Total Factor Productivity Growth, Technical Progress and Efficiency Change in Sugar Industry of Uttar Pradesh

Abstract

This paper examines the total factor productivity (TFP) growth and its components (technical efficiency change and technology change) in the sugar industry of Uttar Pradesh. The TFP growth is estimated applying SBM-DEA-based Malmquist Productivity Index (MPI) on the panel data of 36 sugar mills for the period 1996-97 to 2002-03. The study finds that the average TFP in the industry grew at a moderate rate of 1.6 per cent per annum during the entire period. The decomposition of TFP growth into technical efficiency change (catch-up effect) and technical change (frontier shift) reveals that the TFP growth is primarily contributed by technical change rather than by technical efficiency change. Sector-wise estimation of the TFP testifies that the private sector has the highest growth, followed by the cooperative sector. Regional pattern of the growth demonstrates that the sugar mills in the western region achieved relatively better TFP growth than their counterparts in other two regions. The study also finds that the mills with bigger plant size attained higher productivity growth than the smaller ones. Further, relatively higher TFP growth achieved during the later part of the study period provides some indication that the policy-induced factors, such as de-licensing and partial decontrol of sugar sector have made some positive impact on the TFP growth