. Agrekon 36 (3): 251-267. Tripathi S and Gowda M V S (1993) An analysis of growth, instability and area response of groundnut in Orissa. Indian J. Agric Econ. 48 (3): 345-350. 155 Varghese P K (2004) Trend analysis in area, production, productivity and price behaviour of cardamom in Kerala. Indian J. Agric. Econ. 59 (4): 788-807. Vijayakumar A and Tamizhselvan P (2010) Corporate size and profitability-an empirical analysis. College Sadhana-J. for Bloomers of Res. 3 (1): 44-53. Wawire N W O, Shindu R M and Kipruto K B (2005) Identification and ranking of sugarcane production constraints: The case of Sony sugar zone. Kenya Sugar Research Foundation (KESREF), Kisumu. 1-6. Wegener M K (1997) Opportunity to Improve Economic Performance on Sugarcane Farms: Paper presented at the Department of Agriculture and CRC for sustainable sugar production. The University of Queensland. Old 4072. Australia Welsh D E (1991) Response to economic incentives by Abakaliki farmers in Nigeria. J. Fm. Econ. 47 (4): 15-l8. Yeledhalli R A (1987) Production and marketing of dry chillies in Dharwad district-An Econometric Analysis. Unpub. M.Sc. (Agri.) Thesis, University of Agricultural. Sciences, Dharwad (India). 156 Appendix-I Area, production and productivity of sugarcane in India and Punjab and per cent share of area and production of the state over the period of 1950-51 to 2011-12. Year India Area Yield (000 ha) (tonnes/ha) Punjab Production Area % share Yield Production % share (000 tonnes) 1950-51 1707 32.1 54823 151 8.85 30 4471 8.16 1951-52 1941 38.5 74760 189 9.74 29 5456 7.30 1952-53 1728 35.8 61860 176 10.19 28 4958 8.01 1953-54 1410 38.2 53848 157 11.13 29 4480 8.32 1954-55 1620 43.5 70549 168 10.37 31 5253 7.45 1955-56 1847 31.6 58384 183 9.91 31 5653 9.68 1956-57 2051 40.5 82908 108 5.27 27 2923 3.53 1957-58 2072 40.3 83651 106 5.12 32 3434 4.11 1958-59 1948 44.2 86149 110 5.65 35 3817 4.43 1959-60 2137 42.7 91394 124 5.80 35 4318 4.72 1960-61 2415 45.5 110544 136 5.63 36 4871 4.41 1961-62 2413 43.1 103967 132 5.47 31 4151 3.99 1962-63 2242 41 91913 113 5.04 31 3519 3.83 1963-64 2249 46.4 104225 116 5.16 32 3686 3.54 1964-65 2603 46.9 122077 122 4.69 36 4440 3.64 1965-66 2836 43.7 123990 167 5.89 35 5770 4.65 1966-67 2301 40.3 92826 156 6.78 28 4360 4.70 1967-68 2046 46.7 95500 127 6.21 36 4550 4.76 1968-69 2532 49.2 124682 156 6.16 33 5150 4.13 1969-70 2749 49.1 135024 149 5.42 42 6180 4.58 1970-71 2615 48.3 126368 128 4.89 41 5270 4.17 1971-72 2390 47.5 113579 103 4.31 39 4030 3.55 1972-73 2452 50.9 124866 102 4.16 46 4690 3.76 1973-74 2752 51.2 140805 110 4.00 53 5820 4.13 1974-75 2894 49.9 144289 123 4.25 50 6150 4.26 1975-76 2762 50.9 140604 114 4.13 54 6130 4.36 1976-77 2866 53.4 153007 113 3.94 54 6070 3.97 1977-78 3151 56.2 176966 116 3.68 56 6520 3.68 1978-79 3088 49.1 151655 110 3.56 57 6240 4.11 1979-80 2610 49.4 128833 77 2.95 51 3930 3.05 1980-81 2667 57.8 154248 71 2.66 55 3920 2.54 1981-82 3193 58.4 186358 106 3.32 58 6120 3.28 1982-83 3358 56.4 189505 104 3.10 61 6340 3.35 1983-84 3110 56 174076 84 2.70 66 5530 3.18 1984-85 2953 57.7 170319 79 2.68 63 4920 2.89 1985-86 2850 59.9 170648 78 2.74 65 5050 2.96 1986-87 3079 60.4 186090 97 3.15 63 6110 3.28 1987-88 3279 60 196737 104 3.17 55 5820 2.96 1988-89 3329 61 203037 97 2.91 62 6000 2.96 1989-90 3439 65.6 225569 103 3.00 63 6500 2.88 1990-91 3686 65.4 241045 101 2.74 55.4 6000 2.49 1991-92 3844 66.1 253995 109 2.84 63.5 6920 2.72 1992-93 3572 63.8 228003 112 3.14 56.9 6369 2.79 1993-94 3422 67.1 229660 77 2.25 61.2 4710 2.05 1994-95 3867 71.3 275540 83 2.15 62.2 5160 1.87 1995-96 4147 67.8 281100 132 3.18 65.3 8620 3.07 1996-97 4174 66.5 277560 173 4.14 63.8 11040 3.98 1997-98 3930 71.1 279541 126 3.21 56.7 7150 2.56 1998-99 4055 71.2 288722 103 2.54 59.5 6130 2.12 1999-00 4220 70.9 299324 108 2.56 62.7 6770 2.26 2000-01 4316 68.6 295956 121 2.80 64.2 7770 2.63 2001-02 4412 67.4 297208 142 3.22 65.1 9250 3.11 2002-03 4520 63.6 287383 154 3.41 60.3 9290 3.23 2003-04 3938 59.4 233862 123 3.12 53.8 6620 2.83 2004-05 3661 64.8 237088 86 2.35 60.1 5170 2.18 2005-06 4202 66.9 281172 84 2.00 57.9 4860 1.73 2006-07 5151 69 355520 99 1.92 60.1 6020 1.69 2007-08 5055 68.9 348188 110 2.18 60.3 6690 1.92 2008-09 4415 64.5 285029 81 1.83 57.6 4670 1.64 2009-10 4175 70 292302 60 1.44 61.6 3700 1.27 2010-11 4944 68.6 339168 70 1.42 59.6 4170 1.23 2011-12 5081 68.463 347870 80 1.57 60 4800 1.38 ii Appendix-II Income or profit/loss statement and Balance Sheets a. Morinda Cooperative Sugar Mills LTD. Morinda (Ropar) (`) Sr. No. Particulars 2006 2007 2008 2009 2010 2011 A Sales 295951486.00 273552741.64 249819869.46 510622308.95 412434297.15 195022051.38 1 Opening stock 276066660.00 204997324.98 252659668.83 427475612.40 244488136.48 138595258.80 2 Purchases 148600332.00 293874700.22 358871217.76 140488035.33 149440948.01 313539615.65 3 Direct expenses 75819540.00 97686015.17 121950357.16 95322642.65 106039719.98 123915427.69 4 Less: closing stock 204997326.00 252659668.83 427475612.40 244488136.48 138595258.80 352669970.39 B Cost of goods sold (1+2+3-4) 295489206.00 343898371.54 306005631.35 418798153.90 361373545.67 223380331.75 C Gross profit 462280.00 -70345629.90 -56185761.89 91824155.05 51060751.48 -28358280.37 D Operating expenses 13091825.00 4656685.45 5071917.20 8377994.50 7684353.00 6420666.98 E Operating profit (C-D) -12629545.00 -75002315.35 -61257679.09 83446160.55 43376398.48 -34778947.35 F Non-operating income 6890000.00 5356650 866079.29 813939.32 0.00 14247211.07 G Non-operating expenses 16141197.00 12369831.23 20071471.83 28904031.95 13037668.14 15879939.72 H EBIT (E+F-G) -21880742.00 -82015496.58 -80463071.63 55356067.92 30338730.34 -36411676.00 I Less: interest 16112445.00 12320815.69 20036766.63 28703262.15 12367899.89 15465814.88 J EBT -37993187.00 -94336312.27 -100499838.26 26652805.77 17970830.45 -51877490.88 K Less: Tax - - - - - - L EAT -37993187.00 -94336312.27 -100499838.26 26652805.77 17970830.45 -51877490.88 LIABILITIES 1 share capital 44606227 47741988.84 47742659.84 47742849.84 47745944.39 47765072.39 2 Reserve and surpluses 238261536 268959393.60 270598240.6 214155059.60 217214434.60 220208473.60 A Net worth/ shareholder equity (1+2) 282867763 316701382.44 318340900.44 261897909.44 264960378.99 267973545.99 iii 3 Secured loans 327486305 433342698.21 593165959.95 549396147.00 346279470.00 604591925.80 4 Unsecured Loans B Total debt/long term equity (3+4) 327486305 433342698.21 593165959.95 549396147.00 346279470.00 604591925.80 C Current liabilities 81196692 89753860.58 167642515.62 42388641.92 41137130.38 53152065.20 5 Previous year accumulated loss/profit 6 Add: Current year loss 7 Less: current year's profit D Profit and loss (5+6-7) E Total liabilities (A+B+C+D) 691550760 839797941.23 1079149376.01 853682698.36 682715709.63 925717536.99 A Fixed assets 206000332 205679397.29 206119888.60 210153860.82 218731450.69 221624936.69 B Investment 12962400 12961400.00 12961400.00 12961400.00 12961400.00 12961400.00 1 Cash and balance 761019 2201378.29 2892097.40 2520993.39 6525474.20 6733895.31 2 inventories 213992674 279670954.78 438777697.29 326695154.31 186511569.81 418506616.64 3 loan and advances 25225619 24471619.33 23099821.21 20408886.25 25843411.34 27678339.02 C Current assets 239979312 306343952.40 464769615.90 349625033.95 218880455.35 452918850.97 D Net current asset 158782620 216590091.82 297127100.28 307236392.03 177743324.97 399766785.77 1 Previous year accumulated loss/profit 232797695 232797694.96 314835399.84 336298471.51 232142403.59 201800673.33 2 Add: Current year loss - 82015496.58 80463071.67 - - 36411676.00 3 Less: current year's profit - - - 55356067.92 - - E Profit & Loss A/C (1+2-3) 232797695 314813191.5 395298471.5 280942403.6 232142403.6 238212349.3 F TOTAL 691739739 839797941.23 1079149376.01 853682698.36 682715709.63 925717536.99 30338730.26 30338730.26 ASSETS Capital employed 610354068.00 750044080.65 911506860.39 811294056.44 611239848.99 872565471.79 Quick assets 25986638.00 26672997.62 25991918.61 22929879.64 32368885.54 34412234.33 iv b. Nawanshahr Cooperative Sugar Mill Limited, Nawanshahr (SBS Nagar) (`) Sr. no. Particulars A 2006 2007 2008 2009 2010 2011 Sales 524182663.48 506520191.86 364537291.56 714315535.85 746671619.48 397679687.33 1 Opening stock 423937818.04 397983588.03 380249516.84 537553389.85 436723078.60 281438869.39 2 Purchases 336924080.00 423727941.00 447216879.00 393560651.00 330698898.00 473417289.00 3 Direct expenses 77507424.56 90418888.00 95565167.97 92533439.88 88676286.09 110328249.86 4 Less: closing stock 397983588.03 380249516.84 537553389.85 436723078.60 281438869.39 477815940.78 B Cost of goods sold (1+2+3-4) 440385734.57 531880900.19 385478173.96 586924402.13 574659393.30 387368467.47 C Gross profit 83796928.91 -25360708.33 -20940882.40 127391133.72 172012226.18 10311219.86 D Operating expenses 30844108.42 32457199.76 31399781.84 31745271.13 33978092.07 38132414.07 E Operating (C-D) 52952820.49 -57817908.09 -52340664.24 95645862.59 138034134.11 -27821194.21 F Non-operating income 10396327.44 2436100.55 5949280.98 5254157.39 9334026.97 8782023.03 G Non-operating expenses 18280503.96 5830872.34 18549071.09 31721038.97 7543838.19 4258948.90 H EBIT (E+F-G) 45068643.97 -61212679.88 -64940454.35 69178981.01 139824322.89 -23298120.08 I Less: interest 18202321.96 5698531.34 18411438.87 31592537.50 6544838.00 4110550.15 J EBT 26866322.01 -66911211.22 -83351893.22 37586443.51 133279484.89 -27408670.23 profit v K Less: Tax L EAT 26866322.01 -66911211.22 -83351893.22 37586443.51 133279484.89 -27408670.23 LIABILITIES 1 share capital 116497027.98 116493172.58 116494472.58 116496992.58 116494102.58 116494102.58 2 Reserve and surpluses 30013263.74 30013263.74 29613263.74 29613263.74 30017240.74 30017240.74 A Net worth / shareholder equity (1+2) 146510291.72 146506436.32 146107736.32 146110256.32 146511343.32 146511343.32 3 Secured loans 217591200.31 206226351.79 361388628.75 383208304.12 46922000.00 257613924.81 4 Unsecured Loans B Total debt/long term equity (3+4) 217591200.31 206226351.79 361388628.75 383208304.12 46922000.00 257613924.81 C Current liabilities 262109662.23 306150619.29 384397723.48 274705774.73 275018001.28 284748326.82 5 Previous year accumulated loss/profit 424584598.04 424584598.04 424584598.04 493763578.55 634487001.44 207635577.34 6 Add: Current year loss 7 Less: current year's profit D Profit and loss (5+6-7) 424584598.04 424584598.04 424584598.04 493763578.55 634487001.44 207635577.34 E Total liabilities (A+B+C+D) 1050795752.30 1083468005.44 1316478686.59 1297787913.72 1102938346.04 896509172.29 vi ASSETS A Fixed assets 225831500.41 226328487.06 228870286.30 230009754.54 230922414.90 233071528.22 B Investment 10353613.00 10333613.00 10331547.00 10343817.00 10350707.00 10351157.00 1 Cash and balance 5296548.11 2572947.30 1244531.48 1239352.84 18598493.97 6964488.01 2 inventories 415842690.56 399196203.96 564503779.76 499929199.06 326959581.54 530173860.93 3 loan and advances 93017110.35 83122784.37 84677117.95 129414366.18 89255724.93 92650018.05 C Current assets 514156349.02 484891935.63 650425429.19 630582918.08 434813800.44 629788366.99 D Net current asset 1 Previous year accumulated loss/profit 300454289.87 300454289.87 361910969.75 426851424.10 426851424.10 23298120.08 2 Add: Current year loss 61456679.88 64940454.35 3 Less: current year's profit E Profit & Loss A/C (1+2-3) 361910969.8 426851424.10 426851424.10 426851424.10 23298120.08 F TOTAL 1050795752.30 1083465005.44 1316478686.59 1297787913.72 1102938346.44 896509172.29 Capital employed 364101492.03 352732788.11 507496365.07 529318560.44 193433343.32 404125268.13 Quick assets 98313658.46 85695731.67 85921649.43 130653719.02 107854218.90 99614506.06 300454289.9 vii Appendix-III INCOME OR PROFIT/LOSS STATEMENT AND BALANCE SHEETS a. Wahid Sandhar Sugar Limited, Phagwara (`) Sr. no. Particulars A 2006 2007 2008 2009 2010 2011 Sales 660163101 864756047 946790855 1073142904 1080778594 759889089 1 Opening stock 291239466 368293692 385229712 430356825 390089817 392307321 2 Purchases 487295215 650782817 685631005 714134601 651101959 583069862 3 Direct expenses 102274549 126862761 146794191 148358755 212168772 130747699 4 Less: closing stock 365997244 385229712 430356825 390089817 392307321 540073323 B Cost of goods sold (1+2+3-4) 514811986 760709558 787298083 902760364 861053227 566051559 C Gross profit 145351115 104046489 159492772 170382540 219725367 193837530 D Operating expenses 22832801 28298190 33869743 29692601 28736189 30589583 E Operating profit (CD) 122518314 75748299 125623029 140689939 190989178 163247947 F Non-operating income 608974 309280 902458 844851 1114724 1814441 G Non-operating expenses 51631709 56798522 105661043 109717345 132553619 115965079 H EBIT (E+F-G) 71495579 19259057 20864444 31817445 59550283 49097309 viii I Less: interest J EBT 71495579 19259057 20864444 31817445 59550283 49097309 K Less: Tax 8033815 7892677 9946223 18283375 24747623 17902192 L EAT 63461764 11366380 10918221 13534070 34802660 31195117 LIABILITITIES 1 share capital 132500800 137500800 137500800 197500800 197500800 197500800 2 Reserve and surpluses 102052403 123336128 141385785 229170890 278427249 318796141 A Net worth / shareholder equity (1+2) 234553203 260836928 278886585 426671690 475928049 516296941 3 Secured loans 229723244 739025671 836407147 944925064 1004667167 928987622 4 Unsecured Loans 49232382 67732382 66232382 74062382 98793552 51932510 5 Other terms liabilities 12756392 13064212 14837818 15503776 13700667 12846005 B Total debt/long term equity (3+4+5) 291712018 819822265 917477347 1034491222 1117161386 993766137 C Current liabilities 105729600 100631226 357539849 247231372 221199159 319811792 5 Previous year accumulated loss/profit 6 Add: Current year loss 7 Less: current year's profit D Profit and loss (5+6-7) ix E Total liabilities (A+B+C+D) 631994821 1181290419 1553903781 1708394284 1814288594 1829874870 ASSETS A Fixed assets 199269559 608717545 635866367 1064750396 1185860746 1089740072 B Investment 2000000 2000000 2000000 2000000 2000000 2000000 1 Cash and balance 12606685 63400823 184246764 37109509 29749123 35372435 2 inventories 371495820 420732290 474555660 449104176 449490927 584376470 3 loan and advances 46622757 86439761 257234990 155430203 147187798 118385893 C Current assets 430725262 570572874 916037414 641643888 626427848 738134798 D Net current asset 324995662 469941648 558497565 394412516 405228689 418323006 1 Previous year accumulated loss/profit 2 Add: Current year loss 3 Less: current year's profit E Profit & Loss A/C (1+2-3) F TOTAL 631994821 1181290419 1553903781 1708394284 1814288594 1829874870 Capital employed 526265221 1080659193 1196363932 1461162912 1593089435 1510063078 Quick assets 59229442 149840584 441481754 192539712 176936921 153758328 x b. Indian Sucrose Limited, Mukerian (`) Sr. no. Particulars A 2006 2007 2008 2009 2010 2011 Sales 1017556450 1071720837 1158883345 1017222611 1038436727 1141189318 1 Opening stock 359884959 385548637 570814971 570673958 575949308 614310950 2 Purchases 600147930 855577989 818744845 659999388 689709345 1156498925 3 Direct expenses 146325615 181554487 180487583 192184952 169341511 222573887 4 Less: closing stock 385548637 570814972 570673958 575949307 614310950 1041411458 B Cost of goods sold (1+2+3-4) 720809867 851866141 999373441 846908991 820689214 951972304 C Gross profit 296746583 219854696 159509904 170313620 217747513 189217014 D Operating expenses 48158682 39633840 54019201 64163765 81163566 117770879 E Operating (C-D) 248587901 180220856 105490703 106149855 136583947 71446135 F Non-operating income 1204049 1092811 421737 486266 12651372 97659941 G Non-operating expenses 67901755 58533727 34766102 27758871 68828286 60751234 H EBIT (E+F-G) 181890195 122779940 71146338 78877250 80407033 108354842 I Less: interest 36885918 36194817 60064916 59155568 103265053 62836791 J EBT 145004277 86585123 11081422 19721682 -22858020 161480871 profit xi K Less: Tax 55763726 43034402 12083068 9261791 29015067 -2085557 L EAT 89240551 43550721 -1001646 10459891 -51873087 163566428 LIABILITIES 1 share capital 154182570 154183320 154183320 154183320 224183320 224183320 2 Reserve and surpluses 123992188 181215568 169926907 208520100 253975053 260254407 A Net worth / shareholder equity (1+2) 278174758 335398888 324110227 362703420 478158373 484437727 3 Secured loans 549964493 632683717 650423666 921965718 1018710115 1535293371 4 Unsecured Loans 6230000 4451773 4849564 2150000 111057600 100109209 57106549 99308274 110764899 100631940 92825154 86602006 B Total debt/long term equity (3+4) 613301042 736443764 766038129 1024747658 1222592869 1722004586 C Current liabilities 213633580 381344249 544445198 964391527 1217221160 722413641 5 Previous year accumulated loss/profit 6 Add: Current year loss 7 Less: current year's profit D Profit and loss (5+6-7) 0 0 0 0 0 0 xii E Total liabilities (A+B+C+D) 1105109380 1453186901 1634593554 2351842605 2917972402 2928855954 ASSETS A Fixed assets 508837966 594538366 555437437 541717135 900680506 866472624 B Investment 11722532 11722532 11722532 20222532 20222532 74222532 1 Cash and balance 64496861 81446203 7676859 278201480 212478980 20516350 2 inventories 414647633 609255537 614339994 619977925 686895083 1080717018 3 loan and advances 105404388 156224263 445416732 891723533 1097695301 886927430 C Current assets 584548882 846926003 1067433585 1789902938 1997069364 1988160798 D Net current asset 370915302 465581754 522988387 825511411 779848204 1265747157 1 Previous year accumulated loss/profit 2 Add: Current year loss 3 Less: current year's profit E Profit & Loss A/C (1+2-3) F TOTAL 1105109380 1453186901 1634593554 2351842605 2917972402 2928855954 Capital employed 891475800 1071842652 1090148356 1387451078 1700751242 2206442313 Quick assets 169901249 237670466 453093591 1169925013 1310174281 907443780 xiii APPENDIX-IV Average cane crushed, percent recovery of sugar and production of sugar in India and Punjab over the period of 1950-51 to 2010-11 Year Punjab India Sugar (lakh tonnes) Average cane crushed (lakh tonnes) Recovery (%) Sugar Production (lakh tonnes) Average cane crushed (lakh tonnes) Recovery (%) 1950-51 0.11 1.16 9.77 11.01 109.71 10.03 1951-52 0.20 2.17 9.41 14.83 154.95 9.57 1952-53 0.16 2.6 10.21 13.14 131.73 9.98 1953-54 0.16 1.54 10.06 10.01 99.33 10.08 1954-55 0.10 3.2 9.18 16.9 160.11 9.92 1955-56 0.38 4.31 8.87 18.62 188.37 9.83 1956-57 0.59 6.3 9.01 20.59 211.87 9.73 1957-58 0.83 8.88 9.42 19.78 197.39 10.01 1958-59 0.70 8.18 8.58 19.18 194.87 9.84 1959-60 1.02 11.19 9.14 24.21 244.2 9.91 1960-61 1.22 13.72 8.92 30.28 311.09 9.74 1961-62 0.91 11.01 8.22 27.3 279.37 9.77 1962-63 0.61 6.96 8.93 21.35 207.65 10.24 1963-64 0.69 7.95 8.67 25.62 256.32 9.96 1964-65 0.98 11.58 8.49 32.32 334.59 9.64 1965-66 0.60 7.5 8.58 35.32 364.04 9.68 1966-67 0.35 4.19 8.32 21.58 216.59 9.91 1967-68 0.27 3.26 8.2 22.47 225.99 9.94 1968-69 0.38 5.46 6.93 35.57 376.61 9.46 1969-70 0.69 7.93 8.73 42.61 456.72 9.33 1970-71 0.48 5.61 8.57 37.4 382.04 9.78 1971-72 0.31 3.57 8.75 31.08 309.74 10.03 1972-73 0.42 5.13 8.09 38.73 404.064 9.57 1973-74 0.67 8.04 8.3 39.49 422.83 9.34 1974-75 0.77 8.57 9.02 47.95 484.25 9.9 1975-76 0.82 9.62 8.53 42.61 418.49 10.19 1976-77 0.86 9.4 9.16 48.4 489.67 9.92 1977-78 0.99 10.11 9.01 64.57 672.88 9.66 1978-79 0.94 9.94 9.43 58.41 597.15 9.78 xiv 1979-80 0.52 5.15 10.14 38.58 390.48 9.88 1980-81 0.51 5.86 8.78 51.5 515.98 9.98 1981-82 1.49 15.34 9.71 84.4 873.56 9.66 1982-83 1.5 14.17 10.62 82.3 826.94 9.96 1983-84 1.46 13.96 10.47 59.2 590.22 10.03 1984-85 1.42 13.39 10.63 61.4 600.69 10.24 1985-86 1.46 15.02 9.78 70.2 685.76 10.23 1986-87 2.34 24.15 9.69 85 852.24 9.98 1987-88 2.1 20.75 10.18 91.1 939.43 9.7 1988-89 2.45 25.47 9.61 87.5 856.93 10.21 1989-90 2.95 32.36 9.13 109.9 1111.49 9.89 1990-91 2.75 31.02 8.95 120.5 1223.19 9.85 1991-92 3.84 41.73 9.23 134 1339.87 10.02 1992-93 4.09 43.51 9.39 106.1 1030.02 10.31 1993-94 3.11 33.62 9.27 98.3 983.48 10.01 1994-95 3.19 35.05 9.13 146.4 1476.43 9.93 1995-96 6.33 73 8.7 174.8 1747.61 9.43 1996-97 6.13 69.21 8.86 130.4 1303.79 9.9 1997-98 3.31 36.6 9.05 128.5 1291.88 9.95 1998-99 3.11 36.63 8.49 155.4 1575.6 9.85 1999-00 4.21 46.24 9.1 182 1785.15 10.2 2000-01 4.96 51.13 9.7 185.1 1766.51 10.48 2001-02 5.93 62.81 9.45 185.3 1803.21 10.27 2002-03 5.87 60.35 9.72 201.4 1943.24 10.36 2003-04 3.9 40.06 9.72 135.5 1325.11 10.22 2004-05 3.15 32.2 9.79 126.9 1247.71 10.17 2005-06 3.38 36.76 9.18 193.21 1886.72 10.22 2006-07 5.5 50.91 9.55 281.99 2792 10.17 2007-08 5.34 57.61 9.26 262.98 2499 10.55 2008-09 2.4 26.04 9.29 263.3 1450 10.03 2009-10 1.81 21.12 8.59 189.05 1855.48 10.2 2010-11 2.85 34.33 8.8 245.4 2398.07 10.17 xv VITA Name of the Student : ABUJAM ANURADHA DEVI Father’s Name : Abujam Ibochouba Singh Mother’s Name : Abujam Chandrakala Devi Nationality : Indian Date of Birth : July 23, 1983 Permanent Address : Sugnu Makha Leikai, P.O. Sugnu, District-Thoubal, Sugnu-795101, Manipur EDUCATIONAL QUALIFICATION Bachelor’s Degree University and year of award : B.Sc. Agricultural (Hons.) HNB Garhwal University, Srinagar (Uttarakhand), 2007 Percentage of marks : 8.27 Master’s Degree M.Sc. (Agricultural Economics) University and year of award Central Agricultural University, Imphal, 2010 OCPA : 8.34/10.00 Title of the thesis : “Economics analysis of fish farm production in Thoubal district of Manipur” Doctorate’s Degree University and year of award : Ph. D. (Agricultural Economics) Punjab Agricultural University, Ludhiana, 2013 OCPA : 7.94/10.00 Title of the thesis : “An economic analysis of sugar industry in Punjab” Awards/Distinctions/Fellowship/Scholarships Cleared All India ICAR-JRF examination for PG programme Central Agricultural University Merit Fellowship during Master’s Degree Punjab Agricultural University Merit Scholarship during Ph.D. Degree Awarded INSPIRE Fellowship by DST, Government of India, New Delhi