Pareto Improvement in India's Sugar Sector

Paper Summary:

This paper studies the impact of the government policy on the Indian sugar industry and the ordinary sugarcane farmer, who is also the consumer of sugar. This paper discusses an economic model with two components, one of utility maximization and the other for profit maximization. For the purpose of simulation, two OLS regression models are developed in this paper to calculate the increase in sugar production when the technology level affecting the recovery rate of sugar from sugarcane is increased and the effect on market price of sugar as a result of increased production. As a conclusion, this paper also interprets the simulation results and suggests policy recommendations for the government that increase the overall welfare of the sugar consumers and sugar producers.

From the Paper:

"On the question of how to increase the recovery rate, Kansal argues that the need is to encourage "captive farming", where sugar mills are entrusted with the task of modernizing cane cultivation, adding newer and superior varieties, introducing tissue culture etc. Another important thing is to prevent the staling of cane. This requires planned harvesting of cane, reducing the distance between mill and the sugarcane (by preventing haphazard growth of sugarcane area) and by improving the transport infrastructure in the captive area."

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