PERFORMANCE, EVALUATION AND MANAGEMENT OF HUTATMA KISAN AHIR SAHAKARI SAKHAR KARKHANA LTD., WALWA A CASE STUDY

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1 i PERFORMANCE, EVALUATION AND MANAGEMENT OF HUTATMA KISAN AHIR SAHAKARI SAKHAR KARKHANA LTD., WALWA A CASE STUDY By Miss. MANE ANITA SURESH Reg. No. 11/212 A thesis submitted to the MAHATMA PHULE KRISHI VIDYAPEETH, RAHURI , DIST. AHMEDNAGAR MAHARASHTRA, INDIA In partial fulfilment of the requirements for the degree of MASTER OF SCIENCE [AGRICULTURE] In AGRICULTURAL ECONOMICS DEPARTMENT OF AGRICULTURAL ECONOMICS POST GRADUATE INSTITUTE MAHATMA PHULE KRISHI VIDYAPEETH, RAHURI

2 ii PERFORMANCE, EVALUATION AND MANAGEMENT OF HUTATMA KISAN AHIR SAHAKARI SAKHAR KARKHANA LTD., WALWA A Case Study By Miss. MANE ANITA SURESH Reg. No. 011/212 A thesis submitted to the MAHATMA PHULE KRISHI VIDYAPEETH, RAHURI , DIST. AHMEDNAGAR MAHARASHTRA, INDIA In partial fulfilment of the requirements for the degree of MASTER OF SCIENCE [AGRICULTURE] In AGRICULTURAL ECONOMICS APPROVED BY Dr. H. R. Shinde (Chairman and Research Guide) Dr. D. B. Yadav (Committee Member) Dr. U. D. Chavan (Committee Member) Dr. C. A. Nimbalkar (Committee Member) DEPARTMENT OF AGRICULTURAL ECONOMICS POST GRADUATE INSTITUTE MAHATMA PHULE KRISHI VIDYAPEETH, RAHURI

3 iii CANDIDATE S DECLARATION I hereby declare that this thesis or a part there of has not been submitted by me or any other person to any other University or Institute for a Degree or Diploma. Place : M.P.K.V, Rahuri Dated : / / 2013 (Miss. Mane A. S.)

4 iv Dr. H. R. Shinde, Assistant Professor, Agricultural Economics Section, College of Agriculture, Kolhapur, Maharashtra, (India). This is to certify that the thesis entitled, PERFORMANCE, EVALUATION AND MANAGEMENT OF HUTATMA KISAN AHIR SAHAKARI SAKHAR KARKHANA LTD., WALWA A CASE STUDY, submitted to the Faculty of Agriculture, Mahatma Phule Krishi Vidyapeeth, Rahuri, Dist. Ahmednagar (Maharashtra) in partial fulfillment of the requirements for the degree of MASTER OF SCIENCE (AGRICULTURE) in AGRICULTURAL ECONOMICS, embodies the results of a piece of bonafide research work carried out by Miss. MANE ANITA SURESH under my guidance and supervision and that no part of this thesis has been submitted to any other university for degree or diploma. Place: MPKV, Rahuri (Dr. H. R. SHINDE) Date : / /2013 Research Guide

5 v Dr. S.G. Borkar, Associate Dean, Post Graduate Institute, Mahatma Phule Krishi Vidyapeeth, Rahuri , Dist. Ahmednagar Maharashtra, INDIA. This is to certify that the thesis entitled, PERFORMANCE, EVALUATION AND MANAGEMENT OF HUTATMA KISAN AHIR SAHAKARI SAKHAR KARKHANA LTD., WALWA A CASE STUDY, submitted to the Faculty of Agriculture, Mahatma Phule Krishi Vidyapeeth, Rahuri, Dist. Ahmednagar (Maharashtra) in partial fulfillment of the requirements for the degree of MASTER OF SCIENCE (AGRICULTURE) in AGRICULTURAL ECONOMICS, embodies the results of a piece of bonafide research work carried out by Miss. MANE ANITA SURESH under the guidance and supervision of Dr. H.R. Shinde, Assistant Professor, Agricultural Economics Section, College of Agriculture, Kolhapur, and that no part of this thesis has so far been submitted for any other degree or diploma. Place: MPKV, Rahuri (S.G. Borkar) Date : / /2013 Associate Dean

6 vi ACKNOWLEDGEMENTS I avail this opportunity to acknowledge all those who helped and guided me during the course of my research work. Before giving to way my feelings, I cordially want to salute that supreme cosmic consciousness from which everything originates in the beginning and to which everything goes to end. Though formal and dead words cannot carry the fragrance of emotions with them, still they are the only available way of expressing emotions in such formal acknowledgement. With deepest sense of gratitude, I wish to express my heartfelt and profound thanks towards my research guide, Dr. H. R. Shinde. Assistant Professor of Agricultural Economics, College of Agricultuyre Kolhapur, M.P.K.V., Rahuri for his inspiring guidance, keen interest, constructive criticism, constant encouragement and immense sympathy during the preparation of this manuscript and PG life. I extend my heartful thanks to the members of my Advisory Committee, Dr. D. B. Yadav, Head, Department of Agricultural Economics, Dr. C. A. Nimbalkar, Associate Professor, Department of Statistics, Dr. U. D. Chavan, Associate Professor, Department of Food Science and Technology, M.P.K.V., Rahuri. for their constructive criticism, valuable guidance and critical evaluation of this manuscript. I express my heartiest thanks to Dr. V. G. Pokharkar, Field Officer (II), CPMCC Scheme, Dr. G. G. Joshi, Prof. R.B.Hille, Dr. J.T. Dorge and all the staff members in the Department of Agricultural Economics, M.P.K.V., Rahuri for their helpful comments, suggestions and co-operation in completion of the present study. The enthusiastic, cheerful and selfless support of my dear friends Dipali, Pratibha, Prachi, Nilesh, Shashikant, Pramod, Pravin, Priyanka, Pradip, Ashwini Didi, and Shnehal Didi throughout both bright and dark phases of my work has been invaluable. I wish to convey my heartful thanks to my department colleagues Kalyani, Khushabu, Kuldeep, Atul, Rohan, Mouzam, Kiran, Ashish my seniors Aarati Javne, Surekha Jadhav and all juniors whose excellent company and co-operation helped me in carrying out my study with joy and happiness. I would be failing in my duties if I do not record a deep sense of appreciation for the whole hearted co-operation and assistance provided for

7 vii completing this work by the Managing Directors of sugar factories. I am deeply obliged to all the authors and research scholars past and present whose literature has been cited. No words are enough to express my heartiest gratitude to my beloved parents Mummy, Mama, Mami and sister Rani, Ashu and my brother Pradip for their sacrifice, moral support, constant inspiration, encouragement and provide me valuable opportunities in building up my educational carrier without which it was quite difficult for me to achieve the goal. Thanks are also extended to all other family members and relatives for their encouragement and affection during my higher studies. I am thankful to Shri. Vishwnath Kadam for typing of this manuscript in present form. Finally, I would like to thank one and all the helped directly or indirectly during this investigation. Place : M.P.K.V., Rahuri Date : (Miss. Mane A.S.)

8 viii CONTENTS Particulars Page CANDIDATE S DECLARATION iii CERTIFICATE 1. Research Guide iv 2. Associate Dean (PGI) v ACKNOWLEDGEMENTS vi LIST OF TABLES xii LIST OF FIGURES AND PLATES xiii ABSTRACT xiv 1. INTRODUCTION History of sugar in India Present status of sugarcane crop in India Present status of sugarcane crop in Maharashtra Importance of Sugar Industry Present status of sugar industries in India and Maharashtra Topic of the study Objectives of the study Utility and scope of the study Limitations 8 2. REVIEW OF LITERATURE General studies on sugar factory Management in sugar factory Economics and diseconomies of scale Inventory control and utilization of byproduct METHODOLOGY Selection of factory 30

9 ix 3.2 Sources of data Collection of data Analysis of data Different areas of management Cost of production of sugar Break even analysis in sugar production Crushing efficiency of the sugar factory Capacity utilization of the sugar factory Compound growth rate ORGANIZATION PROFILE Name of the factory Registered office Registration number Industrial License number Board of directors and top management Location Capital structure Board of management Area of operation Annual general meeting Special general meeting Plant and its capacity Salient features of the factory Role of the sugar factory RESULTS AND DISCUSSION General information of the factory Villages in the operational area Villages supplying cane to the factory 43

10 x Area under sugarcane available for crushing 44 (ha) Total sugarcane crushed Sugarcane received from shareholders and non shareholders within jurisdiction Crushing efficiency of the sugar factory Capacity utilization and comparative crushing of the factory Different areas of management Agricultural section Manufacturing section Engineering section Account section Financial status of sugar factory Capital formation Growth in the number of share holders Total share capital of the sugar factory Actual expenditure made on sugar production Gross Income/ Receipts statement of the factory Net profit or loss of the sugar factory Inventory management statement and utilization of products Inventory of store product The inventory of different store and spares of the sugar factory Byproduct utilization of the factory Compound growth rate Break even analysis 78

11 xi 5.7 Feasibility of co-operative sugar industry SUMMARY AND CONCLUSIONS Summary Conclusions Policy implications LITERATURE CITED VITA 95

12 xii LIST OF TABLES Table Title Page 1.1 Present status of sugarcane in India Present status of sugarcane in Maharashtra The number of villages in the operational area Villages supplying cane to the sugar factory Area under sugarcane available for crushing Total sugarcane crushed Quantity of sugarcane received from 48 shareholders and non-shareholders from the area of jurisdiction 5.6 Crushing efficiency of the sugar factory The capacity utilization and comparative 51 crushing of the factory 5.8 Distribution of area under promising varieties in 56 the area of operation of the factory 5.9 Yearwise expenditure on machinery repair and 58 maintenance, Manufacturing and expenses 5.10 Total number of share holders Total share capital of sugar factory Item wise cost of manufacturing of sugar Gross income/receipt statement of the sugar 69 factory 5.14 Net profit or loss of sugar factory Details of inventory control of the sugar factory The inventory of different store and spares of the 74 sugar factory 5.17 Annual compound growth rate Break even analysis of the sugar factory Return to investment in sugar factory 79

13 xiii LIST OF FIGURES Sr. No. Title Between pages 1 Location and area of jurisdiction Hutatma Kisan Ahir Sahakari Sakhar Karkhana Ltd. Walwa 2 Total sugarcane crushed Yearwise expenditure on machinery repair and maintenance and manufacturing expenses 4. Gross income/receipt statement of the sugar factory Net profit or loss of the sugar factory LIST OF PLATES Sr. Title No. 1 Inauguration of the crushing season of Hutatma Kisan Ahir Sahakari Sakhar Karkhana Ltd. Walwa 2. Awards Between pages First prize in best technical efficiency Second prize in best financial management Cane yard Batch vacuum pump Sugar centrifuge Chimney of sugar factory 57-58

14 xiv ABSTRACT PERFORMANCE, EVALUATION AND MANAGEMENT OF HUTATMA KISAN AHIR SAHAKARI SAKHAR KARKHANA LTD., WALWA A CASE STUDY By Miss. MANE ANITA SURESH A candidate for the Degree of MASTER OF SCIENCE (AGRICULTURE) in AGRICULTURAL ECONOMICS Mahatma Phule Krishi Vidyapeeth, Rahuri Research Guide : Dr. H.R.Shinde Department : Agricultural Economics An attempt was made in this study to understand different areas of management and determine the performance of Hutatma Kisan Ahir Sahakari Sakhar Karkhana Ltd., Walwa. The study was based on the information obtained by the personal interview of the officials of the factory and data obtained from the annual reports for the period of to The area under sugarcane available for crushing was observed highest in the year ( ha) and lowest in the year ( ha). Highest crushing efficiency was observed in the year ( per cent) with 181 days of working. On the other hand, highest capacity utilization was observed in the year ( per cent). For smooth functioning of the sugar factory the management is divided into four major sections as agriculture,

15 xv Abstract contd. Miss. Anita S. Mane manufacturing, engineering and account section. In which, Agriculture section is primarily deals with the sugarcane supply and sugarcane development activities. Manufacturing section deals with the production of quality sugar and storage. Engineering section deals with the maintaining the mechanical parts and account section is primarily deals with the finance activities. The total expenditure made on sugar production was increased, in which the cost of sugarcane was always remained above 50 per cent. Per quintal cost of production of sugar was also increased tremendously. The share of the income from sugar sale was observed in between to per cent during the period. With comparison of receipts and expenditure, it could be observed that the sugar factory earned highest profit in the year (` Lakh) and highest loss in the year (` Lakh). From the inventory statement, the sugar stock in the inventory was the highest in the year (i.e per cent) and lowest in the year (i.e per cent). The inventory stock of the byproduct was low. On the basis of break even analysis, factory showed better performance in the year , , , , , , and Growth rate of area of sugarcane is negative and nonsignificant but in case of sugar production, actual crushing of sugarcane has significant during the period under the study. Pages 1 to 95

16 1 1. INTRODUCTION Sugar factories have served as nuclei for various transformations at many places in rural India. Especially, the cooperative sugar factories have proved to be remarkably influential in bringing about various socio-economic and political transformations during the post-independence period. They have been instrumental in the emergence of new overall development takes place such as, political leadership, development of educational, medical and transport facilities and rise of new agrarian entrepreneur class. They have also created important forward and backward linkage for establishment of various other industries in the area of their operation. India is known to be the country of origin of sugarcane. Reference to Sweet grass sugarcane exists in ancient epics of India dating back to 3000 B.C. North Eastern India was regarded as the centre of origin from where sugarcane seems to have been carried to other parts of the world. A proper analysis of performance of this powerful instrument of such multifarious transformations necessitates adequate prior review and appreciation of the history and performance of the industry in the country. 1.1 History of sugar in India India has been the hearth of sugarcane and sugar since time immemorial. If we look at the history we get reference to sugarcane corp. The god of love, Cupid is symbolized having a bow made of sugarcane stalks. Sushruta made mention of

17 2 sugarcane. The Sanskrit world Sharkara means sugar. The Sanskrit world used for sugarcane in Atharvaveda is Ikshu linked with Ikshvaku, son of Manu and a legendary solar king. Alexander, the great and his soldiers carried sugarcane (the honey reed) from India to the west by about 325 B.C. Columbus in his second voyage to new world in 1493 carried sugarcane to Hispanola (Haity). Chinese canes were introduced into India by Roxburg in 1796 and gave the name S. sinens and simultaneously the thick cane introduced in India in 1827 by captain Steeman. Numerous references of sugarcane and sugar in India can be found in ancient and medieval Indian literature. Kautilyiya Arthashastra indentifies sugar as an economically important commodity capable of making significant contribution to the states income in forms of taxes. It is well known that various crude forms of sugar like the khandsari, Chini, Gur etc., were in vogue in India till the end of nineteenth century. However, the tools and techniques employed in the production of these crude forms of sugar were primitive in nature. Large quantities of white sugar were imported mostly from Java (Indonesia) during the early part of 20 th century. Pandit Madan Mohan Malviya raised an agitation in the legislature that Something should be done to save the Indian sugarcane Industry from perishing. Added to this was the said plight of the indigo-cultivars of Bihar with the advent of synthetic dye. This led to the birth of sugarcane breeding station at Coimbatore in 1912 to improve sugarcane industry by cane hybridization.

18 3 1.2 Present status of sugarcane crop in India. Sugarcane is an important commercial crop mainly used for large scale sugar production throughout the world. Sugarcane occupied an important role in national economy and involved millions of cultivators, workers and technicians. Among cane growing countries of the world. India ranks second in area and production of sugarcane after Brazil. The area under sugarcane in India was steadily increased from lakh ha ( ) to lakh ha ( ) which has shown in the Table 1.1. Table 1.1 Present status of sugarcane in India Year India Area ( Lakh ha ) Production ( Lakh tonnes ) (52.62) (119.12) (78.71) (169.04) ) (208.33) Figure in parenthesis indicate percentage change over base year (Source: Cooperative Sugar and Commissionrate of Agriculture, Govt. of Maharashtra.) 1.3 Present status of sugarcane crop in Maharashtra. Maharashtra state has occupied a well recognized place of pride on the sugarcane map of the country. The area under sugarcane in Maharashtra is per cent of the total area in India and the total production is per cent of the total production of India. Maharashtra ranks first in production of sugar. Maharashtra is divided in three region based on recovery percentage of the sugarcane viz., south region, central

19 4 region and north-east region. The state recovery percentage was more in the south region (11.19per cent) such as in Sangli, Satara, Kolhapur followed by central (11.02per cent) and northeast (10.88). (Source Vasantdada Sugar Institute, Pune). The area under sugarcane and production in Maharashtra was steadily increased from to which has shown in the Table 1.2. Table 1.2 Present status of sugarcane in Maharashtra Year Maharashtra Area ( Lakh ha ) Production ( Lakh tonne ) (185.16) (230.30) (283.87) (329.09) (521.93) (643.20) Figure in parenthesis indicate percentage change over base year (Source: Cooperative Sugar and Commissionrate of Agriculture, Govt. of Maharashtra) 1.4 Importance of sugar industry India is the second largest producer of sugar over the globe, with more than 45 millions of sugarcane growers in the country. The bulk of the rural population in India depends on this industry. The sugar industry is the second largest agrobased industry in India as well as Maharashtra followed by the textile industry. Sugar industry in India is well maintained and is growing at a steady pace, boosting up a consumer base of over billions of people. The sugar industry provides employment to the large number of rural population. The sugar industry has been a local point for socio-economic development in the rural

20 5 areas by mobilizing rural resources, transport and communication facilities, further, many sugar factories have established schools, colleges, medical centers, hospitals, engineering and polytechnique colleges for the benefit of the rural population. Sugarcane is the primary raw material for all major sweeteners produced in the state. It also supports two important cottage industries i.e. Jaggery and Khandsari industries. Sugar industry products are molasses, bagasse, which is used for production of chemicals and alcohol. Bagasse is utilized as a fuel in the boilers and also used as a raw material in the paper industry, pressmud also mixed with another residual output of the distillery viz., spent wash and used as biomanure. A sugar mill can thus have multiple streams of revenue. Maharashtra sugar industry is one of the most notable and large scale sugars manufacturing sector in the country. The Maharashtra sugar industry has been contributing nearly 40 per cent of India s, total sugar production. The rate of growth of sugar manufacturing has been massive over the past few years. The latest sugar statistics of sugar production in Maharashtra indicates that this state is doing better than the other states in the country. 1.5 Present status of sugar industries in India and Maharashtra The sugar industry in Maharashtra is highly popular in the co-operative sector, as farmers own a portion in the sugar factories. At present, there are 527 sugar factories in India, out

21 6 of which 56 per cent are in cooperative sector. While in Maharashtra, there are about 209 total registered sugar factories (2011) out of which only 167 are in operation. Average recovery percentage of India is low as compared to Maharashtra. In Maharashtra, average recovery is per cent which is the highest as compared to other sugarcane producing states in India. The Sangli district alone has more than 13 sugar factories, which makes it among the highest sugar-producing district of India. 1.6 Topic of the study Although Maharashtra state contributes 37 per cent of established sugar factories in India (527), out of 209 established sugar factories, only 167 sugar factories are in running stage. Other factories are not in working due to inefficient management, natural calamities such as famine and pest attack. There are different areas of management in sugar factory. Progress and performance of sugar factory being dependent upon proper capacity utilization and cane supply, cost and returns of sugar production, better financial management, efficient use of workers and officials, adequate use of byproducts, etc., which are dependent upon the efficient management. The another benefit of establishment of sugar factory is provision of employment to the skilled as well as unskilled persons. The employment of skilled persons in the factory is of permanent nature. Some unskilled persons are also employed permanently. Besides, unskilled persons are seasonally

22 7 employed for the work like harvesting and transporting of sugarcane. The assured income of these employed persons increase demand for goods. New market establish in the vicinity of the sugar factory. In addition, some ancillary businesses like auto sales and repairing shops, petrol and diesel pumps, small engineering shops, agro-services, canteens, etc. got established in the area generating employment and income to some people. It depends on the success of the sugar factory. But now a days, the number of operating sugar cooperatives in the state are decreasing day by day due to some problems like mismanagement, problems of price crash and shortage of sugarcane etc. and the number of private factories in the state increased rapidly. But in this situation Hutatma Kisan Ahir Sahakari Sakhar Karkhana Ltd., Walwa (Dist.-Sangli) is a good example of successful co-operative sugar factory in the state. An attempt is therefore made to study its Performance in respect of availability of sugarcane, capacity utilization, recovery percentage, cost of sugar production of the sugar factory has been undertaken with the following specific objectives. 1.7 Objectives of the study i. To study the various managerial aspects of Hutatma Kisan Ahir Sahakari Sakhar Karkhana Ltd., Walwa. ii. To study the costs and returns structure of the sugar production activity of the factory. iii. To study management efficiency of the factory with regard to inventory control and utilization of byproduct.

23 8 1.8 Utility and scope of the study As the study is concerned with the economic evaluation of performance and management of Hutatma Kisan Ahir Sahakari Sakhar Karkhana Ltd., Walwa the findings of the same will be useful to the policy makers, management personnel and sugarcane producers. Findings of the study will be helpful to the planners for the formulation of suitable policies for the development of sugar industries. The management personnel can get detail idea about the profitability of the sugar factory on the basis of findings of the study. They can determine and adopt ways and means for economizing sugar production. The study related to different areas of management in sugar factory will also helpful to management personnel for efficient management practices. It is also true that the cost and return structure of the sugar industries undergoes a change over a period of time in response to change in the prices of inputs and output, changing demand and supply condition of ingredient input and output and climatic conditions and government policies. In view of these circumstances the result of the study are cautiously used for efficient management purpose. 1.9 Limitations The study is based on the information obtained from the Hutatma Kisan Ahir Sahkari Sakhar Karkhana, Ltd., Walwa for the years to Furthermore, since the changes in prices of inputs and output and natural calamities affect the profitability of sugar factories, the results of the study need to be used more cautiously for policy formulation purposes.

24 9 2. REVIEW OF LITERATURE The review of literature gives an idea about the research carried out by other research workers in the past. Also, it helps the researcher in devising appropriate research methodology for his study. This chapter is therefore designed to present the review relating to the various aspects of the study. In view of objectives and for the sake of convenience, the available reviews were classified into following broad heads. 2.1 General studies on sugar factory. 2.2 Management in sugar factory. 2.3 Economies and diseconomies of scale 2.4 Inventory control and utilization of byproducts. 2.1 General studies on sugar factory The sugar industry is the second largest agrobased processing industry in the country next only to textile. The cooperative form of organization has lent itself on a powerful instrument in the development and mobilization of human resources and financial resources of the state towards sugar industry. In order to generate employment and income opportunities for the economic development of weaker sections, policy has been endorsed for installation of agro-processing industry based on local raw produce in rural areas. Thaper (1976) pointed out some of the peculiar features of the sugar industry are as follows viz., the industry is seasonal, duration of season varies from one factory to other and also from year to year, sugar content in cane and its recoveries

25 10 also varied randomly from one factory to another and Variation in capital investment. He further noted that, apart from the problem of cyclical nature of production of sugar and variations in capital investment and sugar recovery, the sugar industry experiences interstate difference in the cost of production per unit of sugar. The cost of production of sugar as estimated Dhanuka (1975) in Bihar varied between ` and ` per quintal, the biggest and lowest being Uttar Pradesh and Bihar, respectively. Mohite (1976) stated that the rapid growth of sugar industry has been helpful to a great extent in stabilizing sugar production and in reducing chronic shortage of sugar in the country. The co-operative form of organization has lent itself on a powerful instrument in the development and mobilization of natural human and financial resources of the state towards sugar industry and has helped in reducing the backwardness of the country by improving the socio-economic conditions of rural areas in the state. The co-operative sugar factory of 1250 TCD (Tonnes Crushed Per day) has got the employment potential of 400 permanent workers and 800 seasonal workers in the factory. Ramesh (1980) stated that the sugar industry in India is the second largest processing industry in the country next only to textile. There are 320 factories producing annually lakh tonnes of sugar. The aggregate assets of the industry are more than ` 1300 crores. About 30 million cultivators are

26 11 engaged in growing sugarcane and supplying the same to sugar factories. The sugar industry disburses about ` 800 crores annually towards the sugarcane price. It contributes more than ` 300 crores annually to state. It also controls exchanges socioeconomic development of rural area. The prosperity of the sugar industry is, therefore, closely linked with the development and prosperity of our vast population residing in the villages. Tupe (1980) studied in detail the impact of the Sanjivani Co-operative Sugar Factory in Ahmednagar district on agriculture, agriculturist, on the lives of agriculture labour, economic condition of factory workers and overall economic change in rural areas. He concluded that the area under sugarcane has increased, the area under irrigation has increased and likewise the changes in the cropping pattern and methods of farming have changed. It is argued that the development of agriculture depends on major agrobased industries. It is concluded by the author that the sugar factory in rural areas has worked as a growth centre. Mane (1981) stated that the sugar co-operatives had blazed trial in efficiency only to accelerate economic improvement of the farmers. There has been increase in the level of their income, saving, investment, mostly in productive assets, possession of farm machinery, credit worthiness and employment opportunities. Anonymous (1984) showed that the India was perhaps the only country in the world with very big co-operative base in sugar industries. Out of the total installed capacity of

27 lakh tonnes of sugar production, the share of the cooperative sector was lakh tonnes. Rao (1985) said that the licensing policy for setting up new sugar factories on expansion of existing sugar mills would be reviewed soon in the light of 7 th Five Year Plan requirement. However, the minister of GOI added that, the sixth plan policy of giving licenses, first to co-operative sector followed by the public and private sector might be continued. Jain (1987) revealed that a large number of joint stock sector sugar mills are concentrated in Uttar Pradesh. On an average size sugar plant receives cane supplies from as many as about 40,000 growers who have small holding and constitute a significant segment of our rural population. Against this, the number of sugarcane growers is much smaller in Maharashtra and Gujarat where the sugar industry is mostly in the cooperative sector. It has to be appreciated that economically backward areas with large concentration of sugarcane growers having small land holdings need to be essentially given priority. Whereas in Maharashtra and Gujarat, the sugar industry is mostly in the co-operative sector given priority considering in the matter of self term loans for cane development. Kasar and Tilekar (1989) indicated that the sugar industry has significant impact on the employment of seasonal migrants in Maharashtra. The share of sugar factory employment was to the extent of 45, 51 and 75 per cent in the total employment of an average male, female and bullock pair of the migrant household. As regards the income, it is noted that

28 13 the sugar industry on an average contributes 57 per cent of the gross income of migrant household. The seasonal employment provided by the sugar industry enable the migrant households to increase their income to enjoy slightly better position as compared to the non-migrants under study. Therefore, the policy has been endorsed for the installation of agro processing industries based on local raw produce in rural areas in order to generate employment and income opportunities for the economic development of weaker sections. Dangat and Joshi (1993) studied the performance of Bhogavati Co-operative Sugar Factory, Shahunagar (Kolhapur)- A Case Study, it was concluded that there was over utilization of the erected crushing capacity of the sugar factory. There was increase in the area and production of the sugarcane in the jurisdiction of the sugar factory. The per quintal cost of manufacturing of sugar was ` during the year There was increase in the cost over the years. The cost of manufacturing of sugar was ` 240 per quintal during the year Full utilization of the installed capacity, high recovery percentage and low cost of manufacturing resulted in better prices for sugarcane to the members. The price paid for sugarcane was `368 per tonne during the year which is increased to ` 449 per tonne during the year Jugale (1994) concluded that irrespective of the low wages, the workers are being exploited at various levels. Migration from drought to the destination of sugar belt is a continuous phenomenon. Even if the workers refuse to migrate,

29 14 the Co-operative sugar factory will be in a very difficult position, because at the local level such labour force is not sufficiently available. Now a-days they are Co-operative sugar factory s refusing to make a direct agreement with the contractors of the workers, which is because of the changed industrial relations. He noted that the Sugar Industry is swinging because of growing sickness, lack of quality of raw material, changing attitude of the farmers and unfavorable policies towards sugar industry. Mangal Sing (1996) in his paper viz., Sugar Industry in India- An overview, discussed industry regulation, development of the sugar industry in India, government incentives for promotion of new projects and expansion status of technology and upgradation, etc. From this he concluded that the sugar Industry in India is in rapid phase of growth and is poised to maintain its first position as the highest producer of sugar in the world and should be in the export market soon in sizable way. Weragoda (1997) while studying sugar industry development, trends and challenges in Shri lanka indicated that the high cost of establishing new factories and the limited availability of suitable land for sugarcane cultivation a hindrance to the expansion of the sugar sector in Shri lanka. However, development of the domestic sugar industry would pave the way for the generation of employment and save foreign exchange to a great extent. Harekar and Shinde (2011) concluded that the Maharashtra sugar industry is one of the most notable and large

30 15 scale sugar manufacturing sectors in the country. The pace of growth of sugar manufacturing has been massive over the past few years. Todkari (2012) studied the Shri. Sant Damaji Cooperative Sugar Factory situated in Uchethan and established in This sugar factory is affected on catchments are various ways. Various schemes have adopted by sugar factory for the surrounding rural area development viz. Agril. Exhibition, computer training to employee, cattle camp, felicitation of meritorious students, response to emergencies, supply of molasses, supply of good quality sugarcane seeds, accident insurance sugar factory school, labour welfare programmes etc., are included. But cogeneration and distillery project are not started in this factory which can give large profit and create more employment opportunity. 2.2 Management in sugar factory. The performance of the sugar factory depends on the efficiency and effectiveness of the management. The overall inefficiency in managing the sugar production activity is the root cause of sickness in the co-operative sugar industry. The analysis relating to management in sugar factory is important to find out suitable measures to control the present practices of mismanagement in sugar industry. Kamat (1975) after studying the management of cooperative sugar factories in Maharashtra reported that cooperative sugar factories have not only brought the economies of large scale production to the members but provided them with

31 16 opportunities to organize and manage their own business. The members are trained in democratic and business procedures. Rao (1981) through the study on co-operative sugar industry in India carried out a time series analysis, which indicated that, the factors like inability of sugar factory to operate at the rated capacity during the season, quality of the management and over capitalization in co-operative sugar factories were the most important reasons for the sugar factories in Maharashtra state to become sick. Hinge (1984) while studying the problems of sick cooperative sugar factories in Maharashtra concluded that, the overall inefficiency in managing the sugar production activity is the root cause of the phenomenon of sickness in the co-operative sugar industry. He suggested that suitable measures/ punishment may be advocated in order to control the present practices of mismanagement in the co-operative sugar factories. Singh (1984) concluded that it is easy to see that there in enough scope for improving the efficiency of sugar factories by introducing instrumentation and controls. However, it is very important to have the right maintenance staff for maintaining instruments in working order, otherwise the investment would be lost. An erratic instrument is more dangerous than no instrument at all. Hence, it is imperative that instrument engineers and mechanics are recruited and trained. There is a lot of resistance when any new thing is introduced anywhere, this is only to be expected. It is for the top

32 17 management to support and nurture all modernization returns, so as to increase factory efficiency and productivity. Srinivasan (1985) concluded that it is a sad and ironic fact that the rapid growth in the country s sugar production and consumption instead of bringing buoyancy has cripped the viability of many units. The chief villain of sickness is the lack of objectivity on the part of parameters. Managerial deficiencies have multiplied the misery. Venkataraman (1985) delivered a seminar on achieving uniform recovery throughout the season at Bangalore in which he concluded that to increase the sugar production reduces the cost of production of sugar which will ultimately leads to profitability of the mills and at the same time make the farmer get a good price for his cane. He emphasizes that the difference between the peak period recovery and the average recovery for the season should be brought to the minimum by improving recoveries during the early part and the late part of the season are improved. Reddy (1988) through his paper in financial management the experience of co-operative sugar factories in Tamil Nadu pointed out that, procuring sufficient amount of working capital has become increasingly difficult under the credit squeeze policies adopted by the Reserve Bank of India, working capital, therefore should be managed effectively. The practice of cash management reveals that the co-operative sugar mills in Tamil Nadu carry cash balances to meet their day to day obligations. Receivable management don t acquire any

33 18 significance in co-operative sugar mills, due to fact that sugar is controlled commodity. Inventory management in co-operative sugar mills is greatly influenced by the government policy regarding sugar price. The only thing that has to be ensured by the mills is continuous supply of cane without any break. Daman (1989) defined the term management as it is the art and science of organizing and directing the resources of an enterprise towards the achievement of its objectives. He also indicated that in a co-operative the management structure, as a whole consists of the general membership, the elected boards or committees and the (usually employed) managers. Chauhan (1993) indicated the problems and prospects of co-operative sugar mills in Gujarat as regards to managers and workers. He reported that the problem of purchase tax on sugarcane based on its price, shifts in governmental policies on licensing of sugar factories, shortage of sugarcane, molasses, storage and distribution, efficient disposal and byproduct utilization, delay of cane payment, low sugar recoveries per hectare, etc. Narasaiah and Jayachandra (1996) by conducting study on cash management of co-operative sugar factory exhibited that there must be adequate cash and bank balances to meet day-to-day operations. The amount of cash and bank balances should be raised from long term resources for efficient utilization. For smooth functioning of the factory, it should maintain current ratio above the standard ratio of 2:1. The factory must increase its liquid assets to meet the current

34 19 liabilities. They also stated that, the financial executives should maintain liquidity and profitability more effectively for efficient cash management. Jauhari (1996) while studying Management Information System (MIS) in agricultural co-operatives with focus on Indian co-operative sugar industry describes the management information systems used in six activities, using the case of a cooperative sugar mill in Uttar Pradesh 1. Sugarcane management, 2. Plant and machinery management, 3. General accounting, 4. Manpower planning and training, 5. Inventory management and production, 6. Stock and sale of sugar. Different types of reports were produced and the use of computers in accounting, preparing reports, statements and inventory management are noted. Narasaiah and Jayachandra. (1996) in their study Inventory management in Kovur co-operative sugar factory Ltd. Nellore (A.P.) made the notes about the inventories of raw materials, sugar in process, finished goods, and spare parts at Kovur co-operative cane sugar factory in India, their percentages of the total inventory value are indicated for each season from to Baviskar (1997) based on the study sickness in cooperative sugar factories indicated that mismanagement is one the main cause for the sickness. He concluded that the

35 20 performance of the sugar factory is depending on the efficiency and effectiveness of the management. Also there should be positive approach for the overall progress of the factory. Most of the factories are sick due to lack of good management. The impact of decisions taken by management leads to progress or sickness of the factory. It is management s duty to take only such decisions which are beneficial to the factory particularly purchase procedures should be followed strictly. Stores inventory should also be according to the norms. Mangal Singh (1999) while giving scenario on the present status of sugar industry operating indicated that number of powerful Inspectors continuously hovers around the factories, one of the main functions of the factory management is to entertain them. Manager s time sheet analysis shows it. Sugar mill managers remain occupied in representing to government. On one or other grievance or complying with statutory obligations which are too many. Where is time to innovate? He also indicated that everyone knows more controls more corruption. Can the situation be improved is the question. Sugar managements still look for being liberated. Keerthipala and Thomson (2000) revealed that the existing cane payment systems adopted by Srilankan Sugar Companies do not offer incentives for the farm producers to produce high quality cane or for the companies to improve their processing efficiencies nor they are designed to split proceed from sugar and byproducts between farmers and the company in proportion to their economic contributions to the overall cane

36 21 production and manufacturing process. The author further developed an alternative formula to overcome these shortcomings, which increases the cane price for the farmers in three sugar companies and both farmers and companies receive more equitable shares of proceeds. 2.3 Economies and diseconomies of scale Like any other industry the sugar industry is also characterized by economies/diseconomies of scale. The high cost of machinery and other assets like buildings vehicles, etc; increase the requirement of finance at the initial stage of the establishment of a sugar factory. The investments in such assets are of permanent nature and they do not vary in the short run time period. The sugar factories are able to increase their profitability by way of reducing the per unit fixed cost through fuller utilization of production capacity. The analysis relating to economies/diseconomies of scale, therefore, is of immense use in order to determine optimum plant size for the sugar factories under varying conditions. Pittie (1975) concluded that the production of sugar from newly developed units is uneconomical as setting up of new units is highly capital intensive and fuller capacity utilization is the only solution for overcoming the problems of low returns from new sugar units. Ferran (1976) has rightly said that there is a necessity of determining the most economic size of sugar mill in order to safeguard the industry from the problems of diseconomies. The basic consideration in determining the milling capacity of

37 22 sugarcane mill must, therefore, be illustrated as the basis of production costs and performance figures of factory. While stressing the need for optimum capacity, Phadnis (1976) concluded that as size of plant increases beyond a certain limit there exist diseconomies of scale due to inefficient management of the plant. If the factory is run at optimum capacity, there will be efficient management which ultimately leads to reduce the cost of production and also to maintain consistently high price to cane growers. Pawar (1977) found that the per unit profitability of sugar production was low in the large sized factories as compared to the smaller ones. The large sized factories, however, were at advantage in economizing manufacturing expenses and overhead costs provided the sugarcane price and excise duty remained the same for all the factories. Mittal (1976) recommended rehabilitation and modernization of sugar factory to improve economic position of sugar factory. He stated that economies of sugar factory can be improved by the adoption of new techniques to reduce losses of sugar, labour saving devices, fuel saving devices, adoption of preventive maintenance techniques, reduction in stores consumption, utilization of by products and expansion of capacity. Kawade (1977) found that the supplies of sugarcane to the large factories are insufficient in relation to installed capacity, thereby resulting into under utilization of installed

38 23 capacity, low rate of return on capital investment and diseconomies of scale. Shinde (1981) stated that the escalation in the cost of plant, machinery and civil works has been a major source of sickness and a new co-operative sugar factory requires 4-5 years to break even. Till that time it incurs annually a loss of ` 25 lakhs to ` 40 lakhs. The losses accumulate rapidly due to high interest rate and the unit falls sick. Athare (1982) searched out that, the rate of return on capital investment was comparatively high in large sized sugar factories. In the case of small sized sugar factories, the rate of return on capital investment was observed to be lesser than the market rate of interest even for productive period of 20 years. In the case of the medium sized sugar factories, however, it exceeded the market rate of interest provided the productive period remains at 15 years and above. Waghmare (1993) while studying performance of Shri Chhatrapati Co-operative Sugar Factory, Bhavaninagar (Pune) concluded that there was increase in the area, production and recovery percentage of the sugarcane in the jurisdiction of the sugar factory. The sugarcane produced by the members constituted around 70 per cent of the total sugarcane crushed by the factory and remaining 30 per cent of the total cane crushed was brought from outside of the operational area of the factory to have full utilization of the installed capacity. It resulted in low cost of production of sugar and better prices for sugarcane to the members.

39 24 Rao (1993) through his study on `Co-operative Sugar Industry in India - A time series analysis, concluded that cost of maintenance has increased at a higher rate of growth than rate of growth in sugar production and it is more so during period. Hence management and technologists should take necessary steps to rectify the bottlenecks so as to improve the efficiency of the industry, and to make it competitive in an open market economy. Kale (2002) based on the study on Economic Evaluation of Performance and Management of Indapur Sahakari Sakhar Karkhana in Pune District revealed that sugar factory had worked efficiently with minimum losses during the period on the basis of performance evaluation of the sugar factory. Highest crushing efficiency was observed in the year (148.75per cent) with 238 days of working. On the other hand, highest capacity utilization was observed in the year viz., per cent. Vikhe (2002) based on the study on performance, evaluation and management of Rahuri Co-operative Sugar Factory, Shivajinagar A case study concluded that the Rahuri factory was totally dependent on supply of sugarcane from shareholders of villages from the area of jurisdiction. Actual crushing days and crushing efficiency was the highest during the year i.e days and per cent, respectively. Capacity utilization was highest in the year i.e per cent.