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AN ANALYSIS OF EXPORT SPECIALIZATION AND COMPETITIVENESS OF THE INDIAN SUGAR INDUSTRY.

ABSTRACT

Formation of various regional economic integrations, primarily the establishment of the WTO, has eased the rules in world sugar trade. Hence, the role of developing nations likes India, China, Thailand, and Indonesia is augmented in the world sugar economy. Moreover, export competitiveness and specialization patterns of these developing nations are undergoing a major structural change. Hence, the study is an attempt to examine the export competitiveness of India in the international sugar market between the years 2001 and 2013 with the help of the RCA Balassa approach and export specialization index. India is found to be have a comparative advantage at the aggregated level but lagging behind in disaggregated product categories. Furthermore, major structural changes in export specialization patterns have been observed in Asian, North American, and European markets over the years. Hence, India's export competitiveness is not consistent across the years and not uniform across all product categories, showing the effect of controlled legacy. The reason behind this cyclicalty is occasional sugar exports induced by an irrational sugar price mechanism and procedural delays in announcement of export incentives.

Keywords: Competitiveness, Cyclicality, Specialization, Political Interventions, Structural Shifts.

INTRODUCTION

Various evidence from the literature shows that sugar is produced in 123 countries, amongst which 71 countries manufacture sugar from sugarcane, 43 countries from sugar beet, while 9 countries produce sugar from both cane and beet (OECD-FAO, 2011). In India, sugar is produced from sugarcane and there are 703 installed sugar mills which are located in 18 states in the country. Around 325 of the total installed mills are in the cooperative sector, 335 in the private sector, and 43 in the public sector (Department of Food & Public distribution, 2015). The Indian sugar industry is mainly in the private sector dominated from the point of view of volume of production and crushing capacity. It is also pertinent to mention that India is the second largest sugar producer in the world and the Indian sugar industry is the second largest agro-industry established in rural India (Balasubramanian, 2012). To date, the contribution of the industry is 1% in Indian GDP (Pandey, 2007). Moreover, it has a turnover of Rs.700 billion per annum and it contributes almost Rs. 25 billion to the central and state exchequer as tax, cess, and excise duty every year (Pardomuan, 2012). Additionally, it is highly influential on the social welfare of countrymen because 45 million people depend on the sugar industry (Pandey, 2007).

Although the sugar industry is such an industry that creates a plethora of social and economic benefits, in spite of this fact, sugar is a controlled commodity all over the world. The world sugar trade is entangled with a lot of political pressures and interventions so as to save the interest of domestic consumers and producers (Borrell & Duncan, 1993; Dye, 1994; Sukhtankar, 2008; Mahadevan, 2009; Green World Investor, 2011). It is interesting to point out here that these interventions are also found to be in the form of transparent (1) and non- transparent (2) supports to indigenous sugar production and these financial aids act as a barrier for other producing and exporting nations. Besides this supporting mechanism, some local legal interventions (acts and orders) are also prevalent in all producing countries. In India, sugar has also been a controlled commodity as the whole value, from sugarcane to sugar, molasses (3) and ethanol, is confronted with stringent government regulations (Mahadevan, 2008; Sukhtankar, 2012; UFT, 2012; Singh et al., 2012). Major legal interventions in India are sugar (control) order 1966, levy sugar supply order 1979, sugar (packing and marking) order 1979, jute packaging materials (compulsory use of jute in packaging), and commodities act 1987 (ISMA, 2012). These practices are depriving the market from fair competition among firms. However, after the introduction of the Industry Protection Act, 1932 and with the introduction of financial supports, (4) the sugar industry of India began to grow. But the above mentioned stringent interventions in the last eight decades has somehow guided Indian sugar production in a cyclical manner. In accordance with the unequal production trends in sugarcane yield, sugar production tracks on a 6 to 8 year cycle in whicha 3 to 4 years boom phase having surplus production is followed by 2 to 3 years of lesser production. This type of recurring trend is also highlighted by monthly sugar exports data from 2007 to 2012 (United Nations, 2013). Figure 1 below shows that years 2008, 2010, 2011, and 2012 are the years in which the export volume of the '1701 category had high levels but, after August 2012, export began to fall. It be noted that molasses exports also rose from November 2010 to April, 2011 and this category shows declining trends afterwards. Unlike these two categories, lactose and sugar confectionary exports are very low and even striving below US $7500000.

Indian sugar exports are occasional and cyclical as is quite evident from trend analysis, but there is a pertinent need to study which markets Indian sugar exports are highly specialized and whether the specialization patterns have changed over the years. Hence, this study is a novel attempt to analyze the pattern of export competitiveness of the Indian sugar industry all over the world in the wake of controlled settings. This study is organized into five sections. The first section discussed the dynamics of the Indian sugar industry and trends in Indian sugar exports. The subsequent section will put light on concepts of export competitiveness which will be conferred through a detailed literary review on competiveness and India's overall export competitiveness performance in the last two decades. The following section deals with the explanation of the methodology regarding the measurement of competitiveness. The fourth section concentrates on revealed comparative advantages and export specialization patterns of Indian sugar exports. The last section summarizes conclusions and recommendations and, to validate the results, expert opinions from industry professionals have also been added in the study. These expert opinions have been collected through online and offline discussions with sugar industry professionals on unsolved issues of the Indian sugar industry.

EXPORT COMPETITIVENESS - A LITERARY REVIEW

Before discussing the concept of export competitiveness, it is pertinent to mention the basic competitiveness concept and international competitiveness concept which are closely related to the discussed term. The former can be defined as a comparative advantage acquired by a firm or industry to customers as compared to domestic and international competitors (Vernon, 1966; Deardorff, 1980; Bernstein & Weinstein, 1998; Harrigan, 2001; Wood & Mayer, 2001; Fitzgerald & Hallak, 2004; Chikhasu, 2007). The international competitiveness of a nation can be better explained as the capability to meet global standards, while maintaining the income and employment level of its general people (Clipa, 2011; World Economic Forum, 2014). Fundamentally, export competitiveness is a supporting conception of international competitiveness. It implies better export performance in terms of price and quality, as compared to other nations in export markets, while maintaining economic growth and employment (Wagner, 2007; Ketels, 2010; Bruneckiene & Paltanaviciene, 2012).

Regarding export competitiveness, one notion is explicitly true that stalemate conditions are not possible and there is no room for lax considerations if one wants to compete with excellence. It implies that export competitiveness is a zero sum game and manufacturers and, exporters from all over the world are ready to serve the untapped market with superior products. Additionally, it is the level of comparative advantage that matters as well (Samen, 2010). Basically, export competitiveness may be understood on three different levels: namely, nation's level, industry's level, and firm's level (Bezic et al., 2010). As far as the scope of the present study is concerned, industry competitiveness is the central point. Basic objective of carrying out this competitiveness analysis is that companies operating in an industry must know the trends and patterns of the comparative advantage of the country. It is the industry that ensures the comparative advantage for both the firms and the country.

As far as overall competitiveness of India is concerned, India has been export competitive in several commodities under the head of agricultural exports and manufactured exports, due to near self-sufficiency of inputs, relatively low labor costs, and diverse agro-climatic conditions (Schuele, 1999; Jayawickrama & Thangavelu, 2010). Although with the changes in stages of economic development, India is also achieving specialization in products which require deployment of capital and technology. Likewise, Indian manufactured exports have remained competitive in the post-reform period, as clearly examined by Kaur and Nanda (2011). In industrial product categories, also, Jayawickrama and Thangavelu (2010) have analyzed the degree of export competitiveness between India, China, and Singapore. This study revealed that China and India are strong competitors as well as complementary in many export categories of industrial products. Unlike all agricultural and manufactured products, capacity utilization and competitiveness of Indian sugar industry have not been so consistent in the post-liberalization period (Ray, 2012). This present study will provide empirical evidence in favor of these prior review based findings. The following section is related to the approaches to measure the specialization and competitiveness patterns.

METHODOLOGY REGARDING MEASUREMENT OF EXPORT COMPETITIVENESS

According to various foreign trade theories, pre-trade relative prices have been used to determine comparative advantage of a nation. This phenomenon is based on the conception that low domestic prices, as compared to high world prices, are used to assure the comparative advantage (Maule, 1996; Hillman, 1980). But there are a lot of limitations raised in the context of pre-trade relative prices as a measure of export competitiveness. For example, world trade takes several forms, as there may be situations where a particular nation may have an advantage in various commodity groups or various trading countries may have a competitive advantage in one specific product or commodity (Hillman, 1980). So it was difficult to know the exact specialization level of one commodity at all disaggregated levels or to examine the accurate specialization pattern of individual trading countries in the international trading market.

Balassa developed the concept of RCA which ensures the calculation of revealed comparative advantage at disaggregated levels. Amongst all competitive indices, RCA has become a widely accepted method for revealing the comparative advantage and export specialization of a country with reference to other group countries (Balassa, 1965; Balassa, 1977; Vollrath, 1991; Ferto & Hubbard, 2003; Fetscherin et al., 2010). Balassa (1977) states that comparative advantage is revealed by observing trade patterns and investigating the shares of exports of a particular commodity in relation to total world exports. Extant literature shows that many researchers have used the RCA indices suggested by Balassa. But RCA also has the inherent weakness that its values lie between 0 to 1. It implies that values below 0 and up to infinity do not imply significant interpretations. To overcome the problem of this asymmetry, RSCA (Revealed symmetric comparative advantage) is another technique proposed by Laursen (1998) in which RCA is reformulated in the form of RCA-1/RCA+1 (Hoen & Oosterhaven, 2006).

As RCA and RSCA only take export values into consideration, one new measure revealing import advantage has been recommended by various academicians that gives new horizons to comparative advantage theories. Relative import advantage means revealing the share of imports of a particular commodity of a country in relation with total world imports (Seyoum, 2007). RMA just refines the result carried out by RCA (Balassa, 1977). RMA itself does not yield meaningful results, whereas the RCA2 method outputs adroitly depicts the exact level of comparative advantage. RCA2 is obtained by subtracting RMA scores from RCA scores (Seyoum, 2007). In exemplification to this, for analyzing specialization patterns in partner countries' imports rather than share in world exports of a specific product, the export specialization (ES) index has been introduced by Donges and Riedel (1977), Mlangeni (2000), and Vollrath (1991. This index is a modified version of the RCA index which includes both exports and imports data (Laursen, 1998; Lee, 1995; Maule, 1996; Prasad, 2004; Rana, 1988; Saboniene, 2009). Values greater than 1 depict a comparative advantage in respective markets. Formulation of the above specified indices are described in Table 1.

ANALYSIS AND RESULTS

This present study is basically designed to analyze the export competitiveness of India through various trade indices; RCA, RMA, RCA2, RSCA, and the export specialization index (Modified RCA) from the period 2001-2013. The focal point of this study is India's sugar industry. Data regarding the present study has been taken from UN COMTRADE statistics based on ITC calculations. The sugar industry data at four digit level of HS classification (17) has been sourced, which stands for sugar and sugar confectionary at disaggregated levels. In conformity with the cyclicality pattern of production of sugar, all RCA indices show that Indian sugar exports also follow the path of comparative advantage in a cyclical manner (See appendix: Table 2 ). It implies that the comparative advantage in RCA2 in the years from 2001 to 2003 turned to a comparative disadvantage in the years 2004 and 2009. Afterwards, the trend changed again and India shifted to a pure competitive advantage in 2010 and continued up to 2013 (See appendix: Table 2). In accordance with this three year back to back cycle of comparative advantage of India, all trade indices; RCA, RCA2, RSCA, export specialization index in respective years; 2001, 2004, 2007, 2010, 2013 have been shown for the sake of simplicity. For the sake of ease in interpretation, codes (5) have also been given to all values (RCA, RSCA, RCA2, and export specialization index).

In addition to this, an export specialization index is employed with respect to 52 nations belonging to Africa, Asia, North America, and Europe. These 52 nations are those countries which are significant importers of Indian sugar within a considerable time frame. In addition to this, to verify the structural changes in competitiveness patterns, Spearman's rank correlation (6) has also been used. Here, this correlation tests the dependence and changes in respective years. High rank correlation as 1 means ranking of a country by comparative advantage has not changed or changed a little bit, while value close to -1 shows that competitiveness of a country has undergone major structural changes. Year 2001 has been taken as the base year and correlation co-efficient of corresponding years (2004, 2007, 2010, and 2013) are used to observe the structural changes.

In Table 3, shifts in comparative advantage of Indian sugar exports, on the basis of total positive results are analyzed in category '1701 (Cane or beet sugar and chemically pure sucrose in solid form), India is shows a comparative advantage. Both RCA and RCA 2 scores of India are satisfactory, as both indices are greater than 1. But in the years 2004 and 2013, sugar exports dropped drastically, henceforth, all respective indices also plunged below 1. In the categories ('1702 and '1704) India is at competitive disadvantage in the time period in question.

Besides these two categories, in category '1703, India (Table 3) has a pure comparative advantage in all reference years. India had imported molasses heavily in year 2004 as RCA declined to -5.906 from 3.927 in 2001. RCA and RSCA show the same competitive pattern but RCA 2 has 3 positive counts in category '1701 due to sugar imports in 2010. As per the results of Spearman correlation, India in the year 2004 has seen a major negative change and modest changes in 2007 and 2013 (Table 4). In the year 2004, a major structural change is observed in Asian countries, while in year 2007 both European and North American and Asian countries have undergone a positive structural change. Next to this, in year 2013, export specialization of India declined in the Asian market drastically. The one thing to be noted is that in African markets, there is no structural change and exports are being released to those countries without any barriers. In contrast, European, North American, and Asian countries are importing sugar and sugar confectionaries from India, but there are some environmental factors which are obstructing the trade over the years.

After revealing comparative advantages and analyzing the structural changes in Indian sugar exports, it is the time to examine the export specialization patterns in defined territorial groups. Table 5 results show that Indian exports in the United States of America, Canada, Belgium, United Kingdom, Netherlands, and Russian Federation are highly specialized from 2001 to 2010 but have dropped significantly in 2013 (Table 5). These findings are supported by Spearman correlation results which stress that European and North American countries have seen high negative structural changes in 2004, while a major positive structural boost in 2007 and again structural shifts in the years 2010 and 2013 as .321 and .000, respectively (Table 4).

The major reason behind this structural change (drop in exports) is availability of surplus sugar in the world sugar market and better quality sugar accessibility from Thailand at a competitive price. Table 6 shows that Saudi Arabia, China, Singapore, Thailand, Israel, Vietnam, Malaysia, Iran, Kuwait, and UAE are the Asian nations where Indian sugar exports are very much specialized and export competitive, while in Nepal, Bhutan, Yemen, Bahrain, Sri Lanka, Syrian Arab Republic, Maldives, Indian exports are not much specialized.

The main sugar importers from Asia are Muslim countries and the reason behind this export specialization in these countries is the festive month of Ramadan. Besides that, it is also a fact that India has freight competitiveness in ocean markets as compared to Brazil and Thailand. Brazil's share is getting seized and India is grabbing her share. The new markets acquired by India from Brazil's importer list are Bangladesh, Malaysia, and Sri Lanka where the index is increasing. As far as the structural changes in specialization patterns are concerned, Indian exports to Asian nations have seen many drops in the years 2004, 2010, and 2013 but 2013 is showing a significant decrease (-.547**) of Indian exports in Asian countries.

Among African countries, Tanzania, Jordan, Niger, Nigeria, and South Africa are the countries where Indian sugar exports are highly specialized (Table 7). In addition to this, other countries, Tunisia, Kenya, Madagascar, Oman, Ethiopia, Togo, Cameroon, Namibia, and Lebanon, also have high positive counts between 3-4. Also, there are the countries Eritrea and Egypt where India has exported but Indian exports are not really specialized (Table 7), whereas, in Somalia, Djibouti, Tanzania, India is found to be moderately specialized even in the year 2013 when Indian specialization and competitiveness scores in all the countries remained below the acceptable ceiling 1.

DISCUSSION AND CONCLUSION

Empirical evidence proves that there is a cyclical pattern in the export competitiveness of the Indian sugar industry and structural changes and export specialization patterns are observed to be the main determinants behind these cyclical movements. Reasons behind this cyclical trend are declining financial viability of sugar companies (Kumar and Sheetal, 2013), irregularity in announcement of export incentives, and lack of differentiation in product categories. As far as the financial viability of the Indian sugar industry is concerned, it is turning down year by year and disparity in sugar production is the prominent basis for this distressful situation. Furthermore, low international and domestic sugar prices are also worsening the financial performance of a reeling industry, as low prices technically result in lesser cash realization. Hence, this liquidity crunch faced by the sugar factories drives irregularity in sugarcane price payment to the farmers. Consequently, sugarcane arrears (7) are surmounting in all sugarcane producing states. Confronting this peculiar situation of accumulated sugarcane arrears, affected farmers generally switch over to other cash crops leading to a decrease in the total acreage area, which automatically results in the dilapidation of national sugar production volume (Government of India and UFT, 2012).

Apart from this, controlled consumption patterns (8) and uneven price mechanisms (9) have also affected the financial viability of Indian sugar companies. This stumbling financial viability can be improved by eliminating (10) SAP (State Advised Prices) and applying rationalization in pricing mechanisms. Rationalization stands for sharing 70% revenue from sugar and end products with sugarcane farmers (Srinivasan, 2013). Mainly fair and remunerative prices (11) are considered to be technically acceptable pricing mechanisms from the viability perspective of sugar mills, as determined on the basis of recovery. Farmers' welfare is also kept in mind when FRP is decided by the central and state government. Concerned about the pricing mechanism of sugarcane in India, the Director at Chemical Systems in DCM Shri Ram industries Ltd. articulated:
Sugar factories cry for sugar cane payment. When we will not pay a good
amount to farmers, why will they grow sugarcane and all our investment
will go in waste. Farmers want adequate return from the available land
and they also deserve a good standard of living. Hence, industry and
farmers will have to work hand in hand along with research institutions
to raise the economies of scale in sugar Industry. Fair sugarcane price
should be paid to the fanners so that they can continue the production
of sugarcane. This step will cure cyclicality in production and
thereafter in exports.


Surmounting factory costs are induced by State Advised Prices in many provinces which are further desecrating the margins of mills. Furthermore, these higher costs both at factory and farm levels are creating cost disadvantages in the international market, as well. Decontrolling was the only feasible solution recommended by many committees, (12) Mahajan, Rangarajan and Thareja, to cure the reeling sugar industry. In streamlining the recommendations of these committees, several attempts (13) towards decontrolling the industry had been done in the past as well but all those attempts could not be operational. Finally, Indian sugar industry was partially decontrolled in April, 2013 and various measures have been suggested by the Rangrajan Committee. Among suggested measures by the Rangrajan Committee towards decontrolling, removal of levy quota and advance release mechanism are the main reforms. Levy quota has been dismantled the 10% levy obligation on sugar mills for the public distribution system. (14) According to this new announcement, the units will be free to sell their production on the basis of their own will and the government will have to pay for the share that they will purchase from the market for PDS (The Hindu, 6 February 2013).

By keeping the welfare of sugar factories in mind, the food ministry has also eliminated existence of an advance release mechanism which is generally known as an artificial ban (The Hindu, 6 February 2013). Regarding the release mechanism of sugar from mills, it can be argued that the every month quota system was very volatile in nature and mills were bound to sell their stocks in stipulated month. But a new release mechanism will provide flexibility in selling out stocks in the new stipulated time period of six months and stock holding limits are also eliminated. In addition to this, sugar exports (15) have also been completely allowed free under the Advance License Scheme (ALS) and Open General License (OGL) by Cabinet Committee on Economic Affairs (The Hindu, 6 February 2013). In the present study, the years before decontrolling are primarily considered. Therefore, these decontrolling measures will embrace their benefits in years to come and it will be interesting to measure India's competitiveness in the coming years. The Senior Sales Manager at Rana Sugars Ltd. shared a divergent view of current state of affairs:
Decontrolling is not yielding the desired results rather proving a
handicapped solution to the discussed industry. However, decontrolling
was done on the demand of the industry but the industry has not played
its role completely. Somehow the industry has not been successful due
to own wrong sales strategies. Mills want to liquidate their stocks,
but it is not practically possible (low domestic and international
sugar prices). The industry should need to understand their role. In
addition to this, full decontrolling is needed if the industry really
wants to sustain.


Apart from these indigenous production dynamics, let us discuss the competitiveness of Indian sugar exports. Indian sugar exports are not competitive in the world sugar market due to higher costs as compared to other competitors' countries. To balance the gap between domestic and international prices, export incentives (16) are being announced every year to make Indian exports prices competitive. Reportedly, India's share is rising due to bad weather conditions in Brazil, the announcement of export incentives, and the rupee clearing mechanism with Iran (Brough & Jadhav, 2014). These export subsidies are being announced on a y-o-y basis in the years of surplus production, but procedural delays always impede the trade flows. Besides that, rising exports in Asian and African markets can be attributed to setting up of refineries in African countries. These countries are importing sugar from India at a comparatively lower cost and refining it in their own refineries and afterwards selling the refined stocks at significant profit margins. There is not any structural change that has been observed in exports to African countries, which implies that India continued exports to African markets in the years of fewer surpluses also. On the contrary, the export specialization index is stumbling in the context of some countries irrespective of their territorial group, hence, it is recommended to adapt a product differentiation (17) strategy (Clipa, 2011). As, in India, white sugar is not in a position to remain competitive due to the high cost of production and lack of sugar premiums, henceforth raw sugar is a better option to invest. A propos, export manager in Olam International suggested:
Indian sugar manufacturers should shift towards regular production of
raw sugar to compete in international market as white sugar and refined
sugar production already exists in surplus in global market. Due to
this dilemma and choice over composition of sugar production, she gives
the opinion that Indian sugar manufacturers are not much efficient in
manufacturing raw sugar, while they are enough efficient in producing
white and refined sugar. Not being specialized in raw sugar production,
they are not much sure about real required ingredients of raw sugar.
Raw sugar exports are mainly contract based instead of routine
production of Indian sugar mills.


In order to secure a safe place in the international white sugar market, India has also started following a process having low ICUMSA (18) as adopted by major white sugar exporting countries. As shown by the shifts in comparative advantage in Indian sugar exports, India is at a comparative disadvantage in many disaggregated product categories. Hence, to improve overall competitive performance of Indian sugar industry, all sugar categories (white, raw, and refined sugar exports) are needed to be incentivized. After decontrolling of end products, policies like cane quality based price and zoning (distance between sugar mills) are required to be consistent. In exemplification to this, molasses is still prone to levy and quota obligation, hence, it needs to be fully decontrolled. By-product decontrolling is supported by the datum that decontrolling has reduced cost of production by 4% and payment to farmers was being made easily by mills in 2013 (Mishra, 2013). Incentives for raw sugar exports and suggested full decontrolling measures will secure more benefits in the years to come. Henceforth, it will be interesting to measure India's competitiveness, specialization, and sugar policies' patterns in the coming years with reference to the group of major competitor countries.

ACKNOWLEDGEMENTS

We are grateful to Industry professionals; Anup Kesarwani (DCM Shri Ram industries Ltd.), Mr. S. C. Chabbra (Rana Sugars Ltd.), Uday Badadare (Shreekranti Sugars Ltd.) and Ruchi Ahuja (Olam international Ltd.) for giving their valuable time and sharing their knowledge based solutions on critical and, unresolved issues in Indian sugar industry.

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FOR FURTHER READING

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Sheetal Chaudhary is a research scholar in Guru Jambheshwar University of Science and Technology, Hisar, India and can be contacted at: sheetaldeendyal1988@gmail.com

Dr. Rajiv Kumar is an Assistant Professor in Guru Jambheshwar University of Science and Technology, Hisar, India and can be contacted at: rajivtamak@rediffmail.com

(1) Among transparent assistances, domestic market controls and import controls (tariffs and quotas) are highly prevalent in the world sugar trade.

(2) Non-transparent financial aid includes direct financial aid. Likewise, state ownership, provision of an inclusive farm policy, and debt financing.

(3) In the major sugar producing state of India (Uttar Pradesh), molasses is still prone to a 15% quota and liquor distilleries prominently use this molasses (Rawat, 2015).

(4) In India, import tariffs (duties) are also being imposed on imports to save domestic industry and indigenous production and the present import duty stands at 40%. Besides that, export subsidies on raw sugar are also being offered and input subsidies for seeds and updated farming technology are instances of non-transparent financial supports in India (The Economic Times, 30 April, 2015).

(5) A comparative advantage is denoted as an A and significant high comparative advantage is denoted A*. A Revealed Comparative Disadvantage is denoted as a D.

(7) In the beginning of year 2015, Rs. 11333.19 crore were due on mills and mills were almost unable to clear these dues (Directorate of Food & Public distribution, 2015).

(8) The controlled consumption of sugar in India is segregated into three demands; Indian government' s requirement of 25 lakh tonnes for levy quota, one lakh tone for army purchases organization, and 1.25 lakh tonnes for the festival quota (ISMA, 2012). Albeit, the levy mechanism was abolished in year 2013, the quota still exists and government is procuring levy sugar at market rates from the mills.

(9) Just an 8 to 9% increase in sugar price against 24% increase in sugarcane prices payable to farmers by the government of India has given impetus to irrational and uneven price mechanisms (CACP, 2014).

(10) State Advised Prices are the prices which are mainly governed and influenced by local sugarcane farmers and set by respective state governments without interference of central government. Basically, cane price should cover these costs, but some states in India set comparatively high cane prices as SAP which is generally above the rational and revenue sharing pricing mechanism FRP (Fair and remunerative prices).

(11) At the present time, SAP is fixed as 280 per quintal, while FRP stands at 220 per quintal as per 9.5% recovery rate (CACP, 2014).

(12) Mahajan, Rangarajan and Thareja are notable committees formulated for suggesting the reforms pertaining to the Indian sugar industry.

(13) In the years 1971-72, 1978-79, and 2003-04, respective governments had suggested the measures of decontrolling, but all these attempts could not acted upon.

(14) PDS is the scheme in India under which food condiments are provided at a subsidized rate to the people living below the poverty line.

(15) Indian sugar exports are fully decanalised now. Any exporter or manufacturer can export by just obtaining export release orders from the Directorate of Sugar.

(16) According to DGCI & S, 2011, these export incentives are being availed in the form of duty drawback schemes and the duty entitlement passbook scheme. An advance license scheme has also been designed for the abolition of re-export conditions of certain amounts of sugar in return for zero duty import (Landes, 2010). An export subsidy in 2014 was announced as Rs. 4000 per tonne (Business maps of India, 2015).

(17) Three types of products which are primarily produced in a sugar factory and acceptable in the world sugar market are raw, refined, and white sugar.

(18) ICUMSA stands for international commission for uniform method of sugar analysis which deals with purity and color specifications.
TABLE 1
Description of trade indices

RCA                                  RMA


RC[A.sub.ij]=Xij / Xwj/Xi / Xw       RM[A.sub.ij]=(Mij/Mwj)/(Mi/Mw)
where:                               where:
Xij = ith country's export of        Mij = ith country's import of
commodity j.                         commodity j.
Xwj = World exports of               Mwj = World imports of
commodity j.                         commodity j.
Xi = Total exports of country        Mi = Total imports of country i.
i.                                   Mw = Total world imports
Xw = Total world exports             RCA2
if RCAl>1then competitive            RCA2=RCA-RMA and If
advantage and if RCAK1               RCA2>0=Competitive
then competitive                     advantage, Otherwise
disadvantage                         disadvantage
RSCA
RSCA=RCA-1/RCA+1

RCA                              Modified RCA
                                 (Export specialization index)

RC[A.sub.ij]=Xij / Xwj/Xi / Xw   [.sup.m]RC[A.sub.ij]=Xij / Xi/Mjk / Mk
where:                           where:
Xij = ith country's export of    Xij = ith country's export of
commodity j.                     commodity j.
Xwj = World exports of           Xi = Total exports of country i.
commodity j.                     Mjk =Kth country's imports of
Xi = Total exports of country    commodity j from country i
i.                               Mk=Total imports of country k
Xw = Total world exports
if RCAl>1then competitive
advantage and if RCAK1
then competitive
disadvantage
RSCA
RSCA=RCA-1/RCA+1

TABLE 2
Revealed comparative advantage in sugar at aggregated level

India   2001     2002    2003     2004     2005     2006     2007

RCA     3.02     2.45    2.87     0.44     0.33     2.29     3.36
RMA     0.14     0.12    0.11     0.96     0.78     0.05     0.08
RCA2    2.88     2.33    2.75    -0.51    -0.45     2.24     3.28
RSCA    0.5      0.42    0.48    -0.39    -0.48     0.39     0.54

India   2008    2009     2010     2011     2012    2013

RCA     4.17    0.19     1.6      2.32     2.63    1.25
RMA     0.11    1.24     1.02     0.09     0.33    0.51
RCA2    4.07   -1.04     0.58     2.23     2.3     0.74
RSCA    0.61   -0.68     0.23      0.4     0.45    0.11

Notes: Value in italics represent comparative advantage across the
years Source: Author's calculations based on U.N. COMTRADE data base

TABLE 3
Shifts in Comparative Advantage of Indian Sugar Exports

          2001     2004     2007     2010     2013

RCA
'1701     4.652    0.58     5.333    1.976    1.672
'1702     0.65     0.48     0.422    0.635    0.742
'1703     4.308    0.266    9.246    8.459    1.723
'1704     0.212    0.269    0.359    0.343    0.377
RCA2
'1701     4.55    -0.65     5.331    0.532    1
'1702     0.207    0.11     0.059    0.306    0.273
'1703     3.927   -5.91     9.163    8.396    1.678
'1704     0.142    0.197    0.266    0.27     0.303
RSCA
'1701     0.646   -0.27     0.684    0.328    0.251
'1702    -0.21    -0.35    -0.41    -0.22    -0.14
'1703     0.623   -0.58     0.805    0.789    0.265
'1704    -0.65    -0.58     0.47     0.49    -0.45

          Direction of shift                        Total
          2001     2004    2007    2010    2013     positive
                                                    results

RCA
'1701     A        D       A       A       A        4
'1702     D        D       D       D       D        0
'1703     A        D       A       A       A        4
'1704     D        D       D       D       D        0
RCA2
'1701     A        D       A       D       A        3
'1702     D        D       D       D       D        0
'1703     A        D       A       A       A        4
'1704     D        D       D       D       D        0
RSCA
'1701     A        D       A       A       A        4
'1702     D        D       D       D       D        0
'1703     A        D       A       A       A        4
'1704     D        D       D       D       D        0

Source: Author's calculations based on U.N. COMTRADE data base.

TABLE 4
Spearman' rho correlation among different time frames

                          2001     2004     2007      2010     2013
India with whole world    1.000    .600     .600      .800     .600
European and north
American countries        1.000    .270     .929**    .321     .000
Asian countries           1.000    .464*    .543*     .165    -.547*
African countries         1.000    .011     .082      .155     .362

*. Correlation is significant at the 0.05 level (2-tailed)
**. Correlation is significant at the 0.01 level (2-tailed).

TABLE 5
Shifts in export specialization of India in North America and Europe

              Export specialization scores
              2001         2004       2007           2010         2013


North
America
 USA            4,903.10     258.8     2,375.60     3,318.30       0.5
 Canada         2,887.50     329.8     1,250.00       222.3        0.2
Europe
 Belgium      364,364         51.2   121,415        1,202.10       2.2
 United         3,407.20     303.6       999.2        489.4        0.3
Kingdom
 Spain          1,304.60   7,981         148.7        747.4        0.2
Netherlands       252.7    7,561         187.5        329.5        6.5
 Russian        2,291.60     875.7       209.3     98,182          0.8
Federation

               Direction of shift                       Total
              2001      2004    2007    2010    2013    positive
                                                        count

North
America
 USA          A*        A*      A*      A*      D       4
 Canada       A*        A*      A*      A*      D       4
Europe
 Belgium      A*        A       A*      A*      A       5
 United       A*        A*      A*      A*      D       4
Kingdom
 Spain        A*        A*      A*      A*      D       4
Netherlands   A*        A*      A*      A*      A       5
 Russian      A*        A*      A*      A*      D       4
Federation

Source: Author's calculations based on U.N. COMTRADE data base

TABLE 6
Shifts in export specialization of India in Asian Countries

                    Export specialization scores
Asia                2001      2004     2007       2010       2013


Bangladesh            0       L89       L35        348.3       0.16
UAE                   0         0        11.61      18.48      0.18
Sri Lanka             0.96      0.48      0.67       1.05      1.82
Iraq                 13.54      0        24.21   2,573         0.1

Malaysia             20.51     16.71     69.11     113.7       0.01
Iran (Islamic        69.94    984.7       0         37.81      0.4
Republic of)
Saudi Arabia        359.68    107        32.43     220.1       0.15
Nepal                 0         0         0          2.63      0.63
Singapore            97.35    283.1     133.5      101.7       0.01
Kuwait              325.78      0        27.79      74.17      0.21
Syrian Arab           0         0         4.75      52.14      0.82
Republic
Thailand          8,866     1,409    27,068         63.83      0
Maldives              3.09      0.3       3.79       1.27      0.55
China               196.25  8,251       135.2    2,633         0
Bhutan                0         0         8.88       3.02      0.77
Yemen                 0         2.76      0.48       4.29      0.72
Viet Nam             24.37    562.3     178.77     102.1       0.01
Bahrain               0        99.77     62.63     140.3       0.19
Israel            6,965       132.3      92.51     660.2       0.01

                 Direction of shift                          Total
Asia             2001      2004     2007    2010    2013     positive
                                                             counts

Bangladesh       D         A        A       A*      D        3
UAE              D         D        A       A       D        2
Sri Lanka        D         D        D       A       A        2
Iraq             A         D        A       A*      D        3

Malaysia         A         A        A       A*      D        4
Iran (Islamic    A         A*       D       A       D        2
Republic of)
Saudi Arabia     A*        A*       A       A*      D        4
Nepal            D         D        D       A       D        1
Singapore        A         A*       A*      A*      D        4
Kuwait           A         D        A       A       D        2
Syrian Arab      D         D        A       A       D        2
Republic
Thailand         A*        A*       A*      A       D        4
Maldives         A         D        A       A       D        3
China            A*        A*       A*      A*      D        4
Bhutan           A         D        A       A       D        3
Yemen            D         A        D       A       D        2
Viet Nam         A         A*       A*      A*      D        4
Bahrain          D         A        A       A*      D        3

Israel           A*        A*       A       A*      D        4

Source: Author's calculations based on U.N. COMTRADE data base

TABLE 7
Shifts in export specialization of India in African countries

Africa        Export specialization scores
              2001          2004       2007        2010         2013


Sudan            0.76       4.41       0           7.16        7.23
Tanzania        21.11       5.47       2.71       11.33        1.41
Tunisia          0          0        116        1718.23        0.16
Somalia          0.42       0.07       0.13        0.07       19.13
Djibouti         0.01       0          0.01        0           2.08
Jordan       19865.3     1145.92      29.89      188.01        0.57
Kenya          188.96      37.15       3.57       10.26        0.53
Oman           220.97      17.12      16.51       12.18        0.25
Madagascar     500.34      17.69       7.27        3.06        0.25
Niger         4327.05       0        751.9       328.66        0.08
Eritrea          0        338.73       0.34        0           0.04
Ethiopia        74.97      14.3       12.96     1309.13        0.64
Egypt            0          0          0          72.72        0.01
Mozambique      20.4        1.77      16.29        6.41        0.11
Ghana            0          0          6.83       15.26        0.07
Lebanon          0          0         61.92      360.77        0.02
Angola           0         78.17      64.48       25.38        0.08
Togo          2895.09       0          1.46        0.7         0.99
South Africa  1546.33      43.34     201.48      572.87        0
Benin            0         67.72      15.27        1.49        0.35
Cameroon         0         23.47     111.74       26.79        0.17
Uganda          55.79       9.16      46.05      158.32        0.3
Namibia          0         88.15     261.62       39.08        0.06
Burkina          0          3.35      24.95        5.16        0.23
Faso
Nigeria       5408.82       0        830.77      880.6         0.13
Senegal          0          4.19      56.24       18.34        0

Africa        Direction of shift                          Total
              2001     2004    2007     2010     2013     positive
                                                          counts

Sudan         D        A       D        A        A        3
Tanzania      A        A       A        A        A        5
Tunisia       D        D       A        A*       A        3
Somalia       D        D       D        D        A        1
Djibouti      D        D       D        D        A        1
Jordan        A*       A*      A        A*       D        4
Kenya         A*       A       A        A        D        4
Oman          A*       A       A        A        D        4
Madagascar    A*       A       A        A        D        4
Niger         A*       D       A*       A*       D        3
Eritrea       D        A*      D        D        D        1
Ethiopia      A        A       A*       A        D        4
Egypt         D        D       D        A        D        1
Mozambique    A        A       A        A        D        4
Ghana         D        D       A        A        D        2
Lebanon       D        D       A        A*       D        2
Angola        D        A       A        A        D        3
Togo          A*       D       A        D        D        2
South Africa  A*       A       A*       A*       D        4
Benin         D        A       A        A        D        3
Cameroon      D        A       A*       A        D        3
Uganda        A        A       A        A*       D        4
Namibia       D        A       A*       A        D        3
Burkina       D        A       A        A        D        3
Faso
Nigeria       A*       D       A*       A*       D        3
Senegal       D        A       A        A        D        3

Source: Author's calculations based on U.N. COMTRADE data base.
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Publication:Journal of Competitiveness Studies
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Date:Dec 22, 2016
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