PRODUCTIVITY IN INDIAN SUGAR INDUSTRY * Introduction : India is the fourth major sugar producing country in the world, the

first three being U.S.S.R, Brazil and Cuba in that order. Sugar industry occupies an important place among organized industries in India. The sugar industry provides direct employment to large number of people and indirect employment to millions. It is the largest among the processing Industries. It is ranked third largest industry in terms of its contribution to the net value added by manufacturing. Sugar has been manufactured in India since time immemorial. India regarded as the original home of sugarcane and being the largest producer of sugarcane has considerable potential for the development of sugar industry to meet domestic demand and part of the over seas demand. The sugar industry which ranks second among the industries of India makes significant contribution to Indias export earnings. Being an industry and producing an essential commodity, its importance need not be emphasized further. -------------------------------------------------------------------------------P.PRINCE DHANARAJ ,HEAD,ECONOMICS & R. BAKAVATHY, FELLOW C.P.A COLLEGE, BODINAYAKANUR, TAMILNADU PINCODE : 625513.

Productivity is an index of economic measure of efficiency with which human resources as a whole are utilized in the production process. Productivity at the department level, at the plant level and /or at the job level helps in evaluating the effectiveness of the various schemes of rationalization and scientific management. Productivity also serves as a guideline for the future planning of production. From the very first plan onwards, attempts were made to raise production and productivity in Industry, Agriculture and other sectors. The present study analyses the efficiency of sugar industry in terms of productivity during the period 1982- 83 to 1997 98. Among the studies on sugar industry in India, Sastry (1966) pointed out that there has been a declining Total Factor Productivity (TFP) over the period 1953-65 at regional and National levels. Mehta (1974) in his study also found that TFP has been falling in Indian sugar industry. Subramaniyan (1986) found that the relative contribution of residuary factors on value added in sugar industry was positive in all the selected states in India. Thus there have been conflicting instances of evidence on productivity growth in Indian sugar industry. Naturally the question arises as to what is the impact of New Economic Policy on productivity in Indian sugar industry in the recent period. Thus the main objectives of the present study are:

1. To measure the rate of growth of TFP in Indian sugar industry for the pre (1982-1990) and post-reform (1991-1998)periods. 2. To measure the relative contribution of TFP in Indian sugar industry on value added for pre and post reform periods. 3. To measure the labor efficiency of Indian sugar industry. METHODOLOGY: Sources of data: The study uses secondary data collected from Annual Survey of Industries (ASI). The ASI frame work is classified in to two sectors, the census sector and sample sector. The census sector covers all factories employing 50 or more workers and using power and 100 or more workers not using power. The sample sector covers remaining factories. The census sector and sample sector together are called factory sector. The present study is based on factory sector data and covers the period from 1982-83 to 1997-98. The states included for analysis were selected on the basis of their share in total production of sugar.

Measure of output
In the measurement of output, the important choices arose between value added and physical output. Physical output is the best measure of output. But this is not practicable, because most of the industries produce more than one output. Each output is expressed in different units and dissimilar products can be

aggregated by weights. Weights are computed on the basis of the relative share of overall output and separate price indices which are needed for diverse set of products. So the measuring of output in terms of physical output is not possible. In such case aggregation of output can be measured only in terms of value. This study has used gross value added .at constant prices as a measure of output. In two distinct approaches to get the figures of real value added there are two methods namely single deflation method and double deflation method. In single deflation method the value added at constant prices has been obtained by subtracting raw materials from that of gross output at current prices then the value is deflated by the respective product whole sale price index. In double deflation method, the value added at constant prices has been obtained from deducting the value of gross inputs at constant prices from the value of gross output at constant prices. Such studies were made by Balakrishanan and Pushpangadan (1994). The single deflation method is valid only if the price of materials related to the price of output is more or less constant for the period.. Present study uses gross value added by single deflation method. Infact, construction of single deflation method is superior to the double deflation method as quoted by Dholakia and Dholakia (1994). Labour input :

The ASI provides three distinct measures of labour input 1. Man days worked 2. Number of workers and 3. Numbers of employees (includes workers and persons other than workers). Asit Banerji(1976),Goldar(1986),Vijayalakshmi (1995) and Sunil Kumar(2001) have used the number of employees as a measure of labour input in their studies of productivity. The present study also takes the number of employees as a measure of labour input and all types of labour are treated as homogeneous. Capital input: The measurement of capital input is inherently difficult and has been controversial in the literature. An important question is whether to use gross or net capital stock. Goldar (1986) and Sunil Kumar(1996) have used gross fixed capital stock and allowed 2 % annual rate of discard of capital in their studies. The same method is followed in the present study also. The measurement of fixed capital stock series is constructed as follows. Kt = Kt-1+It-dKt-1 Kt = Gross fixed capital at constant prices by the year t It = Gross real investment in fixed capital during the year t d = annual rate of discard. The gross real investment is computed by following expressions. It = (Bt-Bt-1-Dt)/Pt Bt = Book value of fixed capital in the year t

Dt= depreciation in the year t Pt = price index of gross fixed capital formation Finally gross fixed capital stock series is adjusted by capacity utilization. ANALYTICAL FRAME WORK: Productivity refers to the efficiency or over all effectiveness of a productive unit. It is defined as ratio of output to the corresponding inputs. Productivity of each input under the assumption that all the other inputs are held constant called is partial productivity. In different partial productivity analysis, if indices move in opposite direction, no definite conclusion could be drawn about the performance of the industry. In such situations the Total Factor Productivity index (TFP) helps us to understand the efficiency of the industry. The ratio between the real output and real total factor inputs is defined as Total Factor Productivity. Real total factor inputs is a weighted sum of the quantities of different inputs. For the present study, To estimate TFP we use Divisia Tornquist approximation from a Translog production function. Such a formulation of TFP growth is given by TFPG = ( lnQt lnQt-1 ) - .5 ( Sit +Sit-1 )ln (Xit/Xit-1 )

Where q denotes output, Xit denotes the quantity of ith input for the the year t and S it is the share of input i in output for the year t . Following the study of Sunil Kumar(1995), the present study also presents an index of efficiency of labour input as the difference between the actual and desired rates of growth of labour productivity. It can be expressed as : EL = (Qi/Li)Ag (Qi/Li)Dg,where and (Qi/Li)Dg = (Ki/Li) + (Qi/Ki).That is desired rate of growth of labour productivity If EL= 0; This means that labour productivity is growing at the rate it should. If El >0; This indicates that productivity is being organized in such an efficient manner. If El <0; This indicates the presence of inefficiency of the use of labour input. RESULTS AND DISCUSSION : Variations in TFP Growth: This section presents inter temporal comparisons of TFP growth rates in Indian sugar industry of six major sugar producing (Qi/Li)Ag = Actual growth rate of labour productivity in state i

states and also at the aggregate level during the period 1982-1998. Besides these, an attempt is also made to evaluate the impact of new economic policy on productivity growth. Table 1 Average Annual Growth Rates of Total Factor Productivity in Indian Sugar Industry. States Pre-reform Post-reform Over period 1982-90 Period 1991-98 All(1982-98) All India -5.5 1.9 -1.8 Uttar Pradesh -4.7 -6.9 -5.8 Bihar 14.4 15.6 15.0 Karnataka 1.5 19.6 10.6 Maharastra -3.6 0.04 -1.8 Andhra Pradesh 7.9 -2.8 2.5 Tamil Nadu -12.5 3.7 -4.4
Note: Growth of rate of TFP as percentage over the previous period is TFPG = TFPt-TFPt-1 TFPt-1 X 100

At the all India level, TFP decelerates at 1.8 per cent per annum during the entire study period. The major sugar producing states such as Bihar, Karnataka and Andhra Pradesh have positive growth in TFP during 1982-98. Bihar as one among the backward states holds good along with the industrially forward state like Karnataka which has registered higher growth in TFP with 15 per cent and 10.6 per cent per annum respectively. TFP growth in Uttar Pradesh, Maharastra and Tamil Nadu have been noticed with negative productivity from during 1982-98.
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The comparative analysis of growth rates of pre-reform period contains that productive efficiency at all India level decelerates at 5.5 per cent annum. Uttar Pradesh and Maharastra and Tamil Nadu have experienced a decline in TFP during the period 1982-90. The states like Bihar, Karnataka, Andhra Pradesh have positive growth rates of TFP during the pre-reform period. Bihar has relatively the highest rates of TFPG. With the emergence of New Economic Policy from 1991 on wards, the TFP in all India level had grown significantly at the modest rate 1.9 per cent per annum during 1991-98. The TFP for the states like Bihar, Karnataka, Maharashtra and Tamil Nadu in the post reform period has higher rate than the pre reform period. In fact the TFP growth rate of Tamil Nadu for pre-reform period is 12.5 per cent per annum, and the same for the post-reform period is 3.7 per cent per annum. An improvement in TFP growth performance has been observed at the all India level and almost in all the states except Andhra Pradesh and Uttar Pradesh in the post reform period. So it can be inferred that the impact of Economic Policy results has positive acceleration of TFP in the Indian sugar industry. Sources of Growth of Output:

The growth rate of output indicated by value added can be broken down into 1). The share of weighted growth of labour 2). the share weighted growth of capital and 3). TFP growth. Table 2 Sources Growth of Output in Indian Sugar Industry (1982-98) State All India Uttar Pradesh Bihar Karnataka Maharashtra AndhraPradesh Tamil Nadu Notes: Growth of output 7.4 6.3 15.1 22.1 11.0 10.6 7.6 Growth and % Growt and % Contribution contribution of contribution of TFP Labour* of Capital** -0.6639 (-8.90) 17.40 (235.0) -9.30 (-126.1) -3.5787 (-56.8) 15.15 (240.0) -11.6 (-182.2) -2.5416 (-16.5) 17.17 (113.7) 0.50 (2.8) 0.00033 (0 ) 13.45 (60.0) 8.60 (40.0) -0.0388 (-0.35) 10.48 (95.0) 0.91 (8.65) -0.1666 (-1.5) 17.81 (168) -7.0 (-66.5) 0.03425 (0.45) 18.11 (238) 10.53 (-138.5)

1. * Indicates the contribution of labour that is equal to the growth of labour weighted by labours share in output. 2. ** Indicates the contribution of capital that is equal to the growth rate of capital weighted by capitals share in output. 3. Figures in parentheses represent percentage contribution respectively.

The result reveals that the contribution of growth of input in the growth of output was accounted for capital alone in the Indian Sugar industry at the aggregate level. The TFP growth accounted positive for states like Bihar, Karnataka and Maharashtra. The contribution of TFP growth in the growth of output have negative value for the remaining states. The sources of
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growth for major sugar producing states highlighted that the capital accumulation was a predominant factor that contributed to the growth of output. In all the states except Tamil Nadu and Karnataka, the contribution of labour input in growth of output has been negative. In Karnataka, labour growth of output is close to zero. The analysis of source of growth of output revealed that the industry has the potentiality of absorbing capital in India. This indicates that the sugar industry in India is made capital intensive. The contribution of TFP growth in output is the highest in the industrially forward states like Karnataka and Maharashtra with 40 per cent and 8.65 per cent respectively. This indicates that industrialization is one of the activities to influence TFP.
INDEX OF LOBOUR EFFICIENCY

The index of efficiency of labour has been computed as the difference between the actual growth rate of actual labour productivity and desired growth rate of labour productivity. The index of efficiency of labour for Indian sugar industry at national and state levels is given in the following table.
TABLE :3 INDEX OF LOBOUR EFFICIENCY

EL STATES Pre reform

EL Post reform

EL 1982-98

period 1982-90 period 1991-98

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All India -4.9 Uttar Pradesh -7.3 Bihar -10.0 Karnataka 0.66 Maharastra -2.4 Andhra pradesh -0.5 Tamil Nadu -10.9 Note: EL = (Qi/Li)Ag (Qi/Li)Dg,where
i and

-2.5 4.9 -13.0 2.5 3.4 19.5 -5.6

-1.5 3.4 -11.5 1.5 0.5 -0.10 -8.5

(Qi/Li) Ag = Actual growth rate of labour productivity in state (Qi/Li)Dg = (Ki/Li) + (Qi/Ki).That is desired rate of growth of

Labour productivity It has been noticed that the efficiency of labour in the aggregate level declined over the period 1982-98. In the industrially developed states like Maharastra and Karnataka and industrially back ward state like Uttar Pradesh, the index of labour efficiency is found to be positive. This implies that these states performed much better in the use of labour input. The remaining states seem to be inefficient in the organisation of labour input in these regions. The compartive analysis of index of labour efficiency of pre-reform period contains labour efficiency at all India level and all the states except Karnataka have decelerates. From 1991 onwards, the index of lobour efficiency in all India level decline at the rate of 2.5 % level during 1991-98 and the same is less than that level during pre-reform period. The

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index of l,abour efficiency for all states have been higher than the pre-reform period except Bihar. In fact, the labour efficiency of Andhra Pradesh for pre-reform period is 0.5 % per annum and the same of Andhra Pradesh for the post reform period is 19.5 % per annum. An improvement in the labour utilization performance has been observed at the all India level and almost in all the states except Bihar. So the impact of new economic policy results in positive acceleration of better use of labour input as far as Indian sugar industry is concerned. CONCLUSION: In the present study, an attempt is made an attempt to analyse the Total Productivity Growth in Indian sugar industry. The results show that the TFP has been falling in Indian sugar industry at the rate 1.18 % per annum during 1982-98. The findings further illustrate that the industrially backward state like Bihar had higher growth in TFP during the pre- reform and post reform periods which implies that Bihar is more efficient in terms of productivity in Indian sugar industry. The impact of new economic policy results in positive acceleration of TFP growth in the Indian sugar industry. The overall analysis of growth of output of sugar revealed that the growth of capital input was a predominant source of growth of output. The contribution of TFP

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in value added was negative in aggregate level in the Indian sugar industry. It is found that the efficiency of labour in the aggregate level declined over the period 1982-98. The impact of new economic policy results in positive acceleration of better use of labour input observed at the all India level and almost in all the states except Bihar. The growth of capital was predominant source of growth of output which indicated that there is a reduction in employment in this sector. This is not an appropriate technique in the Indian context, because labour intensive technique is the appropriate one for any labour surplus country. Further poverty eradication is possible with the wide expansion of employment opportunities. Labour is one of the most important determinants of productivity. The human elements play a vital role in extracting productivity generating capacity, optimum utilisation of resources and even minimizing industrial disputes. So it is suggested that the sugar industries should take steps for effective organisation of labour, adopting sounder methods for increasing labour productivity and promoting industrial harmony in India at the present day world. Notes:

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1. The capital productivity has been computed as ratio of output to fixed capital stock. 2. The capital intensity has been measured as capital stock. 3. Regarding capital measurement, Capital formation index has been used for the study instead of machinery price index. It can be derived from the gross fixed capital formation at current prices and gross fixed capital formation at constant prices. 4. Capacity utilization has been measured as actual output to maximum output. The output in physical units has been calculated by the total value of output at current prices divided by price of sugar at current prices. 5. The share of labour has been obtained by a ratio of total emoluments to gross value added. Assuming constant return to scale, the share of capital input has been calculated as one minus the share of labour. 6. Growth rates have been calculated as percentage over the previous Period. 7. Q i(t)/ Li(t) =Ki(t) Q i(t)/ (Li(t) Ki(t)) , Differentiating totally , we have d(Q/L)= d(K/L) (Q/ K) + d(Q/K). (K/L). Dividing the whole equation by Q/L, we obtain d(Q/L) = d(K/L) (Q/L) (K/L)
+

d(Q/K) or (Q/K)

(Q/L)gr =(K/L)gr+(Q/K)gr
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(ie) desired rate of growth of labour productivity =growth rate of capital intensity + growth rate of capital productivity. Selected References: 1. Asit Banergi (1986), Capital Intensity and Productivity in Indian Industry, Macmilan, Delhi. 2. Balakrishnan, P. and K. Pushpangadan ( 1994), Total Factor Productivity Growth in Manufacturing Industry: A Fresh Look, Economic and Political Weekly, July 30. 3. Dholakia, B.H. and R.H. Dholakia (1994), Total Factor Productivity Growth in Indian Manufacturing, Economic and Political Weekly,Dec 31. 4. Goldar,N.(1986), Productivity in Indian Industry,Allied Publishers, Delhi. 5. Mehta,S.S (1974), Analysis of Sugar Industry A Production Function Approach, Anvesank, Vol 4,No. 2. 6. Sastry,V.S.R.K.(1966), Measurement of Productivity and Production in Sugar Industry in India, Indian Journal of Industrial Relations, Vol 12. 7. Shuji G.Chikawa(2001),Investment Boom and Under Utilisation of Capacity in the 1990s,Economic and Political Weekly, vol XXXVI, Nov 34.

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8. Subramanian,G.(1986), Indian Sugar Industry, Madurai Kamaraj University Publication. 9. Sunil Kumar,S.(2001), Productivity and Factor Substitution Theory and Analysis, Deep and Deep Publications Pvt Ltd, New Delhi. 10. Vijayalakshmi,S.(1995),Productivity in Non-Departmental Manufacturing Industry in India, Sri Alarmel Mangai Publications, Madurai.

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