Homework Title / No. : Term Paper on Impact of increasing sugar prices on sugar demand in India.

TABLE OF CONTENT
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INTRODUCTION SUGAR PRICE DEMAND FACTOR – GLOBAL DEMAND FACTOR – INDIA RELATIVELY INELASTIC DEMAND CURVE GLOBAL PRODUCTION, SUPPLY SUGAR PRODUCTION AND SUPPLY IN INDIA FACTORS AFFECTING PRODUCTION THE BREAK-EVEN POINT SUGARCANE UTILIZATION SUGAR CONSUMPTION IN INDIA SUGAR EXPORT SUGAR PRODUCTION SUGAR MARKETS IN DISARRAY SUGAR IN THE NEXT CENTURY

Introduction: India is the largest producer of sugar in the world. In terms of sugarcane production, India and Brazil are almost equally placed. In India, out of the total cane available for crushing, 45% goes for sugar production and 55% for the production of ethanol directly from sugarcane juice. This gives the sugar industry in Indial an additional flexibility to adjust its sugar production keeping in view the sugar price in the international market as nearly 40% of the sugar output is exported. Sugar industry – Global: India are the largest sugar producing countries followed by China, USA, Thailand, Australia, Mexico, Pakistan, France and Germany. Global sugar production increased from approximately 125.88 MMT in 1995-1996 to 149.4 MMT in 2002-2003 and then declined to 143.7 MMT in 2003-2004, whereas consumption increased steadily from 118.1 MMT in 1995-1996 to 142.8 MMT in 2003-2004. The world consumption is projected to grow to 160.7 MMT in 2010 and 176.1 MMT by 2015. According to ISO, the world sugar output is forecasted to reach 145.0 MMT and consumption to reach 147.0 MMT in 2004-2005, resulting in a deficit of around 2 MMT in 2004-2005. Further, since October 2003, nearly 5 MMT of surplus sugar are expected to have been removed from the world sugar balance, reducing the stock/ consumption ratio to less than 42%. SUGAR PRICE: The Government has been following a dual pricing policy for sugar, under which, a fixed percentage of the total production is to be necessarily sold by the sugar mills to the Government or its nominees at a pre-determined price referred to as "levy sugar". The sugar so collected is distributed to consumers through Fair Price Shops under the public distribution system. The balance sugar referred to as "free sale sugar" can be sold in the open market. Free sale sugar is also regulated to some extent, by way of a release mechanism, whereby the Government determines the quantum of sugar that can be sold every month. This helps the Government maintain stability in sugar prices, by regulating the supply of sugar based on the underlying demand. Thus, the Government statutorily determines the price of levy sugar, while the price for the free market sugar is market determined,

affected to some extent by the release mechanism. As per Tuteja Committee, the Central Government decided, in February 2002, to dispense with the release mechanism with effect from April 1, 2003. However, in March 2003, it was decided to continue with the release mechanism up to September 2005 and to review the position in February, 2005. The Tuteja Committee has also recommended that the Central Government may dispense with the release mechanism for free sale sugar with effect from October 1, 2005 The levy imposed has reduced from 40% in the 1990s to 10% effective from March 2002. The Tuteja Committee has also recommended continuing with the 10% levy obligation level. The Committee has also recommended that beyond the initial time limit, a maximum of 3 months may be permitted for lifting of levy sugar by the Government, where after, the levy sugar quota would automatically be converted into free sale sugar, without any recurring levy obligation on this portion of levy sugar. LEVY OBLIGATION OVER THE YEARS Year 1996-1997 1997-1998 1998-1999 1999-2000 2000-2001 2001-2002 2002-2003 2003-2004 2004-2005 Levy Sugar: Free sale sugar ratio 40:60 40:60 40:60 40:60 30:70 (wef. January 2000) 15:85 (wef. February 2001) 10:90 (wef. March 2002) 10:90 10:90

As can be seen from the table, while the gap between levy sugar prices and free sale sugar prices had narrowed considerably until 2002-2003, it has since widened due to high free sale sugar prices. Historical Free sale sugar and Levy Sugar Prices (Rs. / metric tonne)

DEMAND FACTORS – GLOBAL: According to ISO, the world sugar output is forecasted to reach 145.0 MMT and consumption to reach 147.0 MMT in 2004-2005, resulting in a deficit of around 2 MMT in 2004-2005. Further, since October 2003, nearly 5 MMT of surplus sugar are expected to have been removed from the world sugar balance, reducing the stock/ consumption ratio to less than 42%. The world consumption is projected to grow to 160.7 MMT (Million Metric Tons) in 2010 and 176.1 MMT by 2015. According to ISO, the world sugar output is forecasted to reach 145.0 MMT and consumption to reach 147.0 MMT in 2004-2005, resulting in a deficit of around 2 MMT in 2004-2005. Further, since October 2003, nearly 5 MMT of surplus sugar are expected to have been removed from the world sugar balance, reducing the stock/ consumption ratio to less than 42%. The world's largest consumers of sugar are India, China, Brazil, USA, Russia, Mexico, Pakistan, Indonesia, Germany and Egypt. According to USDA Foreign Agriculture Service, the consumption of sugar in Asian countries has increased at a faster rate, as a direct result of increasing population, increasing per capita income and increased availability.

DOMESTIC CONSUMPTION FOR 2004-2005 (All units in MMT)

The Essential Commodities Act (ESA) was amended and the sugar release mechanism was brought within the direct purview of the ESA. This will bring discipline in the sugar release mechanism by making it legally enforceable. In the past, the Government permitted only small sized units of 1,250TCD (TONS OF CANE) and 2,500 TCD. Expansions for 5,000 TCD and above were discouraged. The industry has grown horizontally as a result of this. The Government of India de-licensed sugar sector in August 1998 encouraging entrepreneurs to set up sugar mills without a license but at a distance of 15kms away from existing factories. The de-licensing is applicable not only for new capacity initiatives but also for expansion of existing capacities. The Government permitted futures trading in sugar and granted approval to three Companies for setting up Futures Exchange. Consequently, certain sugar Companies floated Public Limited Companies to cater to this new segment. Futures trading will allow sugar companies to hedge and manage their risk better. The Government of Uttar Pradesh has issued a new UP Sugar Policy. The UP Sugar Policy recognises the need to attract new private mills because the Government sector and the Co-operative sector may not be able to put up these mills due to constraints of funds. The incentive package under the UP

Sugar Policy includes capital subsidies, reimbursement of transportation costs of sugar, etc. Demand Factors: The demand or in other words, the consumption of sugar is increasing and the demand is being fulfilled by more production. Still, the price of sugar has been elastic and rising steadily. Though, being a basic commodity, price hike limit has been fixed time to time by the government. Otherwise, sugar would have been directly influenced by little fluctuations in demand and supply. Main Production Centers: In India, major sugarcane growing states are Uttar Pradesh, Maharashtra, Karnataka, Gujarat, Tamil Nadu, and Andhra Pradesh. These six states contribute more than 85% of total sugar production in the country; Uttar Pradesh and Maharashtra together contribute more than 57% of total production. Sugarcane Production in India: Sugarcane occupies about 2.7% of the total cultivated area (Source: ISMA Website accessed on May 16, 2005) and it is one of the most important cash crops in the country. The area under sugarcane has gradually increased over the years mainly because of much larger diversion of land from other crops to sugarcane by the farmers for economic reasons. The sugarcane area has, however, declined in the year 2003-04 mainly due to drought and pest attacks. Following table shows area under sugarcane farming and total can production.

SUGARCANE AREA AND PRODUCTION FROM 1980-1981 TO 2000-2001 & UPTO 2003-2004

Year 1980-81 1990-91 1999-'00 2001-02 2002-03 2003-04 2004-05

Area under sugarcane (Million hectares) 2.7 3.7 4.2 4.4 4.3 3.9 3.7

Sugarcane Production (MMT) 154.3 241.1 299.2 298.4 281.6 221.2 201.9

Economics Overview on Demand (PRICE ELASTICITY): Sugar as a necessity commodity is used by each and every individual. The price elasticity for sugar is relatively inelastic demand. We can express it by following graph:
D P0
PRICE OF SUGAR

P

D Q0 Q QUANTITY OF SUGAR

The above relatively inelastic demand curve shows that with a more increase in price of sugar the demand for the sugar is less affect. Because of necessity good.

Global Production Supply: Following table provides an overview of the production, supply and distribution of sugar in the international market. WORLD SUGAR PRODUCTION, SUPPLY, AND DISTRIBUTION (September - August) (All figures in '000 metric tons) 20002003-2004 2002-2003 2001-2002 1999-2000 2001 Opening Stocks Production Imports Exports Consumption Ending Stocks 69,327.3 143,701.9 48,190.3 52,062.7 142,766.9 66,389.9 62,040.0 149,405.2 48,593.2 51,339.9 139,371.1 69,327.3 49.74% 62,063.3 137,982.6 45,261.1 47,759.7 135,507.3 62,040.0 45.78% 62,223.6 57,611.7 132,200. 134,753.9 0 43,573.9 41,226.3 44,212.9 42,720.6 13,1721. 128,647.7 2 62,063.3 62,223.6 47.12% 48.37%

Ending stocks as % of 46.50% consumption

According to ISO, the world sugar output is forecasted to reach 145.0 MMT and consumption to reach 147.0 MMT in 2004-2005, resulting in a deficit of around 2 MMT in 2004-2005. Further, since October 2003, nearly 5 MMT of surplus sugar are expected to have been removed from the world sugar balance, reducing the stock/ consumption ratio to less than 42. Sugar Production and Supply In India: The sugar industry in the country uses only sugarcane as input, hence sugar Companies have been established in large sugarcane growing states like

Uttar Pradesh, Maharashtra, Karnataka, Gujarat, Tamil Nadu, and Andhra Pradesh. These six states contribute more than 85% of total sugar production in the country; Uttar Pradesh and Maharashtra together contribute more than 57% of total production. Following table shows the state-wise sugar production in India for 20022003 and 2003-2004.

SUGAR PRODUCTION BY STATE IN INDIA (in MMT) State 2002-2003 %of Total 2003-2004 % of Total Uttar Pradesh Maharashtra Karnataka Gujarat Tamil Nadu Andhra Pradesh Haryana Punjab Uttaranchal Bihar Others TOTAL 5.65 6.22 1.87 1.25 1.64 1.21 0.64 0.59 0.50 0.41 0.17 20.14 28.06% 30.86% 9.28% 6.22% 8.16% 6.01% 3.16% 2.91% 2.47% 2.03% 0.85% 100.00% 4.55 3.18 1.12 1.07 0.92 0.89 0.58 0.39 0.39 0.27 0.20 13.55 33.60% 23.44% 8.24% 7.87% 6.80% 6.54% 4.30% 2.88% 2.86% 2.02% 1.46% 100.00%

Indian sugar industry has grown horizontally with large number of small sized sugar plants set up throughout the country as opposed to the

consolidation of capacity in the rest of the important sugar producing countries, where greater emphasis has been laid on larger capacity of sugar plants. The average sugarcane crushing capacity in India, Brazil and Thailand is given below: AVERAGE SUGARCANE CRUSHING CAPACITY Country Avg. Capacity (TCD) Thailand Brazil India FACTORS AFFECTING PRODUCTION: Sugarcane availability depends on: Area under sugarcane cultivation: The area under cultivation of sugarcane in the proximity of the mill determines the amount of sugarcane that can be made available. Crop switching from sugarcane to other crops effectively lowers the area under cultivation of sugarcane. Climate and irrigation facilities: Sugarcane is a tropical crop which requires adequate water and sunshine. In addition, monsoons can affect the crop yield and quality of the crop. The state of UP is supplied water from the Ganga, which along with its tributaries and associated canal system accounts for 34% of the total river water available in the country. This available perennial water reduces the state's reliance on seasonal monsoons. Crop diseases and pests: Crop diseases affect both the quantity and quality of sugarcane. Harvests have been impacted severely by insects and pests (Eg. Wholly Aphid). Several sugar factories are currently investing in research and development in the field of Entomology to control such pest outbreaks. Sugarcane yield: This is the total sugarcane output per hectare of land. It depends upon several factors like climate, soil, variety of sugarcane, and development measures undertaken by sugarcane farmers, agencies, cooperatives, government, and sugar manufacturers. Agricultural engineering and extension services, usually undertaken by individual sugar mills, have played an important role in increasing sugarcane yields 10,300 9,200 3,500

Diversion of sugarcane to other products: The sugarcane producers may not supply the sugarcane to a sugar manufacturer and divert the production to other products like gur, and khandsari which are forms of crude sugar. THE BREAK-EVEN POINT: In its simplest form, the break-even chart is a graphical representation of costs at various levels of activity shown on the same chart as the variation of income (or sales, revenue) with the same variation in activity. The point at which neither profit nor loss is made is known as the "break-even point" and is represented on the chart below by the intersection of the two lines:

`In the diagram above, the line OA represents the variation of income at varying levels of production activity ("output"). OB represents the total fixed costs in the business. As output increases, variable costs are incurred, meaning that total costs (fixed + variable) also increase. At low levels of output, Costs are greater than Income. At the point of intersection, P, costs are exactly equal to income, and hence neither profit nor loss is made. Sugarcane Utilization: Not only has the sugarcane acreage and sugarcane production been increasing, drawal of sugarcane by the sugar industry has also been increasing over the years. In India sugarcane is utilised by sugar mills as well as by traditional users like gur and khandsari producers. In early 1980s, the proportion of sugarcane drawn by the sugar industry was hovering around 35%, which went upto to 50% in 1990s and to as high as 69% in the year 2002-2003. The sudden growth in 2002-2003 can be attributed to the fact that sugar prices in this year were very low and Gur and Khandsari manufacturers could not effectively compete with the low sugar

prices. In the year 2003-2004, percentage drawal of sugarcane, however, declined due to rising sugar prices and more intense competition from the alternate sweeteners - gur and khandsari. Following table gives data on sugarcane utilization for different purposes. SUGARCANE UTILISATION % Sugarcane utilisation for Year 1980-1981 1990-1991 2000-2001 2001-2002 2002-2003 2003-2004 White sugar 33.4 50.7 59.7 57.4 68.9 56.1 Gur and khandsari 54.8 37.4 28.8 31.5 20.1 32.5 Seed, feed and chewing 11.8 11.8 11.5 11.1 11.1 11.4

SUGAR CONSUMPTION IN INDIA: Total Indian Consumption of sugar has grown at a Compounded Annual Growth Rate of 3.6% from 14.7 MMT in 1997-1998 to 18.2 MMT in 20032004. Apart from white sugar, India also consumes alternate sweeteners - gur and khandsari, which are placed at about 9 MMT per annum. Taking into account all the 3 sweeteners i.e. white sugar, gur and khandsari, on a per capita basis, Indian consumption is more than the world average (See the table below). However, white sugar consumption is much lower than the world average. The consumption of white sugar in India is generally urban based. In rural areas the alternate sweeteners gur and khandsari are consumed in larger quantities. The consumption of sugar in urban areas in some of the Indian states with higher GDP and income levels, matches favorably with various

developed countries. The highest per capita consumption of sugar is in the states of Punjab and Haryana which are adjoining the sugar producing region of western UP. As income levels and GDP rises, it can be expected that there will be a gradual shift from consumption of alternate sweeteners to white sugar. Also, as can be seen from the following table, the total per capita consumption of sweeteners in urban India is higher than total India average by around 5 kg per annum. This clearly implies that per capita consumption of sweeteners in rural India is much lower. It can be expected that this gap will close with increase in urbanization leading to a growth in the total sweeteners market in India. PER CAPITA CONSUMPTION OF SUGAR IN URBAN INDIA States Kgs. Per annum Punjab Haryana Maharashtra Gujarat Kerala Uttar Pradesh Tamil Nadu Karnataka All India 71.5 68.5 40.9 40.9 41.5 35.2 29.1 23.3 31.5

In India, the glut on the domestic market following the sharp rise in 1998/99 production did not stop importers bringing in huge amounts, given the differential between world and domestic prices, and low import tariffs. Following protests by the domestic industry, the government stepwise raised the import duty. But imports continued because of the sharper fall in world market prices. Even Malaysia, the government of which took steps to control domestic demand to stem the outflow of foreign exchange, kept imports at reasonable levels. The same is true of South Korea, where net imports dipped only slightly in 1998, while a modest rise is forecast for 1999. In the Philippines, careful economic management, together with liberal import rules to augment domestic supplies after the 1998/99 crop shortfall,

prevented a fall in sugar consumption. As a result, imports in 1998/99 were noticeably above those of the previous year. The very high support levels for sugar that form part of the stabilization regime in Japan have for years impacted on that country's sugar consumption and imports. While Japan has been affected by the economic crisis in the Far East, the long-term declining trend of imports and demand has hardly varied in the past two years. The Chinese economy has remained largely untouched by the Asian financial crisis, although GDP growth has slowed to single digits. But an expected growth of more than 6 percent in 1999 can hardly be called a disaster. What has affected China's demand growth is not so much the slowdown of the economy but the large usage of high-intensity sweeteners, mainly saccharin. And that has nothing to do with Far Eastern economic problems.

CHART OF ASIAN SUGAR CONSUMPTION

Sugar Export: Exports of sugar from the country have been de-canalized since 1997, enabling sugar mills to undertake exports on their own and to compete directly in the international market. Further, exports from a mill do not form part of the quota under the market quota releasesystem. Despite this, India has not been a consistent exporter of sugar in the past. It has been exporting sugar occasionally in periods of sugar surpluses. In the last five years it exported 4.07 MMT sugar. In these years, India had an average exportable surplus of 6.23milliontonesevery year. As against this, on an average, the sugar exported was only 0.81 MMT or 7.69% of the total exportable surplus. This is primarily because domestic prices have remained higher than international prices. However, should quotas for LOME / APEC for India increase; there will be enough incentive for Indian manufacturers to export.

EXPORTABLE SURPLUS, SUGAR STOCK & ACTUAL EXPORTS Year Closing Exportable Stock (MMT) surplus (MMT) Actual Export % export of surplus stocks

(MMT) 1999-00 9.38 2000-01 10.4 2001-02 11.3 2002-03 11.6 2003-04 8.5 Average 10.23 5.38 6.4 7.3 7.6 4.5 6.23 0.07 1.2 1.1 1.5 0.2 0.81 1.30 18.75 15.06 19.73 4.44 7.69

Lax financial discipline forced Brazil to freely float the real from January 1999. Between March 1998 and March 1999, the real devalued by more than 60 percent, which greatly increased Brazil's competitiveness and the attractiveness of the export market relative to the domestic market for the country's sugar producers. The devaluation of the real has undoubtedly drawn significantly more sugar into the international arena. To a large extent, the devaluation cushioned the effect of the fall in world market prices and helped Brazil to pump out enormous amounts of sugar, facilitated by the diversion of cane from alcohol to sugar production. Greater competitiveness and low freight rates made Brazilian sugar appear in markets as far afield as South Korea, Malaysia and Indonesia. The growth of Brazilian sugar exports must be regarded as one of the main factors behind the fall in world prices. Asian exporters have also contributed to weak prices, albeit to a far lesser extent. Thailand's sugar industry was plunged into financial difficulties by the country's economic problems and poor returns from the world market. Many mills had to put sugar up as collateral against bank loans. The creditors in turn were unwilling to release the sugar at rock-bottom prices, which restricted legal exports in 1998/99, despite a recovery of production. Following table provides an overview of the Import and Export of sugar in the international market.

Net Sugar Imports/Exports - 1000 Tonnes, Raw value

Notwithstanding such gyrations, it cannot be denied that the structure of the world market has changed and that today's price response differs markedly from that before the mid-1980s. Without going into details, it is obvious that one of the consequences of these changes is greater price stability than in the past. SUGAR IN THE NEXT CENTURY: Looking towards the next century, we need have no fears about the future of sugar demand. On any estimate of world population growth, a great deal more sugar will be needed. Can the additional sugar be produced and which countries will be the main suppliers? Technological advances already under way in the areas of genetic engineering; ground-based and satellite-borne sensor and positioning systems for precision field and transport management; juice filtration; combined heat and power generation and so on promise that the ever greater productivity achieved in this century will continue in the next. The wide range of unit sizes and performance still existing within most national sugar industries, as well as between countries, indicates the vast production and efficiency reserves not yet exploited. There will also be new developments

in the field of alternative sweeteners. These new products will contribute to still the world's hunger for sweetness, but, at the same time, will impose a ceiling on the price expectations sugar producers can entertain in the longer run, without opening the gate to competitors. Structural changes on the supply side are the daily bread of the market. At the beginning of the 19th century, Jamaica was the world's leading sugar exporter; at the end, it was Germany. From 1904 onwards, Cuba was for decades firmly installed in first place. On the eve of the 21st century, Brazil is the greatest sugar exporter. There is circumstantial evidence that with the devaluation of the real Brazil can make money, or at least break even, at 5-6 cents/lb. If true, this could completely change the face of the supply side, unless the Brazilian cost structure changes markedly for the worse. None of the other efficient producers (Australia, Guatemala, and Thailand) are profitable at this price. Brazil already controls 25 percent of the market and still has enormous potential for expansion. In a few years, perhaps, the world sugar market will mirror that for coffee, and adverse weather in Brazil will send shock waves through the global sugar market. Alongside the challenges posed by the ongoing process of liberalization, the call to the world's sugar industries in the 21st century is to devise strategies of sustainable development in order to avoid the dangers of an excessive concentration of production and associated price fluctuations. SUMMARY  India is one of the largest producer of sugar in the world and so also the consumer. Can manage its inventory to its advantage by rotating the same through imports and exports.  Agriculture growth pegged at 3.5% - sugar cane has to compete and compete on its own.  There exists a potential in terms of increase in productivity, extraction and production.  Like in the past planners/policy makers/farmers producers - should get together to form a policy also acceptable to politicians.  Optimistion of sugar mill capacity - vertical growth need of the day.  Pricing  Decontrol may not be the answer - at the same time dual pricing policy has to go to provide level playing field for all sweeteners.  Govt. can procure sugar from market and subsidies in case, it is a must for PDS.

 For the good of consumer, farmer and the mills sugar price should move in a band, meaning monthly inflow to market to be regulated by Government.  Balanced export/import policy.  Mills and farmers to work together to improve yield and extraction through better harvesting.  To become internationally competitive - i.e. cost effective and quality producer.  To be ready for free marketing i.e. to hedge on futures.  With consistent policy and competitiveness India can be a regular player in the international market.

India sugar hits record high on demand, supply delay 3 Sep 2009, 1750 hrs IST, REUTERS

MUMBAI: Indian spot sugar prices jumped over 4 per cent to a fresh record peak on Thursday buoyed by good retail demand and a delay in announcing non-levy sugar quota for September, traders said. Depleting stockpile and firmness in overseas markets also bolstered sentiments, they said. In Kolhapur, a key market in top producer Maharashtra, the price of the most traded S-variety sugar climbed 4.2 per cent to Rs 3,021.3 ($61.7) per 100 kg, breaching earlier high of Rs 2,965 on August 11. The spot price had risen more than a quarter in August, while in 2009 it has jumped more than 64 per cent. "Prices rose as government delayed announcement of non-levy sugar quota. Millers were not releasing stocks as they were not aware how much they can sell," said Mukesh Kuvadia, secretary of Bombay Sugar Merchants Association. Non-levy, or free sale sugar, is sold by millers in the open market, but the quantity each mill can sell is fixed by the federal government on a monthly basis. In last week of the month, the government usually announces quota for next month, but this month it delayed announcement till Thursday evening. The country released 1.83 million tonnes of non-levy sugar for September, up 9.6 per cent compared to the previous month as the country is heading towards the peak festive season, the government said in a statement on Thursday. "Prices may rise by another 4-5 per cent this week. Quota is lower than market expectations. Besides, household demand is robust due to new month's beginning and festivals," Kuvadia said. Wholesale traders stock up on food articles in the last and first week of the month to prepare for purchases by India's salaried middle class, who buy in the first two weeks of the month after receiving wages. The country's peak festival season runs from August to October, when demand for sugar goes up as people consume more sweets and confectioneries. India's new sugar season will begin with much lower stocks and production will be hit by lower sugar recovery from cane after the failure of monsoon rains, Farm Minister Sharad Pawar said on Tuesday. Last week, the head of the National Federation of Cooperative Sugar Factories Ltd, JB Patel, said India's opening stocks would be at 2.7 million tonnes, down three quarters from 10 million tonnes on Oct 1, 2008. India has put stock limits for big

Demand outstrips supply on Nokia 3G phone Tony Hallett sil Published: 26 Feb 2004 11:50 GMT Nokia handsets for use on the first 3G networks in Europe provided by 3 are in very strong demand, according to comments from the boss of the continent's largest mobile retailer. Charles Dunstone, Carphone Warehouse CEO, this morning said his company cannot satisfy demand for Nokia 7600 terminals on 3 networks in the UK and Sweden, which are units of Hutchison Whampoa. Speaking at this week's 3GSM World Congress in Cannes, he said: "The barrier to 3G has been handsets [size and performance]. We had high hopes for sales but in reality sales [of the Nokia phones] have greatly exceeded our expectations." He went on to say that as they are manufactured in the Far East, there must be "planes flying in to London and Stockholm to satisfy demand". The 7600 is sold by Carphone Warehouse but not directly by 3, as it doesn't support all the operator's services, most notably video calling. However, there is clearly much greater demand than that for existing offerings from Motorola and NEC, which customers have complained are too big, have low battery life and generally are a step back from current GSM phones. Dunstone was generally positive about progress in the mobile industry, singling out the success of the Blackberry email device from RIM and saying Apple's iPod may go down as a turning point. "It has begun the idea that you download content," he said, and predicted phones may end up doubling as iPod-like devices. However, he criticised mobile content offerings, often in the form of services such as Active from O2, Live! From Vodafone, OrangeWorld and T-Mobile's T-Zones, saying content is often not exclusive or just too expensive.

Speaking about channels such as CNN trying to charge for their news, he said: "Everyone is too greedy. News is too freely available for people to think they can charge €5 per month [for it]." He added ringtones and games shouldn't be priced above €0.99 and MMS photo messages not more than twice that of SMS.
"People don't understand the price elasticity," he said. "We're pretty unsophisticated. Pricing seems to be set by accounts people, not those in sales or marketing."

Reference:
http://www.google.co.in/#hl=en&q=articles+on+high+sugar+prices&meta=&aq=f& aqi=&aql=&oq=&gs_rfai=&fp=5bcb77e30ca73bbe Managerial economics. By getika piyali ghosh.

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