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 uba in that order. Sugar industry occupies an important place among organized industries in India. !he sugar industry pro"ides direct employment to large number of people and indirect employment to millions. It is the largest among the processing Industries. It is ran#ed third largest industry in terms of its contribution to the net "alue 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 de"elopment of sugar industry to meet domestic demand and part of the o"er seas demand. !he sugar industry which ran#s second among the industries of India ma#es significant contribution to India$s e%port earnings. Being an industry and producing an essential commodity, its importance need not be emphasized further. &&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&
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'roducti"ity is an inde% of economic measure of efficiency with which human resources as a whole are utilized in the production process. 'roducti"ity at the department le"el, at the plant le"el and =or at the job le"el helps in e"aluating the effecti"eness of the "arious schemes of rationalization and scientific management. 'roducti"ity also ser"es as a guideline for the future planning of production. 4rom the "ery first plan onwards, attempts were made to raise production and producti"ity in Industry, ,griculture and other sectors. !he present study analyses the efficiency of sugar industry in terms of producti"ity during the period ;>?9& ?< to ;>>@ A >?. ,mong the studies on sugar industry in India, Sastry B;>88C pointed out that there has been a declining !otal 4actor 'roducti"ity B!4'C o"er the period ;>:<&8: at regional and (ational le"els. /ehta B;>@DC in his study also found that !4' has been falling in Indian sugar industry. Subramaniyan B;>?8C found that the relati"e contribution of residuary factors on "alue added in sugar industry was positi"e in all the selected states in India. !hus there ha"e been conflicting instances of e"idence on producti"ity growth in Indian sugar industry. (aturally the Euestion arises as to what is the impact of (ew )conomic 'olicy on producti"ity in Indian sugar industry in the recent period. !hus the main objecti"es of the present study are:

;. !o measure the rate of growth of !4' in Indian sugar industry for the pre B;>?9&;>>FC and post&reform B;>>;&;>>?Cperiods. 9. !o measure the relati"e contribution of !4' in Indian sugar industry on "alue added for pre and post reform periods. <. !o measure the labor efficiency of Indian sugar industry. METHODOLOGY: Sources o d!t!: !he study uses secondary data collected from ,nnual Sur"ey of Industries B,SIC. !he ,SI frame wor# is classified in to two sectors, the census sector and sample sector. !he census sector co"ers all factories employing :F or more wor#ers and using power and ;FF or more wor#ers not using power. !he sample sector co"ers remaining factories. !he census sector and sample sector together are called factory sector. !he present study is based on factory sector data and co"ers the period from ;>?9&?< to ;>>@&>?. !he states included for analysis were selected on the basis of their share in total production of sugar.

/easure of output
In the measurement of output, the important choices arose between "alue added and physical output. 'hysical output is the best measure of output. But this is not practicable, because most of the industries produce more than one output. )ach output is e%pressed in different units and dissimilar products can be

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aggregated by weights. 6eights are computed on the basis of the relati"e share of o"erall output and separate price indices which are needed for di"erse 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 "alue. !his study has used gross "alue added .at constant prices as a measure of output. In two distinct approaches to get the figures of real "alue added there are two methods namely single deflation method and double deflation method. In single deflation method the "alue added at constant prices has been obtained by subtracting raw materials from that of gross output at current prices then the "alue is deflated by the respecti"e product whole sale price inde%. In double deflation method, the "alue added at constant prices has been obtained from deducting the "alue of gross inputs at constant prices from the "alue of gross output at constant prices. Such studies were made by Bala#rishanan and 'ushpangadan B;>>DC. !he single deflation method is "alid only if the price of materials related to the price of output is more or less constant for the period.. 'resent study uses gross "alue added by single deflation method. Infact, construction of single deflation method is superior to the double deflation method as Euoted by *hola#ia and *hola#ia B;>>DC. L!"our in#ut :

!he ,SI pro"ides three distinct measures of labour input ;. /an days wor#ed 9. (umber of wor#ers and <. (umbers of employees Bincludes wor#ers and persons other than wor#ersC. ,sit BanerjiB;>@8C,7oldarB;>?8C,2ijayala#shmi B;>>:C and Sunil 1umarB9FF;C ha"e used the number of employees as a measure of labour input in their studies of producti"ity. !he present study also ta#es the number of employees as a measure of labour input and all types of labour are treated as homogeneous. C!#it!$ in#ut: !he measurement of capital input is inherently difficult and has been contro"ersial in the literature. ,n important Euestion is whether to use gross or net capital stoc#. 7oldar B;>?8C and Sunil 1umarB;>>8C ha"e used gross fi%ed capital stoc# and allowed 9 G annual rate of discard of capital in their studies. !he same method is followed in the present study also. !he measurement of fi%ed capital stoc# series is constructed as follows. 1t H 1t&;IIt&d1t&; 1t H 7ross fi%ed capital at constant prices by the year Jt$ It H 7ross real in"estment in fi%ed capital during the year Jt$ d H annual rate of discard. !he gross real in"estment is computed by following e%pressions. It H BBt&Bt&;&*tC='t Bt H Boo# "alue of fi%ed capital in the year Jt$

*tH depreciation in the year Jt$ 't H price inde% of gross fi%ed capital formation 4inally gross fi%ed capital stoc# series is adjusted by capacity utilization. ANALYTICAL %RAME &OR': 'roducti"ity refers to the efficiency or o"er all effecti"eness of a producti"e unit. It is defined as ratio of output to the corresponding inputs. 'roducti"ity of each input under the assumption that all the other inputs are held constant called is partial producti"ity. In different partial producti"ity analysis, if indices mo"e in opposite direction, no definite conclusion could be drawn about the performance of the industry. In such situations the !otal 4actor 'roducti"ity inde% B!4'C helps us to understand the efficiency of the industry. !he ratio between the real output and real total factor inputs is defined as !otal 4actor 'roducti"ity. Real total factor inputs is a weighted sum of the Euantities of different inputs. 4or the present study, !o estimate !4' we use *i"isia A !ornEuist appro%imation from a !ranslog production function. Such a formulation of !4' growth is gi"en by !4'7 H B lnKt A lnKt&; C & .: B Sit ISit&; Cln BLit=Lit&; C

6here E denotes output, Lit denotes the Euantity of ith input for the the year Jt$ and S it is the share of input Ji$ in output for the year Jt$ . 4ollowing the study of Sunil 1umarB;>>:C, the present study also presents an inde% of efficiency of labour input as the difference between the actual and desired rates of growth of labour producti"ity. It can be e%pressed as : )5 H BKi=5iC,g A BKi=5iC*g,where and BKi=5iC*g H B1i=5iC I BKi=1iC.!hat is desired rate of growth of labour producti"ity If )5H FM !his means that labour producti"ity is growing at the rate it should. If )l NFM !his indicates that producti"ity is being organized in such an efficient manner. If )l OFM !his indicates the presence of inefficiency of the use of labour input. RESULTS AND DISCUSSION : 2ariations in !4' 7rowth: !his section presents inter temporal comparisons of !4' growth rates in Indian sugar industry of si% major sugar producing BKi=5iC,g H ,ctual growth rate of labour producti"ity in state Ji$

states and also at the aggregate le"el during the period ;>?9&;>>?. Besides these, an attempt is also made to e"aluate the impact of new economic policy on producti"ity growth. !able ; A(er!)e Annu!$ Gro*t+ R!tes o Tot!$ %!ctor Producti(it, in Indi!n Su)!r Industr,. States 're&reform 'ost&reform ."er period ;>?9&>F 'eriod ;>>;&>? ,llB;>?9&>?C ,ll India &:.: ;.> &;.? Uttar 'radesh &D.@ &8.> &:.? Bihar ;D.D ;:.8 ;:.F 1arnata#a ;.: ;>.8 ;F.8 /aharastra &<.8 F.FD &;.? ,ndhra 'radesh @.> &9.? 9.: !amil (adu &;9.: <.@ &D.D
(ote: 7rowth of rate of !4' as percentage o"er the pre"ious period is !4'7 H !4't&!4't&; !4't&; L ;FF

,t the all India le"el, !4' decelerates at ;.? per cent per annum during the entire study period. !he major sugar producing states such as Bihar, 1arnata#a and ,ndhra 'radesh ha"e positi"e growth in !4' during ;>?9&>?. Bihar as one among the bac#ward states holds good along with the industrially forward state li#e 1arnata#a which has registered higher growth in !4' with ;: per cent and ;F.8 per cent per annum respecti"ely. !4' growth in Uttar 'radesh, /aharastra and !amil (adu ha"e been noticed with negati"e producti"ity from during ;>?9&>?.
?

!he comparati"e analysis of growth rates of pre&reform period contains that producti"e efficiency at all India le"el decelerates at :.: per cent annum. Uttar 'radesh and /aharastra and !amil (adu ha"e e%perienced a decline in !4' during the period ;>?9&>F. !he states li#e Bihar, 1arnata#a, ,ndhra 'radesh ha"e positi"e growth rates of !4' during the pre&reform period. Bihar has relati"ely the highest rates of !4'7. 6ith the emergence of (ew )conomic 'olicy from ;>>; on wards, the !4' in all India le"el had grown significantly at the modest rate ;.> per cent per annum during ;>>;&>?. !he !4' for the states li#e Bihar, 1arnata#a, /aharashtra and !amil (adu in the post reform period has higher rate than the pre reform period. In fact the !4' growth rate of !amil (adu for pre&reform period is A;9.: per cent per annum, and the same for the post&reform period is <.@ per cent per annum. ,n impro"ement in !4' growth performance has been obser"ed at the all India le"el and almost in all the states e%cept ,ndhra 'radesh and Uttar 'radesh in the post reform period. So it can be inferred that the impact of )conomic 'olicy results has positi"e acceleration of !4' in the Indian sugar industry. Sources o Gro*t+ o Out#ut:

>

!he growth rate of output indicated by "alue added can be bro#en down into ;C. !he share of weighted growth of labour 9C. the share weighted growth of capital and <C. !4' growth. !able 9 Sources Gro*t+ o Out#ut in Indi!n Su)!r Industr, -./012/03 State ,ll India Uttar 'radesh Bihar 1arnata#a /aharashtra ,ndhra'radesh !amil (adu (otes: 7rowth of output @.D 8.< ;:.; 99.; ;;.F ;F.8 @.8 7rowth and G 7rowt and G ontribution contribution of contribution of !4' 5abourP of apitalPP &F.88<> B&?.>FC ;@.DF B9<:.FC &>.<F B&;98.;C &<.:@?@ B&:8.?C ;:.;: B9DF.FC &;;.8 B&;?9.9C &9.:D;8 B&;8.:C ;@.;@ B;;<.@C F.:F B9.?C F.FFF<< BF C ;<.D: B8F.FC ?.8F BDF.FC &F.F<?? B&F.<:C ;F.D? B>:.FC F.>; B?.8:C &F.;888 B&;.:C ;@.?; B;8?C &@.F B&88.:C F.F<D9: BF.D:C ;?.;; B9<?C ;F.:< B&;<?.:C

;. P Indicates the contribution of labour that is eEual to the growth of labour weighted by labour$s share in output. 9. PP Indicates the contribution of capital that is eEual to the growth rate of capital weighted by capital$s share in output. <. 4igures in parentheses represent percentage contribution respecti"ely.

!he result re"eals 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 le"el. !he !4' growth accounted positi"e for states li#e Bihar, 1arnata#a and /aharashtra. !he contribution of !4' growth in the growth of output ha"e negati"e "alue for the remaining states. !he sources of
;F

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 e%cept !amil (adu and 1arnata#a, the contribution of labour input in growth of output has been negati"e. In 1arnata#a, labour growth of output is close to zero. !he analysis of source of growth of output re"ealed that the industry has the potentiality of absorbing capital in India. !his indicates that the sugar industry in India is made capital intensi"e. !he contribution of !4' growth in output is the highest in the industrially forward states li#e 1arnata#a and /aharashtra with DF per cent and ?.8: per cent respecti"ely. !his indicates that industrialization is one of the acti"ities to influence !4'.
INDE4 O% LO5OUR E%%ICIENCY

!he inde% of efficiency of labour has been computed as the difference between the actual growth rate of actual labour producti"ity and desired growth rate of labour producti"ity. !he inde% of efficiency of labour for Indian sugar industry at national and state le"els is gi"en in the following table.
!,B5) :< INDE4 O% LO5OUR E%%ICIENCY

)5 S!,!)S 're A reform

)5 'ost A reform

)5 ;>?9&>?

period ;>?9&>F period ;>>;&>?

;;

,ll India &D.> Uttar 'radesh &@.< Bihar &;F.F 1arnata#a F.88 /aharastra &9.D ,ndhra pradesh &F.: !amil (adu &;F.> (ote: )5 H BKi=5iC,g A BKi=5iC*g,where
i$ and

&9.: D.> &;<.F 9.: <.D ;>.: &:.8

&;.: <.D &;;.: ;.: F.: &F.;F &?.:

BKi=5iC ,g H ,ctual growth rate of labour producti"ity in state J BKi=5iC*g H B1i=5iC I BKi=1iC.!hat is desired rate of growth of

5abour producti"ity It has been noticed that the efficiency of labour in the aggregate le"el declined o"er the period ;>?9&>?. In the industrially de"eloped states li#e /aharastra and 1arnata#a and industrially bac# ward state li#e Uttar 'radesh, the inde% of labour efficiency is found to be positi"e. !his implies that these states performed much better in the use of labour input. !he remaining states seem to be inefficient in the organisation of labour input in these regions. !he comparti"e analysis of inde% of labour efficiency of pre&reform period contains labour efficiency at all India le"el and all the states e%cept 1arnata#a ha"e decelerates. 4rom ;>>; onwards, the inde% of lobour efficiency in all India le"el decline at the rate of 9.: G le"el during ;>>;&>? and the same is less than that le"el during pre&reform period. !he

;9

inde% of l,abour efficiency for all states ha"e been higher than the pre&reform period e%cept Bihar. In fact, the labour efficiency of ,ndhra 'radesh for pre&reform period is AF.: G per annum and the same of ,ndhra 'radesh for the post reform period is ;>.: G per annum. ,n impro"ement in the labour utilization performance has been obser"ed at the all India le"el and almost in all the states e%cept Bihar. So the impact of new economic policy results in positi"e 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 !otal 'roducti"ity 7rowth in Indian sugar industry. !he results show that the !4' has been falling in Indian sugar industry at the rate ;.;? G per annum during ;>?9&>?. !he findings further illustrate that the industrially bac#ward state li#e Bihar had higher growth in !4' during the pre& reform and post reform periods which implies that Bihar is more efficient in terms of producti"ity in Indian sugar industry. !he impact of new economic policy results in positi"e acceleration of !4' growth in the Indian sugar industry. !he o"erall analysis of growth of output of sugar re"ealed that the growth of capital input was a predominant source of growth of output. !he contribution of !4'

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in "alue added was negati"e in aggregate le"el in the Indian sugar industry. It is found that the efficiency of labour in the aggregate le"el declined o"er the period ;>?9&>?. !he impact of new economic policy results in positi"e acceleration of better use of labour input obser"ed at the all India le"el and almost in all the states e%cept Bihar. !he growth of capital was predominant source of growth of output which indicated that there is a reduction in employment in this sector. !his is not an appropriate techniEue in the Indian conte%t, because labour intensi"e techniEue is the appropriate one for any labour surplus country. 4urther po"erty eradication is possible with the wide e%pansion of employment opportunities. 5abour is one of the most important determinants of producti"ity. !he human elements play a "ital role in e%tracting producti"ity generating capacity, optimum utilisation of resources and e"en minimizing industrial disputes. So it is suggested that the sugar industries should ta#e steps for effecti"e organisation of labour, adopting sounder methods for increasing labour producti"ity and promoting industrial harmony in India at the present day world. Notes:

;D

;. !he capital producti"ity has been computed as ratio of output to fi%ed capital stoc#. 9. !he capital intensity has been measured as capital stoc#. <. Regarding capital measurement, apital formation inde% has been used for the study instead of machinery price inde%. It can be deri"ed from the gross fi%ed capital formation at current prices and gross fi%ed capital formation at constant prices. D. apacity utilization has been measured as actual output to ma%imum output. !he output in physical units has been calculated by the total "alue of output at current prices di"ided by price of sugar at current prices. :. !he share of labour has been obtained by a ratio of total emoluments to gross "alue added. ,ssuming constant return to scale, the share of capital input has been calculated as one minus the share of labour. 8. 7rowth rates ha"e been calculated as percentage o"er the pre"ious 'eriod. @. K iBtC= 5iBtC H1iBtC K iBtC= B5iBtC 1iBtCC , *ifferentiating totally , we ha"e dBK=5CH dB1=5C BK= 1C I dBK=1C. B1=5C. *i"iding the whole eEuation by K=5, we obtain dBK=5C H dB1=5C BK=5C B1=5C
I

dBK=1C or BK=1C

BK=5Cgr HB1=5CgrIBK=1Cgr
;:

BieC desired rate of growth of labour producti"ity Hgrowth rate of capital intensity I growth rate of capital producti"ity. Se$ected Re erences: ;. ,sit Banergi B;>?8C, Q apital Intensity and 'roducti"ity in Indian IndustryR, /acmilan, *elhi. 9. Bala#rishnan, '. and 1. 'ushpangadan B ;>>DC, Q!otal 4actor 'roducti"ity 7rowth in /anufacturing Industry: , 4resh 5oo#R, )conomic and 'olitical 6ee#ly, -uly <F. <. *hola#ia, B.+. and R.+. *hola#ia B;>>DC, Q!otal 4actor 'roducti"ity 7rowth in Indian /anufacturingR, )conomic and 'olitical 6ee#ly,*ec <;. D. 7oldar,(.B;>?8C, Q'roducti"ity in Indian IndustryR,,llied 'ublishers, *elhi. :. /ehta,S.S B;>@DC, Q,nalysis of Sugar Industry A , 'roduction 4unction ,pproach$, ,n"esan#, 2ol D,(o. 9. 8. Sastry,2.S.R.1.B;>88C, Q/easurement of 'roducti"ity and 'roduction in Sugar Industry in India$, Indian -ournal of Industrial Relations, 2ol ;9. @. Shuji 7. hi#awaB9FF;C,RIn"estment Boom and Under Utilisation of apacity in the ;>>F$sR,)conomic and 'olitical

6ee#ly, "ol LLL2I, (o" <D.

;8

?. Subramanian,7.B;>?8C, QIndian Sugar IndustryR, /adurai 1amaraj Uni"ersity 'ublication. >. Sunil 1umar,S.B9FF;C, Q'roducti"ity and 4actor Substitution !heory and ,nalysis, *eep and *eep 'ublications '"t 5td, (ew *elhi. ;F. 2ijayala#shmi,S.B;>>:C,R'roducti"ity in (on&*epartmental /anufacturing Industry in IndiaR, Sri ,larmel /angai 'ublications, /adurai.

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