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UMVERSITY LIBRARY

No .

PROBLEMS OF SUGAR
INDUSTRY IN INDIA-

SCOPE AND PROSPECTS OF' RE-ORGANISATION
IN POST WAR PERIOD

M. P. GANDHI,

Editor: Indian Sugar Industry Annual ai\d Imhan C.ntyon Textile Industry
Annual, since 1935 ; part- time Honorary Profc&por, Sydenhain College of Commerce,
and Economics, Bombay ; Proprietor, Bombay Commercial Corporation, etrr.
\Formerly, Ashburner Prizeman, Bombay University, (1924) ; Secretary , lyrfiian
Chamber of Commerce, Calcutta (1^26-^6) ; Secrcta-ry, Federation of Indian Cfham-
"oerv of 'Commerce' n\\d Industry (VJ28-29) ; Indian National Committee, International
Chti,,)bcr ol Commerce (W2S-'JO) ; Indian Sugar Millx Association '(1932-36) ; Direc-
for, lii(im,> tiiictar Syndicate Ltd. (W37-40) : Member, U. P. & Bihar Joint Power
Alcohol Committee (1 937 -38) : Member, Bihar Government Labour Enquiry
Committee (1938-40) ; Member, U. P. <fr fttlwr Sugar Control Board (1939-40) ;
Cliiej Commercial Manager, Dalmia Group oj Industrie!*! comprising .sugar, paper,
eemcut t coal, etc., (1937-40) : Member, f'ural Industries Sub-Committee of the
National Planning Cowurittee, (1,040) ; Controller oj Supplies, Bengal Circle,
(lowrnnient oj India. (1941), etc.

WITH A FOREWORD BY

SIR PURSHOTAMDAS THAKURDAS, K.B.E., C.I.E.

EXTRACT FROM THE FOREWORD

Viewed from (his general aspect, I am sure the public in India
will more than -welcome this publication at this juncture. The author
has been issuing Annuals reganljtiy- Jjhpv .Cotton Textile, and
Sugar industries in India, which Jiavr^c^h regarded as standard works
of reference and the usefulness of which has been steadily kept up by
the untiring zeal with which the author brings out revised and amplified
editions every year. 1 congratulate .Mr. MrP| 'panel hi on the great-
industry and care which he has put Ififo .the preparation of this work,
and I believe that the Indian public will endorse my hope that similar
careful studies of other ' -ies serving India's needs will be under-
taken by students of eco in years to come.

375 Pages NC R 1945 Rs. 12/-;By V.tJ?. Rs. 12/8/-

To be had of: t I & CO. (Publishers),

Jan Mansion, Sir Pherc ' 'ehta Road, Fort, BOMCAY.

Telephones ; Telegrams :

Office: 25981, 24047 ; Res. : 43926. "*" BOMBAY.

HANDLOOM WEAVING INDUSTRY IN INDIA

(ITS PAST AND PRESENT POSITION AND
POTENTIALITIES IN POST-WAR PERIOD)

Mr. M. P. GANDHI,

Proprietor, Bombay Commercial Corporation; Bombay Agent, Gujarat Paper
Mills Ltd. ; Editor, Indian Cotton Textile Industry Annual and Indian
Sugar Industry Annual ; Honorary Lecturer in Cotton Economics, Syden-
ham College of Commerce & Economics, Government oj Bombay ;
I Formerly, Controller of Supplies, Bengal Circle, Supply Department,
Government of India : Secretary, Indian Chamber of Commerce,
Calcutta ; Secretary, Indian Colliery Owners' Association ;
Secretary, Indian Sugar Mills Association ; Secretary, Federation
of Indian Chambers of Commerce & Industry ; Secretary,
Indian National Committee, International Chamber of
Commerce ; Chief Commercia/ Manager, Dalmia Cement
Ltd. & Rohtas Industries Ltd, ; Head of Credit Depart-
ment, National City Bank of New York, Calcutta ;
Director, Indian Sugar Syndicate Ltd. ; Member,
Bihar Government Labour Enquiry Committee ;
Member, U. P. & Bihar Joint Power Alcohol
Committee ; Member, U. P. & Bihar Sugar
Control Board; Member, Cottage & Rural
Industries Sub-Committee of the National
Planning Committee ; Member, Advisory
Committee, East Indian Railway;
Member, Executive Committee, Ben-
gal Textile Institute ; Ashburner
Prizeman, Bombay University ;
Examiner in B.Com. Examin-
ation of the University of
Allahabad, Lucknow, and
Bombay.]

To be had of:

GANDHI & CO. (Publishers),

JAN MANSION, PHEROZESHAH MEHTA ROAD,

FORT, BOMBAY.

Telephone Nos. : 32

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Printed by V. V. Bamberdekar at the India Printing Works, 9 Bakehouse Lane,
Fort, Bombay, and published by him for Messrs. Gandhi & Co. (Publishers),
Jan Mansion, Sir Pherozeshah Mehta Road, Fort, Bombay.

FOREWORD

SIR PURSHOTAMDAS THAKURDAS, K.B.E., CXE.

Of the various questions relating to the sugar industry in India dis-
cussed by the author in this publication, the one which has an imme-
diate interest for the Indian economic system as a whole at this juncture
is the extent to which protection afforded by the Government of India
during the period from 1930 onwards has vindicated itself. The pro-
duction of sugar in India during this period, that is from 1930 to 1944,
has gone up, as indicated in Table 3 in Chapter V in the following
pages. Cane factory production went up from 158,000 tons to 1,216,000
tons between 1931-32 and 1943-44, and the nett import of sugar into
British India went down from 438,000 tons in 1931-32 to 18,000 tons
in 1940-41. That in spite of this increase in production, there was
scarcity of sugar tluring the last five years of the war period, and efforts
had to be made by the Government of India to control sugar distribu-
tion and ration it, has its own lesson to teach. How the masses took
to sugar increasingly is evident to anybody conversant with the rural
and urban areas in India and the steadily increasing hunger for sugar
during this period.

In Chapter III, the author discusses the economics of discriminating
protection and tries to meet the arguments advanced by parties interested
in imports of sugar from abroad into India, particularly the Bengal
Chamber of Commerce, and some economists in India who supported
that view. If Sir George Schuster, as Finance Member of the Govern-
ment of India, had not, as appeared then, taken his courage in both
hands and decided to give protection to the sugar industry, the economic
history of India during the war period as far as sugar consumers are
concerned, and indeed even as far as the requirement of the Army in
India is concerned, would have been substantially different. Those
who wished to rely upon what they fondly called cheap sugar from
Java, would have had the mortification of seeing the Indian public
falling back only on local Gur production, and large quantities of
sugar would have had to be imported for the British and American
troops in India who would otherwise have had to go without sugar.

IV PORJEWOR*

Thanks to the policy of protection, however, they had a considerably
greater ration of sugar than what fell to the lot of the civil consumer
in India. It is hoped that the experience of India during the last five
years would put an end to controversies regarding the advisability
of protection for Indian industry and prevent vested non-Indian interests
from misguiding the Indian consumer into opposing a sane protectionist
policy for any industry.

It has to be borne in mind that the comparative chaos in organising
a proper distribution policy through reasonably honest channels during
this period has and justifiably so more than irritated the Indian con-
sumer. Those who are of the nationalist school feel that if Indian
Ministries responsible to the Legislature were in power in various pro-
vinces and the Centre, the story might have been appreciably different.
But this may be open to the charge of being mere wishful thinking
and need not be pursued at this stage. The distributors and manu-
facturers must take this lesson to heart. That the consuming public
in India, not merely of sugar but also of other articles of local manu-
facture, ^have passed through experiences which will rankle in their
minds, is but too evident. But, that, instead of being a reason for not
building up indigenous industries for local requirements, would indicate
that there should be enough manufacturing concerns in the country under
Indian ownership and management to fully meet local require-
ments under any contingency. This is particularly necessary where an
Indian industry proves to have been of substantial benefit to the grower
of the raw produce required for such industry. And in the case of the
sugar industry in India, there should be little doubt left that the protection
given to that industry has, to a large extent, been reflected in increased
cane production and comparatively better return to the cane producer.
As against this, the return to the producers of, say, cotton or oil-seeds
in India, which have to find their market abroad in the absence of
manufacturing industries in India of sufficient size to consume the major
portion of the supplies, is comparatively small. The facts and figures
given by the author in this publication go t strengthen the case of
reasonable protection to the sugar industry in the event of any attack
on it by uneconomic competition from abroad.

Chapter XVI in the following pages deals with the important ques-
tion of scope for further production and consumption of sugar in India.

1QU.WO1B V

The author has brought out, without any vestige of doubt, that there
is waste of resources at every point in the sugar industry as carried on
at present. The most culpable waste has admittedly been regarding
the criminal manner in which molasses have been allowed to be wasted
till now. During the war period, a few laudable efforts were made
by certain factory owners to get "on, in spite of this apparent antagonism
of the Government, to the fullest use of molasses, and it is very much
to be hoped that what has taken place till now in connection with
molasses will not be tolerated any longer. With full economic use of
molasses and greater yield of cane per acre of land which, I am convinced,
is possible if suitable effort, is made in this behalf by the provision
of irrigation, manuring, better seeds, etc., there is every chance
of increasing the production of sugar without putting additional acreage
of land under cane and of sugar being made available to the con-
sumer in India in larger quantities for meeting the nutritional require-
ments of the people, and at reasonable prices, under normal peace
conditions.

A significant feature of the protection granted to the sugar industry
is that it benefits not merely the manufacturer of sugar but also the
cultivator of sugarcane. In several provinces in India, such as the United
Provinces and Bihar, sugarcane forms a most important cash crop,
on the proceeds of which the agriculturist depends for meeting his
obligations in respect of land revenue, payments to creditors and house-
hold requirements involving cash expenditure. The increase in the
production of sugar since protection was granted has meant a corres-
ponding increase in the amount of sugarcane which the agriculturist
has been able to produce and sell. The sugar industry in this respect
is typical of a large class of industries in India and it illustrates the
clpse connection which exists between industry and agriculture and the
importance to the agriculturist of a properly conceived policy of indus-
trial development. The idea current in certain quarters that industry
can be developed only at the expense of agriculture is one which will
hardly bear examination. The development of the sugar industry in
recent years has given the lie direct to this contention and the story of
its growth, as set out by Mr. Gandhi, is therefore valuable, particularly
now when plans for large-scale industrial development are under active
consideration in the country.

VI FOREWORD

There is one more aspect of the policy of protection, as exempli*
fied in the case of the sugar industry, which needs to be noticed. The
cry of protection for the sugar industry in India was first raised nearly
50 years ago, when bounty-fed sugar in European countries began to
menace the older sugar-producing countries in the world. But the
Government of India showed no signs of moving in the direction of
protecting the Indian industry until as late as 1930. What the country
might have saved if suitable action had been taken in time is too obvious
to need elaboration. In this respect, again, the sugar industry is typical
of Indian industries generally, many of which, with timely assistance,
would have established themselves long ago and provided much needed
avenues of occupation and sources of income. If Mr. Gandhi's book
leads to an awakening of public opinion to the importance of providing
prompt assistance to our industries, it will have served d very useful
purpose.

Viewed from this general aspect, I am sure the public in India
will more than welcome this publication at this juncture. The author
has been issuing Annuals regarding the Cotton Textile, and
Sugar industries in India, which have been regarded as standard works
of reference and the usefulness of which has been steadily kept up by
the untiring zeal with which the author brings out revised and amplified
editions every year. I congratulate Mr. M. P. Gandhi on the great
industry and care which he has put into the preparation of this work,
and I believe that the Indian public will endorse my hope that similar
careful studies of other industries serving India's needs will be under-
taken by students of economics in years to come.

"Sunceta",

Ridge Road,

Bombay. FURSHOTAMDAS THAKURDAS

30-10-1945

AUTHOR'S PREFACE

The present volume on the " Problems of Sugar Industry in India " is the
esult of studies and business activities spread over well-nigh two decades.

Firstly, as a research scholar pursuing my studies in the Benares Hindu
Jniversity for the M. A. Degree in Political Economy and Political Philosophy,
vhich I took in 1925 after graduating from the Bombay University in 1923,
md immediately thereafter, for a period of nearly 10 years, as Secretary of
leading commercial bodies like the Indian Chamber of Commerce, Calcutta,
Federation of Indian Chambers of Commerce and Industry, Indian National
Committee of the international Chamber of Commerce, Indian Colliery
Owners' Association, I had ample opportunities of indulging in my love of
study of Indian economic problems ; and I have all along endeavoured to
embody from time to time the results of such studies in brochures and mono-
graphs on various industries, large and small. 1 But the Indian Sugar
fndustry lately came to absorb all my attention, partly because it is unique
imong protected industries for the multiplicity of its special problems, and
uartly because of my appointment in 1932 (in addition to being Secretary of
die Indian Chamber of Commerce) as Secretary of the Indian Sugar Mills
Association, Calcutta 8 as well, up to 1936, and then, even more, due to my
appointment as the Chief Commercial Manager a position of greater direct
responsibility in the Dalmia Combine owning three large sugar mills in
Bihar, (in addition to plants for cement, paper etc), for a period of nearly three

1 Vide, for example :

The History of Cotton Textile Industry in India from the earliest time to the present day,
being an essay for which the Ashburner Prize 'was awarded in 1934 by the Bombay
University, to the present author.
M, P. Gandhi's Indian Cotton Textile IndustryIts Past, Present and Future, 1937 with

a foreword by Sir Purshotamdas Thakurdas.
M, P. Gandhi's Indian Cotton Textile Industry Annual, 1938, with a foreword by Mr. Subhas

Chandra Bose,
Indian Cotton Textile Industry Annual 1939, with a foreword by the Hon'ble

Dr. Kailas Nath Katju, Minister for Development, United Provinces.
Indian Cotton Textile Industry Annual, 1940, with a foreword by Mr. Nalini

Ranjan Sarker.
Indian Cotton Textile Industry Annual, 1941, with a foreword by Dr. John

Matthai.

Indian Cotton Textile Industry Annual, 1942, with a foreword by Sir Chuni-

lal B. Mehta, Ex-President, Federation of Indian Chambers of Commerce
and Industry.
Indian Cotton Textile Industry Annual, 1943, with a foreword by Sir Homi

Mody, Ex -Supply Member, Government of India.
Indian Cotton Textile Industry Annual, 1944.

" How to Compete with Foreign Cloth "a study in the economics of handspinning. and
hand weaving, and cotton mills, in the cloth production of the country, with a foreword by
Sir P. C. Ray, for the English Edition, 1931, and by Mahatma Gandhi, for the Gujerati,
Hindi, Bengali and Tamil editions, 1932.

Handloom Weaving Industry in India Its Past and Present Position, and Potentialities
in the Post-War Period, 1945.

*The Indian Sugar Mills Association, of which I was the first Secretary* was established at
Calcutta, on 30th June, 1932.

viii AUTHOR'S PREFACE

years. As a Director of the Indian Sugar Syndicate, Ltd. representing tteit
Dalmia Group for a period of three years from 1937 to 1940, it was incumbeflf
on me to study directly and in greater detail the structure, efficiency
technique and organisation of the sugar industry in India, in its technological;
general and statistical aspects.

I have no desire to conceal the origin of my work 3 on the Indian Suga 1 ?
Industry in circumstances which are not quite favourable to a strictlr
academic detachment. Professionally, I have been for a long time (about 2f
years) an avowed partisan in current economic controversy, and not unoftei*
in the past, my study of a particular problem has been motivated by the
desire to strengthen the brief I held, I venture to hope, however, that I haw
not only shed the dust of controversy, but I have regained the mental detach*
ment of my undergraduate and post-graduate days at the Bombay University
and the Benares Hindu University, to which latter I was also attached as
research scholar for some time in 1925. The change, I might, perhaps, say,
is not abrupt, as I have had the honour of serving as a member on various
Public Committees of Enquiry, like the U. P. & Bihar Joint Power Alcohol
Committee (1938-39) the Bihar Government Labour Enquiry Committee (1939-
4P), the U. P. & Bihar Joint Sugar Control Board (194041), the East Indian
Railway Advisory Committee (193941), the Rural Industries Sub-Committee
of the National Planning Committee (194041) etc., and since 1943, I -have
again had the opportunity of cultivating an academic outlook since I accepted
the position of Honorary Part-time Professor at the Sydenham College of
Commerce & Economics, in Bombay.

Broadly, my connections with the industry in the earlier stage were
largely as a spokesman of the manufacturing interests, but I have also had
the opportunity of understanding the view-point of other'interests in the in-
dustry ie., the cultivators, consumers, and labour, during the period of my
membership of the Bihar Government Labour Enquiry Committee, the U. P.
& Bihar Joint Sugar Control Board, the Rural Industries Sub-Committee of
the National Planning Committee, etc. I have also acquainted myself
personally with the researches-on sugarcane and by-products of sugar being
conducted in various places, and have visited several important centres of
research, like Pusa (Bihar), Cawnpore, and various factory farms and
laboratories in order to gain first-hand knowledge. I have endeavoured all
through to evince a non-partisan attitude and all my publications have been
the result of my research work year after year, into the various problems
of the industry, and the fruits of such research have been presented,
statistically supported and in an unbiassed manner, in these- various Annuals
from 1935 till date.

Having thus had occasion to go into the numerous aspects of the sugar
industry ^from various angles, I felt an impulse, as soon as my direct
commercial association with the industry came to an end in 1940, to put

Vide M. P. Gandhi's Indian Sugar Industry Its Past, Present and Future with a foreword
by Sheth Walchantf JJirachand, 1934.

Airmen's PREFACE ix

gether the results of my studies into a more enduring form than the Sugar
adustry Annual* which I have been bringing out every year during the last
iecade commencing from the year 1935, and I have devoted myself to a much
letailed and detached study of the problems of this industry during the last
' years in order to reduce to writing some of the conclusions which I have
T>rmed in regard to the scope and problems of reorganisation of this second
Kgest national industry of India, with which I have been fortunate to be
issociated for a period of nearly 14 years since 1932, when the industry was
granted tariff protection.

This, then, is the raison d'etre and genesis of this thesis which may be
;aid to be the result of years of unbiassed and practical research in and study
rf the sugar industry in its various aspects from different angles and positions
if special vantage.

The statistics appertaining to various aspects of the industry have been
:empiled and built up by me with the greatest care and industry, over a series
of years, and I venture to claim, are as authoritative and reliable as they can
be, bearing in mind the woeful lack of general statistical information in this
country, and the defective basis of agricultural statistics, which cannot be too
greatly deplored, and which needs to be improved immediately, if proper
planning for the country is to be undertaken.

In preparing the present thesis, I have subjected to a critical review the
various problems before the industry, including the policy of control initiated
in various provinces by the various Provincial Governments, as also the
Central Government, since 1937, when the industry has been controlled in a
very large measure. I am aware that this thesis leans more on the practical
side than on the theoretical side, but my excuse for it is my desire to pass
under review the various problems of the industry as they appear to an
academic person, with a business man's outlook derived from close and
practical contact with the industry for nearly 14 years.

My task, in the first instance, is of detecting the relations between a
number of disparate studies on various aspects of the sugar industry which
1 had undertaken in the past and, secondly, bringing the light of established
economic theory to illumine them all. But economic thought, if not economic

M.P.Gandhi's

Indian Sugar Industry Annual, 1935
1936 with a foreword by Lala Karam Chand Thapar.

1937 with a foreword by Sardar Kripal Singh, President

Indian Sugar Mills Association.
M 1938 with a foreword by Dr. Ra jendra Prasad, Ex -President,

Indian National Congress.
1939

n M , 1940 with a foreword by Dr. Syed Mahmud, Ex-Minister,

Education and Development, Bihar.

> M 1941 with a foreword by Mr. D. R. Sethi, Director of Agri-
culture, Bihar.
,* 1942 with a foreword by Sheth Lalchand Hirachand

1943

t t> it 1944

x AUTHOR'S PKEFACE

science as such, is of late so far from being established that it is no longer a
matter of applying a particular body of economic laws and doctrines to parti-
cular problems. It is even less a matter of wishing for different trends and
developments in national or world economy other than what have actually
taken place, wishes in which some of the foremost economists are known to
have indulged in by way of suggesting a cure for the ills of modern economic
life.

1 have endeavoured, for my part, to see the development of the sugar
industry more in the setting of established trends in world economy than ir
the setting of economic doctrines, the universality of which seems by no
means indubitable. In this approach one detects at least what I may call the
rationality of inevitability and can feel oneself led on to the purposeful task ,
of examining the economics as well as the economies of the sugar industry *
in a realistic spirit instead of an attitude of wishful thinking. \

Two facts emerge as a result of this approach. First, that the develop ,
ment of the sugar industry is part of a redistribution of productive activity
among the various countries of the world, achieved, superficially and in the
initial stages, by protectionist policies and later, and more deeply, by
changes in productive technique tending to widen the range of eligible raw
material 6 and secondly, that during the last decade, new industries are
rightly deemed to be so clearly in the national interest that for all practical
purposes they are emancipated from obedience or conformity to the laws of
laissez faire economics. In other words, the Stale agrees to take upon itself
the responsibility of correcting any social injustce that may result from the
encouragement of such new industries instead of leaving the task blindly
to the natural forces of the free market. In other words, it is not protect-
ionism but regulationism, if I may coin the term, that isthe dominant note of
economic policy.

I have shown that the sugar industry is the first of the great industries
to be subject to the redistribution of productive activity through the interven-
tion of a substitute raw material, viz., beet, and that in regard to the industry
in India, public policy has, as a matter of fact, exceeded the limits of
protection as we have understood it till now, and aims at regulation, whidi is
Of far wider import. Indeed, as I have shown in Chapters II and III, the
development of Indian economy, as indeed of the economy of many other
countries, serves only to emphasise the unreality of fiscal controversies along
the customary lines of free trade versus protectioa

Nevertheless, on a critical review of the facts of the case it will be seen
clearly that the Indian sugar industry is, from the national point of view,
a strictly economic proposition, in the sense that the nation would have been
obliged, in the absence of an indigenous industry, to pay higher prices for its
requirements of sugar, not to speak of having to do without it altogether in
an emergency like the second World War which has just ended

*VW Chapter I.

AUTHOR'S PREFACE xx

But the problem of making the most of the sugar industry, now that it is
established, is a problem, on the one hand, of improving the quality aftd
method of cultivation, and maximising the quantity of average yield per
acre, and on the other, of establishing new industries for the efficient
utilisation of byproducts of sugar manufacture. These problems have been
examined in the appropriate places in detail, while the internal economies of
the sugar industry, which are deemed to be of comparatively less importance,
have been discussed in brief.

Since popular welfare is the measure of all matters of public policy,
a few pages have been devoted to the relation between the sugar industry
and the adequacy of so important a dietetic article for the people of the
country. Here I have taken the view that the maximisation of sugar
consumption in India should be attempted mainly through the full realisation
of economies in cultivation and manufacture rather than through abrupt and
grandiose schemes of expansion of acreage. It is indeed heartening to find
that with such economies and proper planning, production of sugar, inclusive
of gur, can be easily doubled, if not trebled, without increase of acreage of
sugarcane, in a few years, and with the improvement in the standard of
living of the people, which is essential and which appears to show signs of
accomplishment as a result of the recent acceptance of economic planning
by the Government and the people, it is possible to envisage a satisfactory
increase in the per capita consumption of sugar in India, in keeping with our
basic resources and the requirements of adequate nutrition. The means by
which our total sugar production, inclusive of gur, can be doubled, if not
trebled, within the next few years, are examined in Chapter XVI, together
with the technological basis of such expansion and an estimate of the capital
cost involved therein. t

The sugar industry is in many ways different from our other protected
industries. The grant of protection to sugar brought in its wake a series of
measures for the control of the price of sugarcane in the major sugar "produc-
ing provinces of Bihar and UP. And these entailed a number of administra-
tive devices for enforcing price control. The sugar industry is again unique
in its link with agriculture, & link for which there is no exact parallel in the
case of other protected industries. Besides, broadly considered, it comprises
not only the modern vacuum pan sugar factories, but also the production by
villagers of Gur and Khandsari Sugar . In the production of raw material as
well as the utilisation of by-products like molasses and bagasse, there
are a number of technical problems which the public will need to appraise,
both by themselves and in their relation to the fortunes and progress of the
sugar industry. In this, the reader will find this volume a valuable, if not
wholly self-contained, help.

It is, however, the problem of protection that is likely to have the widest
appeal. Reference may be made here to the special approach to this
problem, which is attempted in this work. It is maintained in the first place,
that the place of beet sugar in the world sugar industry shows that, given

i AUTHOR'S PREFACE

certain aids and favourable conditions, a substitute like beet sugar can gain
as much importance as the natural product and that beet sugar furnishes the
first instance of ersatz* of which the world must liear more and more
in course of time.

Secondly, it has been shown that, in the conditions of world economy
and international trade which have obtained since the Depression, the
question of the price at which the consumer of sugar in India could have got
the imported product, is more than usually hypothetical and that, all the
world over, fiscal controversies have an element of unreality which it is
unwise to overlook or underrate.

Thirdly, it has been argued that, since comparison with probable import
prices is impossible in the altered conditions of world trade, the only test of
the success of protection is whether the sugar industry has satisfied the
expectations of the Tariff Board and whether the consumer has had to pay
a higher price for sugar. That the consumer has paid less than during the
pre-protection period is well-known. What is not as well-known is that the
industry achieved, even before the commencement of the World War, more
than was expected of it by the Tariff Board, and that further progress did not
rest with the industry but with the development of our agriculture and the
establishment of industries for the utilisation of by-products.

And the history of the sugar industry must be deemed to have provided a
welcome corrective to the most serious of economic misconceptions in India that
economic progress can be achieved by attending to industry or agriculture
without regard to the links between the two.

And fourthly, it ought also to be remembered that the reason which
weighed-most with the Tariff Board in recommending for this industry tariff
protection of an unique nature, viz., protection for a period of 15 years the
longest period for which protection has been recommended for any industry
so far without making any attempt at the same time to foresee the period
when the need for protection would be obviated was the link between this
industry and agriculture. The Tariff Board definitely ignored the theory of
protection in its classical form, and in doing so, far from being guilty of
lowering the tests of a sound protectionist policy, they only showed a keener
grasp of the special requirements of the industry.

We thus come to the most important point, viz., that in the conditions of
India today, nothing can be a graver blunder than to look at the problems of
each industry separately from those of others and to consider industrial
development apart from the development of our agriculture. With such
a compartmentalised view, the national economy would be imprisoned in a
vicious circle, agricultural development waiting for industry to provide
artificial fertilisers at sufficiently low prices, and industries unable to compete
because agriculture cannot furnish the raw material at economic prices.

Vfcte Chapter!.

AUTHOR'S IPREFACE xiii

The main conclusion, therefore, is that, protection to sugar is an unquali-
fied success in the sense that the country has been recompensed for the aid
given to the industry, particularly in the war period, and there is wide scope
for future progress of the industry, which can be secured only by co-ordinated
development in both industry and agriculture. k

I cherish the hope that the Government and the Legislatures will evince
the greatest care in safeguarding this industry which has stood by them
during the war-period and has supplied sugar at reasonable rates without
any attempt at profiteering or improving its own financial condition, in
appreciation of the effects of such a policy on the welfare and well-being of
the general consumer who has enabled the establishment of this industry.
The importance of this great industry in the national economy of the country
need hardly be stressed, if it is remembered that it has stopped the drain of
about Rs. 16 crores per annum with the complete cessation of sugar imports,
is supporting no less than 20 million agriculturists whose interests are
indissolubly linked up with the future of this industry, has led to the
development of the village industry of gur manufacture, has provided a
channel for investment of indigenous capital estimated at Rs. 33 crores, has
been responsible for finding employment to no less than 3,000 University men,
1,00,000 labour, skilled and unskilled, and has made the country completely
self-sufficient in respect of supplies of sugar, a valuable article on the dietary
of millions in the country, and promises to develop further, with the general
improvement in the economic conditions of the people. 7

I earnestly hope that this volume written in an unbiassed manner will
be found useful by the readers and I trust that it will be of use to the Members
of the Central Legislatures and the Government of India, when the question of
devising measures for the further development and stabilisation of this great
national industry which has thoroughly justified the grant of protection given
to it during the last 15 years, comes up for consideration in March 1946, when
the present tariff protection to the industry is due to expire.

I suggest that it would be appropriate if the present tariff protection is
continued for a period of three years and in the interval as soon as conditions
within the industry return to normal, a Tariff Board should be appointed to
conduct the necessary enquiry and to recommend the kind of -aid and the
period for which it would be necessary in the years to come.

Needless to say, in a work, so complicated and so wide in scope, the need
for consultation with scholars and men of affairs was often felt. It is as no
matter of form that I acknowledge here my grateful thanks to all those,

1 Vtde: the following observations of the Famine Inquiry Committee in their Final Report, 1945,

pp. 122 and 123, (to hand when this preface was under print).

" While sugar is a carbohydrate food, containing no protein or vitamins, it supplies calories,
and since there is much undet nutrition, calories are needed."

''The present per capita intake of sugar in all forms in India is much lower than peacetime
intake in most western countries arid we believe that its production and consumption
can with advantage be considerably increased."

Also vide pages 255 and 259 of this volume.

xiv AUTHOR'S PREFACE

literally too many to be mentioned here individually, who have freely given
the help and guidance I sought of them. But I may mention particularly
Prof. C. N. Vakil and Prof. J. J. Anjaria of the Bombay School of Economics
and Sociology who gave me every assistance that their position and equipment
enabled them to do. Not less helpful than these academicians have been the
editors of the four leading Financial Weeklies of Calcutta, Bombay and
Delhi, as the discussions I have often been privileged to have with them have
enabled me to give point and sharpness of outline to my views on many
questions.

My thanks are also due to Mr. R. C Srivastava, Director, Imperial
Institute of Sugar Technology, Cawnpore, for having gone through a few of
the chapters of this thesis in which he was specially interested, and for giving
me his reactions thereto.

I must also express my gratefulness to Dr. John Matthai, a distinguished
economist, who was for several years a member and President of the Indian
Tariff Board and is one of the authors of the Bombay Plan, for the trouble he
has taken in reading patiently through this volume, and for his advice and
criticism which have been of great value to me in improving my arguments
at several places.

I must also refer here to the benefit I derived from the detailed
discussions on various subjects pertaining to the industry which I had the
privilege to have in the past with Sir T. Vijayaraghavachariar, Ex-
Vice-Chairman of the Imperial Council of Agricultural Research, who was
engaged in 1936-37 by the Indian Sugar Mills Association to prepare the
Industry's case for submission to the Tariff Board, with the Hon'ble
Dr. Kailas Nath Katju, and the Hon'ble Dr. Syed Mahmud in J 937-1940 when
they were Ministers in charge of Development in the U. P. and Bihar
respectively, with Dr. Rajendra Prasad and Mr. R. R. Bakhle, Chairman and
Vice-Chairman of the Bihar Labour Enquiry Committee in 1939-40, as also
with various other officials, particularly Sir P. M. Kharegat, I.C.S., former
Vice-Chairman of the Imperial Council of Agricultural Research and now
Secretary, Department of Agriculture, Government of India, Mr. N. C. Mehta,
I.C.S., former Sugar Controller for India, Mr. S, Lai, C. I. E., I.C.S., former
Secretary of the Development Department, Bihar, and at present Additional
Secretary, Labour Department, Government of India, Mr. N. Baksi, O.B.E.,
I. C.S., Registrar of Co-operative Societies, Bihar, Mr. Vishnu Sahai, I.C.S.,
Cane Commissioner of U. P. and at present Sugar Controller for India,
Mr. V. K. B. Pillai, I.C.S., Cane Commissioner of Bihar, Sir T. S. Venkataraman,
late Sugarcane Research Expert to the Government of India and Dr. Shanti
Swarup Bhatnagar, who was my colleague on the U. P. & Bihar Joint Power
Alcohol Committee in 1937-38 and who is at present Director of the Board
of Scientific & Industrial Research, Government of India.

I would be failing in my duty if I did not acknowledge my deep gratitude
to Sir Purshotamdas Thakurdas for his very great kindness in going through

AUTHOR'S PREFACE XV

this entire volume and for having written a foreword thereto in spite of his
present state of health which prevents him from undertaking strenuous
work. I am also very thankful to him tor the appreciative references he has
made in respect of this work as also my Annuals on the Indian Cotton
Textile Industry, and the Indian Sugar Industry.

For the sake of ready reference, I have given the text of current impor-
tant Legislative measures relating to this industry, and not less than 35 up-to-
date statistical tables in the earlier portion of this book styled as "The Sugar
Industry at a Glance ". As far as possible statistical tables have been put in
this portion, but I must invite the attention of the reader to the fact that as
many as 20 interesting tables have been put in Chapter XV entitled " Methods
of utilisation of sugar and gur in India."

Chapter XVI on the "Scope of optimum production and consumption of
sugar in India " will be found of interest to a large number of readers in view
of the attempt made therein to picture the potential development of the
industry in India.

There are five appendices, including a brief bibliography. The last
appendix contains a complete and up-to-date list of sugar factories in India,
showing the location, district, nearest railway and steamer station, the daily
cane-crushing capacity, and names and addresses of the Managing Agents or
Proprietors of sugar factories, in the various Provinces and States.

A work with so wide a scope, it is hoped, will have as wide an appeal.

"Gmi KUNJ", M. P. GANDHI

11, Hughes Road, Bombay.

5th November, 1945.

For ERRATA,

please see Page xviii.

The only Indispensable & Authoritative Annual Reference
Book for the Indian Sugar Industry

THE INDIAN SUGAR INDUSTRY-

(1944 ANNUAL)

VoL X

Editor : Mr. M. P. GANDHI

306 Pages: September, 1945. Price Rs. 6/8; V.P.P. Rs^6/14. Sh. 12.
CHIEF FEATURES -

<> Retrospects and Prospects of the Sugar Industry in India in
1943-44 and 1944-45, and position in world economy.

<s- Modus Operandi of the Indian Sugar Syndicate Ltd., Cawnpore.

*> "The Sugar Industry at a Glance' 1 , containing 46 Statistical
Tables pertaining to production and consumption of Sugar,
imports and exports of Sugar, Production of Gur, Cane-
crop, Duty and Revenue from Sugar, etc.

<?> The Sugar Industry (Protection) Act, 1939, Protective Duties
Continuation Act, 1944, and Sugar (Temporary Excise
Duty) Order, 1943. (Texts).

**> The Sugar and Sugar Products Control Order, 1943, of the
Government of India, with the latest amendments, the
Gur Control Order, 1943, and other important Notifications.

& Personnel of U. P. and Bihar Sugar Control Board, 1944-45.

* Details re. U. P. & Bihar Sugar Commission, Cawnpore.

* Necessity of Regulation of Industry on an All-India basis.

<a* Discussion on Export Prospects, Sugar Control Policy, and

Rationing.

<s* Personnel and functions of Central Sugarcane Committee, 1944.
<s Capital and Dividend Statement of Sugar Mills. (Latest.)
* Complete and up-to-date list of Sugar Mills, working and

projected, with addresses of Managing Agents, information

regarding crushing capacity etc.

Extract from Reviews of 1944 Annual

The Times of India, Editorial, 24th October, 1945:

The Annual is as usual an excellent compendium of information regarding
the industry.

The "Commerce", dated 13thQctffor, 1945:

The publication gives, as usA, a graphic account of the affairs of the
industry. It has maintained all its familiar features. The standard of
performance has been as high as it was in previous years.

Another Recent and Authoritative Publication t

THE INDIAN COTTON TEXTILE INDUSTRY-1944 ANNUAL

300 Pages: July, 1945.

Editor : M. P. GANDHI
Price Rs. 5/-; V.P.P. Rs.5/6; Foreign Edition Sh. 9/~

PROBLEMS OF SUGAR INDUSTRY IN INDIA

SCOPE AND PROSPECTS OF REORGANISATION
IN POST-WAR PERIOD

By M. P. GANDHI

CONTENTS

PAGES

Foreword by Sir Purshotamdas Thakurdas, K,B,B.,C.I.E. ... iii-vi

Preface by the Author ... ... ... vii-xv

Contents ... ... ... xvii-xviii

Errata ... ... ... xviii

Index ... ... ... ... xix-xxi

" Sugar Industry at a Glance " containing 35 Statistical
Tables and Important Acts and Legislative Measures

appertaining to Sugar Industry ... ... i-xxxvi

CHAPTER

I. The Indian Sugar Industry in World Perspective ... 1-16

II. Unreality of Fiscal Controversies ... ... 17-22

III. Economics of Discriminating Protection Some Criticisms

Answered ... ... ... ... 23-37

IV. History of Sugar Industry in Pre-protection Period

A Comparative Study ... ,., ... 38-48
V. History of Sugar Industry -in Post-protection -Period (1932

onwards.) ... ... ... 49-55

VI, The Costs of Protection to Sugar Industry ... ... 56-63

VII. Benefits of Sugar Protection to Cane Cultivafipn ... 64-77

VIII. Fixation of Cane Prices ... ... ... 78-99

IX. Economies in Production by Utilisation of By-products

( Molasses, Bagasse, etc. ) ... ... ... 100-126

X. Economies in Manufacture of Gur and Sugar by Various

Processes ... ... ... ... 127-152

XL Problems of Marketing ... ... ... 153-178

XII. Localisation of the Indian Sugar Industry ... ... 179-202

XIII. Sugar Control in the U. P, and Bihar ... ... 203-216

XIV. Central Government Control Over Sugar Industry in the

War-period ... ... ... ... 217-221

XV. Methods of Utilisation of Sugar and Gur in India (Contain-
ing 20 Statistical tables, ) ... ... ... 223-244

XVI. Scope of Optimum Production and Consumption of Sugar

in India ... ... ... .,. 245-260

XVII. Conclusion ... ... ... ... 261-266

xviii CONTENTS

APPENDICES PAGES

T, Glossary and Explanation of Some Indian Terms Appertaining
to Sugar ... ... ... ... i

II. Comments on Levy of Import Duty and Excise Duty on

Sugar from 1932 to 1946 ... ... ... ii-x

III. Substitution of Gurby Sugar, and Possibilities of Develop-

ment of Palm Gur Industry ... - ... ... xi-xii

IV. Important Problems Facing the Sugar Industry and Awaiting

Solution ... ... ... ... ... xiii-xv

V. Bibliography ... ... ... ... xvi-xviii

LAST List of Sugar Mills in India, with Names & Addresses of
Managing Agents, information regarding Cane-crushing
capacities, Method of Manufacture, and Location in
Various Provinces and States ... ... ... i-xxx

ERRATA

KINDLY MAKE THE FOLLOWING CORRECTIONS.

Page Line For Substitute

39 5 Part Past

46 1st Para Indian Sugar Committee Indian Sugar Commi-

in 1929 ttee in 1919

69 8 from bottom cultivation cultivator

78 1 Chapter IX Chapter- VIII

113 23 (4) Drop the words "of manufacturing," after

possibilities of, and drop " the " after molasses in

132 19 problems problem

196 18 factory factor

196 26 factory factor

214 17 from bottom contributors contributions.

252 18 Drop " is " after mills.

INDEX

Page

Adarkar, B. P. 24, 63, 149

Adarkar, B.N. 62

Alcohol, Power * 105

All-India Village Industries Association 133

Anstey Vera 266

Acquisition Of Land Near Factories 65

Bagasse: 120, 124

Utilisation in manufacture of

packing paper. 122

Beet:

Cost of production, higher than cane 14
Development 8

First Ersatz Industry 2, 3

Bengal :
Condition of industry in 188, 189, 190

Bengal Chamber . 24

Bihar:
Govt. Labour Enquiry Committee 151

Bihar:
Sugar Control Act. "At a Glance" 203

Bombay :

Advance in Production 199
Highest Consumption of Sugar

in India 198, 238

"Deficit" Province 199

Brussells Conference of 1902 2

By-products 100, 126

Cane:

Cess Also "At a Glance*' 92

Fixation of Prices of 79

India, Java, Queensland,

Hawaii, Mauritius 83, 84, 85

Methods of payment in
Minimum Prices of cane 86, 87 to 92
Quantity crushed in

factories, Gur manufacture,

and utilised in other ways 128

Cane Crop :

Age 143

Acreage of 66, 67, 62

Cost of cultivation 67

Cultivators dependent on 263

Crushed in factories 227

Crushing capacities 76, 142, 147

Payment- Deferred 209

Percentage crushed in Provinces 253, 288
Pests and Diseases 69

In various Provinces 183, 187

Research for different kinds of cane 71
Statistics of 66

Total Production of sugarcane 180

Utilisation 227

Vital importance 69

Cane Prices:
Formulae 79

Cane Sugar:
Production and Consumption 226,233, 199

Central Sugar Selling Organisation 150, 178

Page

Chadbourne Restriction Scheme 9

Confectioneries 104, 260

Congress Govt. of U. P. and Bihar 265
Co-operative Societies 212

Cost of Production of Sugar 231

Cotton Industry Indigenous 38, 202

Crushing Capacity 76, 142, 146, 147

Cuba, Sugar Industry 14, 15, 140, 144

Dey. H. L. 24, 25, 29, 32, 33,

34, 36, 37, 63, 264

Dividends 221, 222

Excise Duty :

Changes in 50

Appendix II, page i

on Indian Factory Sugar 50, 52

Appendix II page v

on Khandsari Sugar 50

Appendix II page v
Revenue from

Appendix II page vi

Export Of Sugar: 41, 175, 176, 251

Freight on Sugar 83, 195

Famine Commission Final Report,
1945 Preface, 266

Fiscal Commission 23, 26

Fiscal Controversies 17, 24, 25, 26, 27, 265

Gandhi M. P. 17, 38, 192, 196, 198, 202

Ahmedabad Rotary Club Speech 201

Bombay Rotary Club Speech 196, 198

Gandhi, Mahatma:
on value of Gur 134

Gur:

What it is 129

Cost of Manufacture 131

Consumption in Various Provinces 238
Future of Industry 132

Method of manufacture 129

Nutritive Value, Importance in

Diet 134. 234

Palm Cur-Possibility Development of 133
Also Appendix III, 135
Production in India 131

Size of Industry 130, 132

Utilisation of 232, 235, 236, 237

Gur Control Order 3

Gur Refineries ' 40

Hawaii Islands 141, 144

Imperial Council Of Agricultural

Research, 1929 :

Establishment 47, 263

Sugar Committee of 47, 48, 62, 139

Import Duty On Sugar : 41, 42

Changes in 50

In various Countries 44

Revenue from 43

Appendix II page ii

Value of

INDEX

Page

India:

Birth place of Sugar Industry 17, 39
Largest producer of Sugar and Gur

in the World 55

Price-Market for Sugar 151

Indian Central Sugarcane Committee :
Constitution
Establishment in 1944 Funds of

"At a Glance"

Indian Sugar Committee of 1919 17, 128

Indian Sugar Industry :
Beginning of Modern factories

in 1903 in Bihar 41

Meaning of " term " Foot-note 1

Its Past, Present and Future by

M. P. Gandhi 11, 38

Growth 185

M. P. Gandhi's Annual for 1937,

1938, 1939, 1940, 1941, 1942,

1943, and 44, 55, 155 etc.

Indian Sugar Mills Association:

" At a Glance " page xxxiii
Indian Sugar Syndicate 160, 178

Indian Tariff Board, 1931 & 1937

1, 24, 25, 49, 51, 263, 265

International Sugar Agreement:
India signatory to xxii, 176

Java :

Scorched earth policy 201

Sugar Industry in 8, 16, 140, 144

Khandsari;: 138, 230

Licensing of Sugar Factories :
National Planning Committee on 220, 74

Localisation :

of sugar industry 180, 196, 202

of Gur industry 199

Lokanathan, Dr. P. S., 202

Machinery :

Imports in India from 1932-1940,
value of 54

Manufacture of Sugar :

Carbonatation process 140

Open Pan Process 137

Suiphitation Process 140
Carbonatation factories 140, pp. xxxv
Suiphitation factories 140, pp. xxxv

Khandsari 138

Marketing : 153

Black Marketing 200

Molasses :

Important By-product 101

Other uses 102, 103

Price of 100, 103

Production of 102, 226

Use in Power Alcohol 104

What it is 100

National Planning Committee : 220

Nivas (of Java) :

Function 156 to 160

Whit it is 155 to 160

Page

Overall Efficiency : 147, 148

Pests & Diseases (See under cane)

Power Alcohol Committee, 104, 105, 108,

109, 117, 138, 120

U. P. & Bihar Govt. Resolution 114

Prices of Cane (See under cane)

Protection to Sugar :

Benefits to cane cultivation 64

Continuance of 41

Costs of 19, 56, 57

Criticism answered 23, 37

Discriminating 23, 27

Effects of, on development 64

Effect on consumer 58, 264

Employment caused by 24

Liberal, not an accident 22
When granted Appendix II 41, 42

Petrol:

Admixture with Power Alcohol 109, 110
Consumption of 109, 110

Power Alcohol :

Cost of 111

Manufacturing of 110, 115

Problems before Industry : Appendix iv

Philippines 145, 257

Quality of Sugar 177, 229, 230
Refineries

Research in Sugar Problems : 256, 257,

258, 259

allotment of money for 62

urgent necessity of 254, 256

Greater Expenditure Recommended 256
Saccharine 243

in United States 258

Simla Sugar Conference of 1933 80-84
Statistics of Consumption ; Production,

Export, Import, Duties etc. 35 Tables in

"At a Glance"

Sugar Industry Protection Act. (1932) and
1944 (Text) Beginning of "At a Glance"

Sugar :

All India Consumption 199

Consumer has been benefited 58
Cultivators depending on Cane

Cultivation, 20 millions 263

Cost of production 231

Etymologically, of Indian origin 39

Export of 255

Fixation of basic prices 162

Freight 195
Import of 41, 42

Import Duty, value of, on 42

India Birth place of 39
Indigenous method of manufacture 137

Largest Producer India 249
Maximisation of Production pp. xxxiv

Open pan process 137

Output in various countries 146

Past history 39

Manufacture from beet 39

Manufacture from cane 39

INDEX

XXI

Page
Sugar contd.

Nutritional Survey, and Diet

Reform 255, 260

Per Capita consumption

and Production 199, 239, 248, also
Price fixed by Sugar

Controller " At a Glance "

Price in India compared with

other countries 58, 59

Prices of Sugar in India 240

Prices of Gur in India 240, 162

Recovery of, f roiri cane, in

India and Java, 129, 149, 229

Target for production and

consumption 250, 253

Tons of cane required per ton 148

Total production, value

of, Estimated 54, 263

Transport 194

Typical Post-Depression Industry 21
Yield per acre in different countries 145

Sugarcane :

Acreage 66

Average production per acre 66

Cess on cane in U. P. & Bihar 1937

88, 90

Cost of . 67

Cultivation

Fluctuation in area 67

Improved varieties 66

Minimum price U. P. & Bihar 87, 88,

89,90

Methods of payment 83

Production of 66

Ratooning 73

Sliding Scale 84, 87

Use of Manuring 72

Value due to quality 62

Yield, improvement possible 70

Zoning of areas 73

Sugar Control : 203, 204

Board, U. P. & Bihar " At a Glance "
Central 217, 220

Sugar Commission U. P. & Bihar

" At a Glance ", 169

Sugar Factories :

Average number of working days 228
Capacity of cane crushing 76

Capital, needed for expansion and

capital employed 254

Duration of cane crushing season 62
Expansion recommended 253

Extent of development upto 1932 54
List of Last Appendix

Names of Managing Agents

Province-wise distribution 86, also

Sugar Industry:

Benefits to Agriculture 64, 263

Investment of capital Preface

Nutritional Survey 255

Possibility of Further Development 252

Page
Sugar Industry omft*.

in Madras, Bombay, Bengal 197

Post-war organisation 250

Problems Appendix iv

Protection justified, preface 262 265
Provincial Development 186

Progress from year to year
Rapid Development " At a Glance "
Restriction on further Development
in U. P. & Bihar 197

Scope and Prospects 1

Sugar Selling Organisation in Java : 155

Nutritional Survey 255

Rationing 143

Quota for Provinces 219

Also "At a Glance"

Utilisation in different ways 233, 235, 236,

238 239
Value of 248, 62, 263

Sugar & Sugar Products Control Order

in "At a Glance" xxv

Tariff Board :

Benefits to cane cultivation 64, 263

First Enquiry (1930) , 1, 49, 58, 61, 64
Government criticism of Report

in 1939 52

On fixation of cane prices 61, 64

Period of Protection 49, 51, 61, 265

Recommendation 49, 5.1, 61

Research grant of 3 annas

per cwt. 62, 256

Second Enquiry (1937) 51, 58, 61, 64, 148
Utilisation of Sugar and Gur for
various purposes in Urban areas etc.

232, 233 to 240, 264, 265

Thakurdas, Sir Pur shotamdas Foreword

Beginning

Transport :

Economy 75

Problems of 195

Sugar 195

Sugarcane 195

United States intensive Research in 257,260

U. K. Sugar Industry Enquiry
Committee Report 3, 4, 6

U. P. Sugar Control Act,

"At a Glance" 203
U. P. Sugar Industry (Protection)

Rules 1933 86

Venkataraman, Sir T. S. & his research 71
World Sugar Picture " At a Glance " xxxv

World's Sugar Production And
Consumption 7, 11, 12, 12A, 13

Percentage of cane and Beet 11, 12 and

12A

Zoning :
Areas of cane 73

Published in July, 1945

The only Authoritative & Indispensable Annual Reference
Book for the Indian Cotton Textile Industry

The Indian Cotton Textile Industry-
(1944 Annual)

Vol. VIII

Editor: Mn M. R GANDHI

300 Pages: Rs. 5: V.P.P. Rs. 5/6. July, 1945

CHIEF FEATURES :

> Retrospects and Prospects of the Indian Cotton Textile Industry,
during the War period and Post-War period.

* Organization of the Cotton Textile Directorate of the Industries

and Civil Supplies Department of Government of India, 1945
and personnel of Cotton Textile Board, its various Sub-Com-
mittees, and the All-India Handloom Board.

> "The Cotton Industry at a Glance" giving over 16 authoritative

and up-to-date Statistical Tables relating to the Industry.

> Latest Tariff on Piecegoods and Yarn, and Text of Cotton Yarn and

Cloth (Control) Order, 1943 with latest amendments thereto,
and Cotton Cloth Movements Control Order, 1943 inclusive of
General Permit No. I, and references to other allied Control
Orders.

* Per capita consumption of piecegoods in India.

* Review of Govt. measures for Control of Prices of Cloth and Yarn
for distribution, production, availability of Standard Cloth, etc.
" Present financial and economic position of the industry.
Scope of Export and Import of Piecegoods in post-war period.

* Target of further development of industry in post-war period.

TWO APPENDICES:

* An elaborate and up-to-date Appendix regarding cultivation of *

superior variety of Cotton, Exports of Cotton, Imports of Cotton,
Prices of Cotton, Consumption of Cotton in Indian Mills, etc.

* A detailed Appendix regarding present position and post-war

prospects of Handloom Industry.

LIST OF COTTON MILLS IN INDIA, 1945

Complete and up-to-date list of Cotton Mills working in India, with names
and addresses of Managing Agents, number of Spindles, Looms, etc.
( Published separately as a companion volume, Re 1.)

Extracts from Reviews of 1944 Annual (Vol. VIII ) :

"Times of India", Bombay, 1O July, 1945 :

"An informed and interesting analysis of the future of the Indian Cotton Textile
Industry is contained in the 1944 Annual."

"Commerce", Bombay, 7 July, 1945:

, "Mr. Gandhi's survey of the working of the Clotfc Control is comprehensive, and no
aspect of it is left out. His conclusions in many cases are sound and realistic."

"Capital", Calcutta, 9 August, 1945;

"This is a valuable reference book containing a great deal of statistical data and
information about an industry of importance to India.'-

STATISTICAL TABLES

"THE SUGAR INDUSTRY AT A GLANCE"

(1944)

( Revised up to 30th June, 1945 )

TABLE No. i

Number of Cane Factories working in India, including States, and Production of
Sugar from Cane Factories, Gur Refineries, Khandsari, Net Import of Sugar in British
India and Import in Kathiawar Ports during the last 13 years, and estimates for

1944*45 and 1945-46

c/>

G J

*"* cti

k*.O d>

4)tJ RJ

3*1

u tfl>-*
8-8.9

fjlf

ys
iii

2 'S

1-s?

g.so

U V

fill?
till?

|g -,

en| t5
R'S "
1^1 >

sgS

jf" Q

j|i

*-* C/3 *"'
O ..

<U "*

I M Z

ac >^

8 "^

Tons

1931-32

158,781

69,539

250,000

478,120

438,797

95,678

1932-33

290,177

80,106

275,000

645,383

321,081

68,649

1933-34

112

453,965

61,094

200,000

715,059

233,366

87,094

1934-35.

130

578,115

39,103

150,000

767,218

197,775

113,364

1935-36

137

932,100

50,067

125,000

1,107,167

86,962

45,218

1936-37

137

1,111,400

19,500

100,000

1,230,900

11,160

12,870

1937-38

136

930,700

16,600

125,000

1,072,300

9,410

12,284

1938-39

139

650,800

14,200

100,000

765,000

254,400

76,819

1939-40

145

1,241,700

31,700

125,000

1,398,400

252,000

85,580

1940-41

148

1,095,400

48,500

125,000

1,268,900

18,778

1941-42

150

778.100

13,400

150,400

941,900

48,637

1942-43

150

1,070,700

6,370

117,630

1,294,700

563

1943-44

151

1,216,400

7,706

80,000

1,304,106

...

1944-45

144

985,100

7,980

80,000

1,073,080

(Estimated.) *

(Estimated.)

(Estimated)

1945-46

150

1,200,000 I

...

(OurEst.)

* Vide Indian Trade Journal, p. 289, dated March 15, 1945.

TABLE NO. 2

Comparative growth of the Sugar Industry in the various Provinces
since 1931-32, the pre-protection year

(No. of Cane-jactories Working)

Province

1931-32

1932-331

<cf
CO
I

i
^

?
to

1937-38 1

1938-39 1

1940-41 1

A
2

1942-43 1

1943-44J

1944-45]

United Provinces
Bihar
Punjab, Sind & N.-W. F. P. ..
Madras
Bombay
Bengal
Orissa

14
12
1
2
2

33
19
1
2
1

59
33
5
4
4
2

65
34
6
8
5
5

67
35
4
8
6
6

68
33
5
11
6
6

68
33
3
8
7
6
?,

69
32
3
7
7
8
?,

70
32
3
10
7
9
?,

70
32
4
11
8
9
fl

70
31
4
11
10
9
?,

71
31
4
10
9
8
?,

70
31
2
12
10
6
?.

68
29
2
12
10
4
1

Indian States

...

Total for India ...
Burma*

32
1

57
1

112
1

130
2

137
2

137
3

136
2

139
2

145
3

148
3

150
15"

150
()

151

"w"

144
()

* Burma excluded from 1936-37 onwards from the total for India.
(a) No information available after occupation of Burma by Japan.

THE SUGAR INDUSTRY AT A GLANCE, 1944

TABLE No. 3

Number of Sugar Factories in various Provinces, working in 1943-44,

Estimated quantity of cane crushed, sugar produced and Recovery

percentage obtained, etc.

(Official Estimates oj the Director, Imperial Institute of Sugar Technology,

Cawnpore, published in the Indian Trade Journal, dated 5tJv

October 1944, and 15th March 1945.)

Province

No. of
Mills
Working

Cane
Crushed

Tons

Sugar
Tons

Sugar-cane
Recovery
per cent
1943-44

United Provinces
Bihar
Punjab, Sind & N.-W. F. P.

70
31
2

7,332,400
2,018,400
174,200

727,100
212,400
17,400

9.92
10.53
9.99

Madras
Bombay
Bengal
Orissa
Indian States

12
10
6
2
18

420,400
739,700
175,900
17,600 .
1,259,200

39,200
81,200
13,600
1,700
123,800

9.32
10.98
7.73
9.66
9.83

Total ...

151

12,137,800

1.216.400

10.02

TABLE No. 4
Total, and per capita consumption of Sugar and Gur in India*

Year
(November-
October)

Consumption
of Sugar in
tons

Official
Estimate

Consumption
of Gur in
tons

Per Capita Consumption Ibs.

Sugar

Gur

Total of
Sugar and

Gur

Ibs. per

head

1931-32

982,000

2,758,000

6.2

17.2

23.4

1932-33

1,006,000

3,240,000

6.3

20.2

26.5

1933-34

996,000

3,486,000

6.1

21.5

27.6

1934-35

1,059,000

3,701,000

6,5

22.6

29.1

1935-36

1,074,000

4,101,000

6.5

24.8

31.3

1936-37

1,167,000

4,268,000

7.3

26.7

34.0

1937-38

1,159,000

3,364,000

7.2

20.9

28.1

1938-39

1,073,000

2,131,000

6.6

13.1

19.7

1939-40

1,019,100

2,441,000

6.4

18.0

24.4

1940-41

1,100,000

( Our Est. )

3,410,000

6.7

20.6

27.3

1941-42

1,050,000

2,829,000

6.0

18.5

24.5

1942-43f

966,000

3,567,000

5.9

20.1

26.0

1943-44t

1,086,300

3,989,500

23.8

30.3

* Total value of sugar, including gur, produced in the year 1943-44 may be
estimated at about Rs. 118.33 crores.

Price calculated at the rate of Rs. 15-4-0 per maund of sugar and Rs. 9-6-0
per maund of gur as the standard of average for the whole season.
Maund 82 . 2/7 Ibs. Sugar 15J Gur 9 . 1/6

Tons Rs. Price

10,86,300 49,09,65,375

39,89,500 69,23,44,479

1943-44

Gur

Total Value Rs. 1,18,33,09,854 Rs. 118.33 Crores.

t Our estimates.

TABLE No. 5
Per capita consumption of Sugar in various countries

United Kingdom

U. S. A.

Brazil

France

Australia

Germany

106
97
34
52

116
52

Ibs. per head

Cuba ... 88

Java ... 11

Japan ... 33

Union of South Africa 47
Netherland ... 64

Ibs. per head

India

27 (including 20 lbe.Gi*f)

THE SUGAR INDUSTRY AT A GLANCE, 1944

TABLE No. 6

Yearly world production, consumption and the carry-over of stocks of Sugar for the
last 10 years in thousand tons \(Raw Sugar Value)*

(In Thousands of Long Tons)

Crop year
(Sept. 1st
to Aug. 31st)

Opening
Stocks
(Sept, 1st)

Production

Consump-
tion

Closing
Stocks
(Aug. 31st)

Percentage
relation of
stocks to
Consumption

1931-32

12,362

26,431

26,724

12,069

" 45.2

1932-33

12,069

24,692

26,193

10,568

40.3

19133-34

10,568

25,709

26,287

9,990

38.0

1934-35

9,990

2\19i

27,188

8,993

33.1

1935-36

8,993

28,846

29,231

8,608

29.5

1936-37

8,608

30,818

30,549

8,877

29.1

1937-38

8,877

30,967

29,647

10,197 1 34.4

1938-39

10,197

29,478

29,406

10.269

34.9

1939-40

10,269

30,753

26,551

11,471

38.8

1940-41

30,498

1 ...

1941-42

*..

19,211

...

1942-43

...

17,908

...

* Figures are in long tons (Long ton = 2,240 Ibs.), (Metric ton = 2,205 Ibs.),
and (Short ton = 2,000 Ibs.).

A glance at the last Table in the 1940 Indian Sugar Industry Annual will show
that India leads as the largest sugar producing country in the world, since 1931.

TABLE No. 7
*

Average and maximum percentage of recovery of Sugar in factories in India and

Java since 1931-32*

Year

India
Average

17. P.
Average

Bihar
Average

Bombay
Average

Java
Average

India
Maximum

1931-32

8.89

8.59

9.06

10.92

1932-33

8.66

8.55

8.60

10.00 i 11.56

1933-34

8.80

9.08

8.32

10.00

12.84

1934-35

8.66

8.56

8.79

10.37

12.55

11.10

1935-36

9.29

9.60

8.93

10.47

13.23

11.34

1936-37

9.50

9.65

9.20

10.68

12.77

11.43

1937-38

9.38

9.18

9.58

10.97

11.87

11.63

1938-39

9.29

9.14

9,00

11.29

11.77

12.25

1939-40

9.45

9.37

9.29

10.97

12.23

12.31

1940-41

9.70

9.87

9.86

9.94

.. .

11.15

1941-42

9.69

9.87

10.35

9.87

...

12.45

1942-43

10.28

10.16

10.93

10.64

...

13.35

1943-44

10.02

9.92

10.53

10.98

...

12.84

Indian Trade Journal, Calcutta, 5th October 1944.

THE SUGAR INDUSTRY AT A GLANCE, 1944

TABLE No. 8
Capacity of factories and duration of crushing season in India*

Tons

Average Cane-crushing capacity of Factory
(calculated on the basis of tons of cane
crushed per day of actual working)
in India

Maximum Cane-crushing capacity of Facto-
ries per day in India

f 517

1934-35

568

1935-36

630

1936-37

660

1937-38

{ 630

1938-39

710

1939-40

690

1940-41

640

1941-42

690

1942-43

708

1943-44

2,012

1934-35

1,807

1935-36

1,960

1936-37

2,000

1937-38

1,850

1938-39

! 1,960

1939-40

1,980

1940-41

1 1,800

1941-42

1 1,920

1942-43

I 1,903

1943-44

en 1 m

C/)

C/J

Duration of

**" nTI e?

^ e?

00 0? ^ rt'

QVJ >*

m ^

^ >

Cane-crushing
Season

J- ^

55o

CT; ^

(October-May)

2 6

2 o

2^6

2 o

f 4 O

2 6

JZ5

Mean duration of

Cane-crushing season

in All-India

106

104

126

138

112

129

113

101

117

Maximum duration of

Cane-crushing season

in All-India

208

172

179

203

181

184

203

264

313

278

255

Mean duration of

* Cane-crushing season

'.inZ7. P.

112

107

134

140

124

133

100

112

131

Mean duration of

fc/ Cane-crushing season

. in Bihar

105

109

150

136

100

Mean duration of

Cane-crushing season

in "All other Pro-

vinces"

112

138

103

119

144

117

110

* Vide Indian Trade Journal,
Issues.

Calcutta, dated 5th October 1044 and previous

THE SUGAR INDUSTRY AT A GLANCE, 1944

TABLE No. 9

Acreage under Sugar-cane, under improved varieties, production of cane per acre, gross
production of Gur, and calculated production of Cane-crop* from 1931-32

to 1944-45

a C *

8*1

!?!

IJjfJ

Year

** 01 TJ

ila

to OO

||!

sPI

1JJ

8 > g
8 |l

a|l

O p,*- 1

J C^H

H c

^ S.S

* a 49

1930-31 .

2,905

817

12.3

3,359

35,780

193132 .

3,076

1,170

14.1

4,116

43,316*

193233 .

3,425

1,845

14.9

4,859

51,129

193334

3,422

2,295

15.3

5,055

52,455

193435

3,602 '

2,433

15.1

5,292

54,346

193536

4,154

3,056

15.3

6,102

61,202

193637

4,582

3,452

15.6

6,932

67,322

193738

3,869

2,968

15.5

5,579

55,637

1938-39 .

3,130

2,673

15.0

3,572

35,851

193940

3,640

2,893

15.0

4,748

47,632

194041 .

4,598

3,480

15.0

5,794

59,090

194142

3.515

15.0

4,371

46,030

194243

3,600

......

15.0

5,076

194344 .

4,234-

...

......

5,848

194445

4,134f

......

...

5,422

(Estimated)

* Vide Indian Trade Journal. The yield of gur per acre has increased from
.80 tons in 1901-02 to 1.47 tons per acre, due to improved varieties of cane.

f Vide Indian Trade Journal, p. 116, 26th April, 1945.

TABLE No. 10

Percentage of Cane used under different heads during the years 1932-33 to 1943-44

(November-October)**

co
o>

1934-35

CO
rH

CTi
rH

00 ->*

00 cS

rHQ

o *:

CO r-

Cr> 3

rH -J

^ <n

4< 1*

r^O

<M *J
rf V4

o> a

rHQ

3 i

Oi 3

Cane used in Factories ...

6.5

9.8

12.3

16.0

17.6

17.8

16.2

27.7

19.1

21.2

25.0

Cane equivalent to gur

used in refineries

3.0

2.0

1.2

1.4

0.5

0.9

1.4

1,0

1.0

Cane used for gur manu-
facture

64.7

65.5

66.0

63.8

64.9

62.0

64.0

51.4

57.7

53.4

50.0

Cane used for other

purposes, including

Khandsari, Chewing,

setts for planting etc. ...

25.8

22.7

20.5

18.8

16.9

19.7

19,3

20.0

21,8

24.0

Total percentage ...

100

1941.

** Vide Reply in the Council of State to Question No, 39, dated llth November

THE SUGAR INDUSTRY AT A GLANCE, 1944

TABLE No. ir
Percentage of Cane crashed in factories to the total Cane-crop in various Provinces*

Season

U. P.*

Bihar*

Bombay

Bengal

Madras

India

1934-35

13.6

30.9

2.7

12.3

193536

17.1

40.4

16.0

193637

17.1

49.3

17.6

1937 38 (Ou

Est.)

18.6

62.3

17.8

193839

14.5

44.5

19.5

1939-40

25.5

48.4

27.7

1940-41

13.9

29.3

19.1

1941-42

14.6

......

21.2

1942-43

21.9

25.0

1943-44

22.3

25.0

* Figures based on Cane Development Department (U. P.) statement showing
disposal of cane crop in the U. P. during 1934 to 1942 and on letters from Cane
Commissioner, Bihar to Chairman, Sugar Commission, U, P and Behar.

TABLE No. 12
Cost of production of Cane per maund

(a) Definite figures are not available. Cost of production varies from Province

to Province from annas 0-3-0 to annas 0-7-0 per maund. (Vide 1939
Annual.)

(b) Enquiry undertaken by the Imperial Council of Agricultural Research in 1934,

is concluded. Reports of cost in various Provinces were published in 1938
and 1939, and also referred to in Tariff Board's Report of 1937.

prices.

TABLE No. 13

Estimate of total amount of money paid by Sugar factories to Cane-cultivators and
workers, since 1931-32 to 1943-44

Estimated

average price

amount

No. of unskilled

amount of

C*Aae

per maund

paid for cane

workers

money paid

OCaB

of cane in

by factories to

employed (2)

to unskilled

U. P. & Bihar

Cultivators (1)

workers (3)

Rs. a. p.

Rs.

No.

Rs.

193132

5 10

1,77,51,000

16,640

998,000

1932-33

056

3,14,39,000

29,640

1,778,000

1933-34

056

4,83,98,000

67,200

4,032,000

193435

053

5,97,66,000

78,200

4,680,000

1935-36

053

8,81,03,000

82,200

4,932,000

193637

045

8,92,19,504

100,000

6,000,000

1937-38

051

8,57,53,775

100,000

6,000,000

1938-39

6 10

8,13,00,988

100,000

6,000,000

193940

085

18,81,09,460

100,000

7,000,000

194041

048

8,96,40,583

100,000

5,650,000

194142

070

6,15,00,000

100,000

4,000,000

194243

13,00,00,000

100,000

5,000,000

194344

18,00,00,000

100,000

5,500,000

1944-45

014

26,40,00,000

90,000

6,200,000

THE SUGAR INDUST&Y Af A GLANCE, 1944

(1) Based on statistics received from a large number of factories in U. P. and Bihar.

(2) Based on an assumption of an average factory employing about 600 workers.

(3) Based on an estimate of payment of o-8-o per day, (upto I94M 2 ) an d on

the average working period of the season. After 1941-42, the estimate is
on a 25 per cent higher basis.

(4) Dearness and allowances were increased by 50 per cent in 1942-43 and 1943-44.

TABLE No. 14

Import Duties on Sugar in India and Principal Countries in the World
As there have been so many changes due to the war in regard to the
duties on sugar in the various countries, we are not giving the full table
here. A reference may be made to the 1939 Annual for the import duties
on sugar then existing,

The following table gives the duties in India:
Import Duty on Sugar in India (1944)

Total Import Duty including 20 per cent surcharge
(with equivalent excise duty)
equivalent to
Excise Duty on factory sugar

in British India equivalent to

The. present import duty will continue till 3ist March 1946

Rs.
Rs.
Rs.
Rs.

11-1-7 1
7-1-96
3-0-0
2-3-3

5 per cwt.
7 per maund.

per cwt.

per maund.

TABLE No. 15
Excise Duty and Import Duty on Sugar, Sugar Candy* and Molasses in India

On Sugar per cwt.

Protective
Import Duty
per cwt.

Additional Revenue
Duty

Total Import
Duty per cwt.
Rs,

From 1st April, 1932 to 31st

Rs. 7-4-0

Revenue surcharge @ 25%

9-1-0

March, 1934

of protective duty Rs. 1-13-0

From 1st April. 1934 to 27th

7-12-0

Equivalent excise duty

9-1-0

February, 1937

(0-8-0 being

Rs. 1-5-0

additional

margin)

(Rs. 1-5-0 Excise Duty on domestic

production of factory sugar)

From 28th February, 1937

7-4-0

Equivalent excise duty

9-4-0

(Rs. 2-0-0 Excise Duty on domestic

Rs. 2-0-0

production of factory sugar)

From 1st April, 1939

6-12-0

Equivalent excise duty

8-12-0

(Rs. 2-0-0 Excise Duty on domestic

Rs. 2-0-0

production of factory sugar)

From 1st March, 1940

6-12-0

Equivalent excise duty

9-12-Of

(Rs. 3-0-0 Excise Duty on domestic

Rs. 3-0-0

production of factory sugar)

From 1st April, 1942
(Rs. 3-0-0 Excise Duty on domestic

6-12-0

Revenue surcharge of 20%
amounting to Rs. 1-5-7 1/5

11-1-7 l/5{

production of factory sugar)

and Equivalent excise duty v

Rs. 3-0-0

* From 20th February 1934, a revenue/ duty of Rs. 10-8-0 per cwt. was imposed
on sugar candy in plaee of Rs. 9-1-0 per cwt. The rate of import duty on molasses
is 31J per cent ad valorem since April 1932.

fThe import duty of Rs. 11-1-7J per cwt. works out at Rs. 7-1-9 per md
and Rs. 3-0-0 excise duty per cwt. works out at Rs. 2-3-3 per md.

This import duty has been continued till 31st March 1946.

$ Total import duty includes surcharge of 20 per cent as from 1st April 1942.

Vni

SVGAR INDUSTRY AT A GLANCE, 1944

TABLE No. 16

Yield of Revenue from Import Duty on Sugar in India from 1931-32 to 1944*45
(Burma excluded from 1937-38)

Year

Yield of Revenue

Year

Yield of Revenue

(April-March)

Rs.

(April-March)

Rs.

1931-32 ...

7,97,63,000

1938-39 ... ...{ 45,22,000

1932-33 ...

6,84,79,000

1939-40 ...

3,96,08,000

1933-34 ...

4,72,04,000

1940-41 ...

18,24,000

1934-35 ...

3,81,35,040

1941-42 ...

1,94,000

1935-36 ...

3,24,16,000

1942-43 ...

56,000

1936-37 ...

50,52,000

1943-44 ...

4,14,000

1937-38 ...

25,33,000

1944-45 ...

3,56,000

TABLE No. 17

Excise Duty on all Sugar produced in British India and Yield of Revenue
therefrom from 1935-36 to 1945-46 Fiscal years (April-March)

Amount of
duty per
cwt.

Yield of Revenue from Excise Duty (in Thousand Rupees)

1935-
36

1936-
37

1937-
88

1938-
39

1939-
40

1940-
41

1941-
42

1942-
43

1943-
44

1944-
45

1945-
46

Khaftdsari:
Factory :

Total

Rs.

15,824

Rs.

25,202

Rs.
51

33,097

Rs.
59

42,244

Rs.

146

24,760

Rs.

286

39,011

Rs.

443

66,827

Rs.
157

48,184

Rs.

327

67,900

Rs.

65,000
(Revised
estimate)

Rs.

62,500
(Est.)

15,884

25,249

33,148

42,303

24,906

39,297

67,270

48,341

68,227

65,000

62,500

TABLE No. 18
Average price of Indian and Imported Sugar in India per maund of 82-2/7 ^ s -

Indian 1st quality

1934

1935

1936

1937

1938

1939

1940

1941

1942

1943

1944

Special (Cawnpore
market average

Rs,

Rs.

quotation) (Factory

Delivery Basis)
Imported Sugar

9-6-0

9-0-0

8-4-0

7-0-0

8-8-0

10-12-0

10-8-0

11-0-0

13-0-0

15-0-0

16-4-0

(Calcutta market

for

average quotation)

9-13-0

9-12-0

9-10-0

LQ-8-0

11-0-0

...

*..

D24

THE SUGAR INDUSTRY AT A GLANCE, 1944

TABLE No. 19
Average price of Gur per maund in 1940-41, 1941-42, 1942-43 and 1943-44

Gur Market

1940-41 (Nov. to Oct.)
Rs. a. p.

1941-42 (Nov. to Sept.)
Rs. a. p.

1942-43
Nov.-Oct.
Rs. a. p.

1943-44
Nov. -Oct.
Rs. a. p.

Madras

316

426

9 6 10

9 10

Ahmednagar ...

369

658

14 14 6

15 9 9

Lyallpur

292

406

10 7 7

10 4 5

( No quotation ) May, ,'41

( No quotation ) Feb., June,

July, August, Sept. '42

Mimffarnagar ...

307 ! 5 13 9 | 8 15 6

6 12 11

Meerut

2 12 11

5 12 10

901

760

( No quotation ) August, '41

( No quotation ) for March

and Sept. '42

Bhagalpur

301

5 10 3

11 4 4

856

( No quotation ) for Mar.,'41

( No quotation ) for May,

June, July and Sept. '42

Dacca

554

977

TABLE No. 20

Approximate Official Estimate of total Carry-over of Stocks of Sugar in India

at the beginning of November, since 1931

Year Tons

1931 ... ... ... ... ... ... 32,000

1932 1. ... ... ... ... ... 19,000

1933 ... ... ... ... ... ... 9,000

1934 ... ... ... ... ... ... 30,000

1935 ... ... ... ... ... ... 23,000

1936 ... ... ... ... ... ... 159,000

1937 ... ... ... ... ... ... 211,000

1938 ... ... ... ... ... ... 102,000

1939 ... l ... ... ... ... ... 105,000

1940 ... ... ... ... ... ... 390,000

1941 ... ... ... ... ... ... 295,000

1942 ... ... ... ... ... ... 105,000

1943 ... ... ... ... ... ... 133,863

1944 ... ... ... ... ... ... 265,802

TABLE No. 21
Approximate Railway Freight on Sugar-cane in 1943-44

Railway

Kind of Wagon

Average Capacity

Distance

Rate per Wagon

A. B. Railway
E. B. Railway
E. B. & A. B. Rly.
combined
0. & T. Railway
E. I. Railway

4 wheeler
4 wheeler

4 wheeler
4 wheeler
4 wheeler

160 maunds
160 maunds

160 maunds
270 maunds
480 maunds

35 miles
177 miles

54 miles
55-60 miles
39 miles
up to 50 miles
up to 100 miles

' Rs. A. p.
* 8 14
27

17 8
900
10
14
25

THE SUGAR INDUSTRY AT A GLANCE, 1944

TABLE No. 22

Statement showing Expenditure on Sugar Research by the Imperial Council of

Agricultural Research*

Year

Amount spent or proposed
to be spent

Directions in which generally Spent

Rs.

1935-36

4,79,088

) Production and testing of new varieties of

1936-37

3,88,627

j sugar-cane.

1937-38

3,46,820

) Devising and testing systems of cultivation and

1938-39

3,24,928

J manuring.

1939-40
1940-41

3,56,790
3,19,304

I Study and combating of insect and fungus pests.

1941-42

3,74,580

\ Research in use of molasses as manure and cattle

1942-43

3,57,446

J food.

1943-44

4,26,828

Sugar Marketing Survey.

1944-45

4,11,700

Utilisation of Bagasse for the paper, and board

( Estimated to be spent. )

industry, Etc., Etc.

* Figures collected from official sources and furnished by Secretary, Imperial
Council of Agricultural Research, (Vide letter No. F. 66(14)|43D dated* 16th
January 1945).

TABLE No. 23

Estimated Percentage of Gate-cane to the Total Quantity of Cane (i.e. Gate-cane
and Rail-borne cane) crushed in Factories in the various Provinces*

CO
CO

00
CO

r-1

Province

rt -5

10^

<i^

<i c

O-^O

ci >

co^

i 1

r-4

i-H

r-4

r 1

r-l

Bihar

63 ^

United Provinces

80 ^

85^

85 ^

Bengal

52 o

60 o

Punjab

...

80 g

Bombay

100

Madras

...

60 ^

65 ~

65 ^

* Compiled by the Indian Sugar Syndicate Ltd. in September 1939.
t Compiled by us from the returns made by factories in 1939-40, 1940-41,
1941-42, 1942-43 and 1943-44.

TABLE No. 24

This Treble shows the production, consumption and per capita consumption of
sugar in thfe different Provinces and Indian States in 1939-40, 1940-41 and 1941-42 (1st
November to 31st October). In estimating these figures also, no account has been
taken of the differences between opening and closing invisible stocks and imports
and exports by road. But it is believed that initial and closing invisible stocks
do not differ appreciably and that the volume of inter-provincial traffic in sugar
by road is not great. A better estimate of consumption will, however, be possible
if statistics of markets stocks improve.

TfiE SUGAR INDUSTRY AT A GLANCE, 1944

Production, Consumption and Per Capita Consumption of Sugar in the various
Provinces and States, during the years 1939-40, 1940-41, and 1941*42 (Nov.-Oct.)

193940

194041

194142

. Name of Province

5 &

So,

o ^

III

*J en *

til

c ***

& o *"*

fc CJ ' M

o **

V-i

Q-,

ft(j

a,cj

Tons

Lbs.

.Tons

Lbs.

Tons

Lbs.

(1000)

Bengal

45,800

161

6.7

64,600

178

6.6

29,400

120-

4.5

Bombay

97,200

219

15.2

120.132

260

20.8

113,354

240

192

Madras

50,400

3.6

67,400

106

4.8

47,448

4.1

Bihar

328,800

(a)3.1

257,100

(fl)3 9

122,300

(a)36

United Provinces

783,400

153

708,592

244

9.8

480,663

159

6.4

Punjab

32,100

169

12.0

51,023

231

15.3

38,120

199

13.1

C. P. and Berar...

4.3

6.3

4.9

Assam

3.5

4.4

Sind and British Baluchistan.

14.3

19.5

17.3

Orissa

...

N.-W. F. P. ...

3.8

13.3

ll'.l

Delhi

44.8

53.7

342

Rajputana

6.8

7.9

9.8

Central India ...

4.8

6.8

6.4

Nizam's Territory

2.8

3.7

3.2

Kashmir

1.1

2.3

Mysore

3.5

4.3

4.6

ALL-INDIA ...

1,074

6.5

1,376

8.5

1,132

7.0

(a) Includes Orissa also.

TABLE No. 25
Total Production, Import and Export of Molasses in India* for the last 13 years

Production of Molasses

Imports of

Export of Molasses

in India in Thousand Tons

Molasses

from British India

Year

into British

(including Palmyra

From
Cane

From
Gur

Rpfinp-

From
Khand-

Totalf

India
(Tons)

and cane jaggery)
(Tons)

Nov.-Oct.

Factory

ries

sarif

Apr. -Mar.

Apr.-Mar.

1931-32

250

365

40,191

740

1932-33

130

275

461

31,991

819

1933-34

190

% 40

209

430

2,401

1,201

1934-35

234

150

406

415

1,153

1935-36

337

125

495

Nil

1,026

1936-37

406 10

100

516

Nil

24,195

1937-38

349

125

482

79,167

1938-39

242

100

348

2160

52,676

1939-40

485

125

627

2000

16,000

1940-41

424 i 32

100

556

1941-42

293

100

400

1942-43

369

100

480

t f

1943-44

438

100

540

1944-45

341

* After 1936-37, statistics regarding Burma are excluded,
t Official estimates.

XII

THE SUGAR INDUSTRY AT A GLANCE, 19*4

TABLE No. 26

Total value of Sugar Machinery imported in| British India from 1932-33 to 1939-40*

(In Thousands of Rupees)

Source

1932-33

1933-34

1934-35

1935-36

1936-37 1 1937-38

1938-39

1939-40

U. K.
Other Countries

Rs.
91,48
61,63

Rs.
1,95,87
1,40,51

Rs.
73,60
31,84

Rs.

49,70
16,00

Rs.

68,49
26,66

Rs.

43,15
26,21

Rs.

30,16
31,20

Rs.

1,53,11

3,36,38

1,05.45

65,70

95,16

69,37

61,36

50,84

* Statistics discontinued after 1939-40.

TABLE No. 27

Calculated Net Production* of Gur in India for direct consumption, from

1937-38 to 1942-43

Year Calculated net Annual Production of Gur for

( November October ) direct consumption ( in Tons )

1930-31 . - .. 2,241,000

2,758,000

3,240,000

3,486,000

3,701,000

4,101.000

4,268,000

4,364,000

2,131,000

2,441,000

3,414,000

2,829,000

3,015,000 (Revised)

3,564,000 (Estimated)

1931-32

1932-33

1933-34

1934-35

1935-36

1936-37

1937-38

1938-39

1939-40

1940-41

1941-42

1942-43

1943-44

* The net production of gur is calculated by deducting from the total yield of
cane expressed in terms of gur, and published in the " Final General Memorandum
on the production of the Principal Crops in India ", by the Director-General, Com-
mercial Intelligence and Statistics, the gur equivalent of the cane used for purposes
other than gur manufacture. Vide letter No. 8002|stat, dated 2nd February 1944,
from the Director, Imperial Institute of Sugar Technology, Cawnpore, to the
Chairman, Sugar Commission, U.P. and Bihar, Cawnpore, for figures from 1940-41
to 1942-43.

TABLE No. 28

Cane Factory Production of Sugar in U. P., Bihar and All-India
(in Tons) from 1931-32 to 1943-44

(Vide Indian Trade Journal, 6th. -April 1944)

Total quantity of cane

Season

U.P.

Bihar

All-India

crushed all factories

in tons

1931-32

66,312

75,091

1,58,5S1

17,83,000

1932-33

1,40,344

1,28,610

2,90,177

33,50,000

1933-34

2,73,774

1,39,957

4,53,965

51,57,000

1934-35

3,15.600

1,84,038

5,78.115

66,72,000

1935-36

5,30,000

2,50,200

9,32,100

98,01,000

1936-37

6,08,600

3,29,300

11,11,400

1,10,87,000

1937-38

5,31,300

2,25,300

9,30,700

99,16,400

1938-39

3,20,300

61,600

6,50,800

70,04,800

1939-40

6,59,500

3,22,100

12.41,700

1,31,31,700

1940-41

5,13,300

2,46,100

10,95,400

1,12,90,900

1941-42

3,82,900

1,17,300

7,78,100

80,26.300

1942-43

6,12,500

2,37,400

10,70,700

1,04,18,500

1943-44

7,27100

242,400

12,16,400

1,21,37,800 (Revised)

1944-45

5,33,500

1.70,600

9,85.100

95.33.400

THE SUGAR INDUSTRY AT A GLANCE, 1944

O O
in CO rH

fs. 0. f~

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CO

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CD CD
Oi 00
CO CO

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rH in CO

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iini

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1
1

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-d

S J

CO
CM

CO CO CD

CM 00

rH rH

CO CO CD

o
co

CD
CM

rH O
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Controller

& Ja

CM
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: : co

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rH rH

in in

CO
rH

S 8
"8 Ji

Q O

CO
CD

O
CD

o
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CO
rH

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rH rH

in in

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I -

a
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CD
rH

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rH

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O OS
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in in

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: : :

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00

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co in

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in in

rH rH

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W fe

THE SUGAft INDUSTRY AT A GLANCE, 1944

TABLE No. 30
Recovery of Sugar from Cane during 1932-35 to 1944-45

Provinces

Recovery of Sugar per cent Cane

CO
1

in
g

t**

CO
1
CD
00

<?
t>.

1938-39

T*
1

1940-41

1942-43

rf
0>

1944-45

U. P.

8.56

9.60

9.65

9.18

9.14

9.37

9.87

10.16

9.92

10.36

Bihar ... | 8.79

893

9.20

9.58

9.00

9.29

9.86

10.35

10.93

10.53

10.70

"All other
Provinces"

8.77

9.00

960

9.77

9.91

9.88

9.34

9.22

9.95

9.94

...

All-India

8.66

929

9.50

9.38

9.29

9.45

9.70

969

10.28

10.02

10.31

* Vide Trade Journal. (Second Memorandum on production of cane sugar, in
1944-45.)

TABLE No. 31

Production of Sugar directly from Cane in Modern Factories in India, 1929-30
to 1943-44, and Recovery Percentage for Java

Season

Number of
Factories
producing
Sugar direct
from cane

Cane
crushed

Sugar
produced

Percentage
Recovery
for India

Percentage
Recovery
for Java*

Tons

1929-30

989,776

49,768

9.07

11.76

1930-31

1,317,248

119,859

9.00

10.92

1931-32

1,783,499

158,581

8.89

11.56

1932-33

3,350,231

290,177

8.66

12.84

1933-34

112

5,157,373

453,965

8.80

12.55

1934-35

130

6,572,000

578,115

8.66

13.23

1935-36

137

9,801,748

932,100

9.29

12.77

1936-37

137

11,687,200

1,111,400

9.50

11.87

1937-38

136

9,916,400

930,700

9.38

11.77

1938-39

139

7,001,800

650,800

9.29

12.23

1939-40

145

13,131,700

1,241,700

9.45

1940-41
1941-42
1942-43 (OurEst.)

148
150
150

11,290,900
8,026,300
10,418,000

1,095,400
778,100
1,070,700

9.70
9.69
10.28

1
1

1943-44 (Revised)
1944-45

151
144

12,137,800
9,533,400

1,216,400
985,100

10.02
10.31

* Vide <the Indian Trade Journal, 23rd September 1943,

THE SUGAR INDUSTRY AT A GLANCE, 1944
TABLE No. 32

Value of imports of Sugar,* Revenue from imports, and Rate of Import Duty
on Sugar from 1920-21 to 1944*45

Year
April-March

Value of foreign Sugar
( net ) imported i n
British India in Lakhs
of Rupees*

Revenue from
Import Duty on
Sugar in Lakhs
of Rupees**

Rate of Import Duty

1920-21
1921-22
1922-23
1923-24
1924-25

1,850
2,750
1,549
1,545
2,090

185
412
487
486
578

10 p c. ad valorem
15 p.c. ad valorem
25 p.c. ad valorem
> *
>

1925-26
1926-27
1927-28
1928-29
1929-30

1,520
1,534
1,450
1,586
1,836

659
744
653
782
846

Rs. 4-8-0 per cwt
u

1930-31
1931-32

1 1,047
590

1,081
798

Rs. 6-0-0 per cwt.
Rs. 9-1-0

1932-33
1933-34
1934-35

422
270
210

685
472
381

Re. 1-13-0 being revenue sur-
charge from 1st April 1932.)

Rs. 9-1-0 per cwt.
(Rs. 7-12-0 being protective &
Re. 1-5-0 being equivalent ex-
cjse duty from 1st April 1934.)

1935-36
1936-37
1937-38

1938-39

190
23
18

324
51
25

Rs 9-4-0 per cwt.
(Rs. 7-4-0 being protective and
Rs. 2-0-0 being equivalent
excise duty from 28th February
1937.)

1939-40

331

396

Rs. 8-12-0 per cwt.
(Rs. 6-12-0 being protective &
Rs. 2-0-0 being equivalent ex-
cise duty. (With effect from
1st April 1939.)

1940-41
1941-42

36
107

18
1*9

Rs. 6- 12-0 being protective and
Rs. 3-0-0 being equivalent
excise duty. (With effect from
1st March 1940.) Rs. 9-12-0
per cwt.

1942-43

1943-44
1944-45

...

4-1**
3'5**

Rs. 11-1-7 1|5 per cwt. with
effect from 1st April 1942
(i.e. including 20% surcharge
on ordinary import duty of
Rs. 6-12-0) and Rs. 3-0-0 being
equivalent excise duty.

* Annual statement of sea-borne trade (Burma excluded from 1937-38) .

** These figures appear to be too large, looking to imports reported to be
negligible. On an enquiry, however, we were informed that they represent duty
collected in those years on sugar released from Bond out of stock imported during
1941 and 1942.

XVI

THE SUGAR INDUSTRY AT A GLANCE, 1944

TABLE No. 33

Java Sugar Statistics from 1935-36 to 1940-41*
(In Long Tons)

Crop Year

Initial Stock
on 1st April

Production

Exports

Local
Consumption

Final Stock
on 31st Mar.

1935-36 ...

1,585,397

505,528

863,356

285,013

942,556

1936-37 ...

942,556

583,029

975,003

309,449

541,133

1937-38 ...

241,133

1,392,151

1,017,276

306,522

309,486

1938-39 ...

309,486

1,376,824

1,163,809

315,922

206,579

1939-40 ...

206,579

1,550,462

1,214,125

304,740

238,176

1940-41 ...

238,176

1,579,697

837,342

"351,828

628,703

1941-42 ...

( No reliable

reports availa

ble since occu

pation of Java

by Japanese)

* Vide Lamborn Weekly Report, issue of June 24th, 1941.

TABLE No. 34

An interesting Table regarding Per Capita Consumption of Gur and Sugar in
certain Rural and Urban Areas* in pre-war period (1937-38)

Name of Province

Gur

Sugar

Urban areas
(lb.)

Total for the
Province
(lb.)

Urban areas

db.)

Total for the
Province
(lb.)

United Provinces

13*2 (1)

53'9

58'1 (2)

8'3

Punjab

18'0 (3)

23*3

50'4 (4)

12'8

Bengal

15'4 (5)

22*8

85'5 (5)

6'3

Madras

8*9 (6)

12*1

51 '2 (6)

4'4

Bombay

12*4 (7)

14'4

81'4 (7)

16'3

Sind

6'0 (8)

7*2

82'1 (8)

17'8

(1) 22 markets, (2) 29 markets, (3) 6 markets, (4) Delhi, (5) Calcutta, (6)
Madras, (7) Bombay, (8) Karachi.

* Report on the Marketing of Sugar published by Central Agricultural Market-
ing Department (Government of India), 1943, p. 130.

THE SUGAR INDUSTRY AT A GLANCE, 1944

xvu

TABLE No. 35

Statement showing Sugar Production and Quotas allotted for Civilian Consumption

for the Quota Year 1943-44

Production

Quota

i from

Total quota

Areas

during
1943-44

Local
Production

U. P. &

Bihar

for civilian
corlSump-
tion for

Total
quota for
1944-45

(Tons)

( Tons )

(Tons)

1943-44

Assam ..

16,000

Baluchistan

4,700

Bengal & States

13,649

1,34,351

1,48,000

Bombay & States

1,03,225

80,181

1,27,819

2,08,000

Central India

12,172

12,828

25,000

</}

C P & States

33,000

38,000

Delhi

19,000

Hyderabad

17,467

18,000

Jammu & Kashmir ...

5,985

6,000

U">

Madras & States

66,858

43,042

1,09,900

N.-W. F. P.

6,253

11,247

17,500

Orissa

1,695

6,305

8,000

Punjab & States

28,348

1,39,652

1,68,000

Rajputana

2,179

38,821

41,000

Sind & States

31,200

U P & States

7 59 436

1 38 500

1,38 500t

Bihar

2 12 809

53,500

Khandsari Sugar . .

80 OOOt

Total ...

13,04,106

4,20,817

6,28,956

10,86,300**

* Estimated.

** Includes 44,000 tons of khandsari sugar allotted outside the U. P. and 36,000
tons estimated consumption of khandsari sugar in the U. P.

fThe U. P. is allotted a further quota of 36,000 tons of khandsari sugar in
1943-44

N. B. The figures of allotment quota are collected from official sources. But as
the cane-crushing season of 1944-45 has not yet been closed and returns of
sugar production from Madras, Bengal and Bombay were not available so far,
the allotment quotas are provisions^ and should be taken as such. The quotas
have not been finalised at the time this volume has been sent to press and
readers may kindly note that there might be some difference in final figures.

NOTE. Where States, are not shown separately their quotas are included in
the British Indian Provinces adjoining them.

According to the Sugar Controller of India, Annual quotas for the Provinces
and Indian States are fixed by him on the basis of consumption averages during
the year 1934-35 to 1938-39. The sugar allowed for civilian consumption in
1942-43 may perhaps be 25 per cent less than the consumption requirements of
the country which have appreciably increased as compared with the average of
the pre-war years. The population in many towns and cities has increased even
as compared with 1941 census figures. There has been a large influx of refugees
in the country. The Allied forces stationed in the country have also increased.
Again, conditions now are more prosperous than before and this has naturally
resulted in a change in the social habits of the people leading to a higher demand
for luxury foodstuffs.

xviii THE SUGAR INDUSTRY AT A GLANCE, 1944

Non-varying price for cane in U. P. and Bihar in 1943-44
Punjab and Bengal Fix Higher Prices

Early in November, 1943, the Government announced an increase
in the minimum price of cane in U. P. and Bihar from As. 10 a maund
which was the price in the 1942-43 season, to As. 12 a maund of cane.
At the same time, the factories were directed not to pay the full price
to the cane-grower all at once. One-sixth of the price, i.e. two annas
a maund, was to* be paid in Defence Savings Bonds or Certificates which
were to be cashed one year after the war was over. The Govern-
ment expected that on the basis of production of 9 lakhs tons of sugar
in U. P. and Bihar, nearly Rs. 3 crores would thus be withheld from
circulation and be of assistance in their anti-inflationary tendencies. The
Punjab Government, finding 'that factories were unable to get cane at
Rs. 0-12-0, fixed Rs. 0-14-6 per maund, and the Bengal Government fixed
Re. 1 per maund.

Special Reduction in Cane Price towards the fag end of the Season, 1943-44

With effect from 15th May, 1944, the U. P. Government announced a
reduction of Rs. 0-2-0 in the price of cane, i.e. to Rs. 0-10-0 per maund,
in order to induce factories to continue crushing and produce maximum
quantities of sugar. The full amount was to be paid straight to cane-growers.

Discontinuance of Additional Special Cess of Rs. 0-0-6 per maund of Cane in
. U. P. and Bihar in 1943-44

Additional Cess of 0-0-6 per maund of cane imposed in 1940-41 to
repay the deferred excise duty, for which an amount of Rs. 1,50 crores was
borrowed from the Government of India, with a view to enable the Govern-
ments of U. P. and Bihar to give a temporary rebate of one rupee per
maund of the excise duty, was discontinued from 1943-44 season, as the
amount was fully collected and as the sum, along with the interest, was
repaid to Government of India.

Raising of Ordinary Cess on Cane from 0-0-3 to " I * P er maund in U. P. and

Bihar in 1943-44

The rate of ordinary Provincial cess on cane which was O r O-3 per
maund was, however, Braised to 0-1-0 per maund with effect from 1943-44,
in U. P. and Bihar, in spite of the protests of the industry. The proceeds
of this cess will be credited to Provincial Revenues as usual. No portion
of this cess is earmarked for any specific purposes. But in 1942-43, the
U. P. Government spent a substantial amount from the General Revenues
on (i) Cane Development Department, (ii) the staff for reservation and
bonding of sugarcane, (Hi) the seasonal, staff maintained for the adminis-
tration of the United Provinces Sugar Factories Control Act, 1938, and
the rules made thereunder, (iv) the Sugar Commission, (v) the special
staff maintained at the Imperial Institute of Sugar Technology in connection
with the technical and statistical work entailed by the Sugar Factories
Control Act and Rules, and (vi) the staff maintained in connection with
the Sugar Control Scheme of the Government of India.

The U. P. Government realized Rs. 61,07,755, as cess on sugarcane during
the financial year 1942-43. This also includes the proceeds of the addi-
tional cess of 0-0-6 per maund of cane levied in order to recover the loan
advanced by the Government of India in the form of deferred sugar
excise duty with a view to assist the sugar industry of the province.

THE SUGAR INDUSTRY AT A GLANCE, 1944 xix

The sum advanced by the Government of Bihar to the industry in
Bihar a few years ago in connection with Excise Duty has not yet been
recovered in full. There was a sum of Rs. 5,70,000 yet to be realized at
the end of November 1943. But the special cess on cane was discontinued
from 1943-44.

The total amount collected from the Cane Cess in Bihar in 1942-43,
was Rs, 22,74,000 of which Rs. 7,58,000 represented the ordinary cess and
Rs. 15,16,000 represented the special cess for repayment of loan to the
Government of Ind^i.

In Bihar also, the income from the cane cess is merged in the Provincial
Revenue and no separate account is maintained of the expenditure from
cess. The annual expenditure incurred by Government on the Cane Deve-
lopment and other schemes related to sugarcane generally covers a large
portion of the proceeds from the ordinary cess.

The Chairman, Sugar Commission of U. P. and Bihar assured the indus-
try, however, (vide his letter to the Sugar Mills Association, No. 5784 1 Com.
E-7, dated the 22nd September, 1943) that " the proceeds of the cess though
credited to General Revenues will in due course be utilized for the benefit
of the industry and the growers".

Cane Prices and Cane-cess During 1944-45 Season in U. P. and Bihar

In October, 1944, the Sugar Controller for India, after consulting his
Advisory Committee, announced an increase of Rs. 1-7-0 in the sugar price,
thereby fixing the price of sugar of the standard quality (D. 24) at Rs. 16-4-0
per maund. The Governments of U. P. and Bihar on the basis of this
increase fixed a cane price of As. 14 -. Thus the minimum price of cane
for the season 1944-45 was fixed at annas fourteen per maund of cane
exclusive of cess to be paid by all factories. An exception was made in
the case of the Gokulnagar Sugar Factory at Kichha, the cane price in
the case of which was fixed at 12 annas per maund. As in the previous
year, the two Provincial Governments levied compulsory deductions from
the cane price for investing in the National Savings Certificates. In U. P.
compulsory deductions were as follows :

Rs. a. p.

1. Kichha Factory . . . . . . 0-1-0

2. Factories in Gorakhpur Division . . . . 0-2-0

3. Ratna and Aira Sugar Factories . . . . 0-2-0

4. All other Factories .. .. .. 0-3-0

In Bihar, the Government at the very commencement of the season
fixed a cane price of 14 annas and ordered a uniform deduction of 0-2-0
for National Savings Certificates from the cash price. As the season advanced,
it was found that the cane price for ryots seemed low in view of the bad
crop in Bihar. As the industry considered the price of Rs. 0-14-0 inadequate,
a deputation of industrialists waited on His Excellency the Governor of
Bihar towards the beginning of December,^ 1944. In response to the demand
of the industry the Governor agreed to abolish the cess of one anna in the
case of Bihar factories and permit this amount to be added on to the cane
price. With effect from 16-12-1944 the cess of one anna was abolished and
the cane price was raised to Rs. 0-15-0 per maund in the case of Bihar. The
compulsory deduction in the case of Bihar was fixed at a uniform rate of
two annas per maund.

xx THE SUGAR INDUSTRY AT A GLANCE, 1944

It may be noted that the Governments of U. P. and Bihar also abo-
lished the compulsory deductions from cane prices paid to the cultivators
with effect from 25th January, 1945, in response to the requests
of the industry. This salutary measure came none too early as it
was recognised to be long overdue, both in the interests of the cultivators
and the future of the sugar industry.

Cane Prices in Other Provinces
Madras *

The basic minimum prices of sugarcane were fixed by the Government
of Madras for the season 1943-44 ranging from Rs. 17 to Rs. 20 per ton
in accordance with the costs of transport of cane to the factory from the
field. In view of the increase in price of sugar announced by the Sugar
Controller, prices for sugarcane for the current season of 1944-45 were
fixed at between Rs. 20|8|- to Rs. 24 - per ton.

Mysore

The minimum price fixed for sugarcane in Mysore for the factory at
Mandya for the 1943-44 season was Rs. 18 per ton. In view of the increase
in the ex-factory price of sugar by Rs. 1-7-0 per maund with effect from
20th October, 1944, a proportionate increase in cane-price was under con-
templation of the Mysore authorities before the season could start.

, M. P. GANDHI.

Bombay, 30th July 1945.

iliiliiJiiiiiv

"THE SUGAR INDUSTRY AT A GLANCE"

(1944)

SUGAR INDUSTRY (PROTECTION) ACT, 1939*
(Present Duties to continue till 31st March 1946)

ACT NO. XX of 1939

An Act to provide for the continuance for a further period of the protection
conferred on the sugar industry in British India.

Whereas it is expedient to provide for the continuance for a further period
of the protection conferred on the Sugar Industry in British India, and to extend

VTTT t moo tne date before which the Central Government is required under

A 1 11 or Lij6tt * . .

Section 3 of the Sugar Industry (Protection) Act, 1932, to lay

before the Indian Legislature the proposals referred to in the said Section ;
It is hereby enacted as follows :

1. This Act may be called the Sugar Industry (Protection)
Act, 1939.

Amendment of 2 - * n Section 3 of the Sugar Industry (Protection) Act,

SecJ* of Act XIII 1932, for the figure "1939" the figure "1941" sball be
substituted.

3. In Item No. 17 of the First Schedule to the Indian

Short Title

of 1932 t

Amendment of First
Schedule to Act rr .~ A A 1ri _.
XXXII of 1934 J fariff Act, 1934 :

* Received the assent of the Governor-General on March 31, 1941. For the Sugar Industry
(Protection) Act, 1932, and the Sugar Industry (Temporary Extension) Act, 1938, see 1939
Sugar Industry Annual, pages 1 to 4.

f As amended, Section 3 of Act XIII, 1932, viz. the Sugar Industry (Protection) Act, 1932,
will read as under:

3. The Governor-GeneraHn-Council shall cause to be made by such persons as he may
appoint in this behalf, an inquiry to ascertain if the protection of the sugar industry during the
period from the 31st day of March 1941 to the 31st day of March 1946, should be continued to
the extent conferred by this Act, or to a greater or lesser extent, and shall, not later than 31st
day of March 1941 lay his proposals in this behalf before the Indian Legislature.

t As amended, Item No. 17 of the First Schedule to the Indian Tariff Act, 1934, will read as
follows:

17. Sugar, excluding
confectionery

Protective

The rate at which excise duty
is for the time being leviable on
sugar, other than khandasari or
palmyra sugar, produced in British
India plus Rs. 6-12-0 per cwt.

Upto

31st March
1946

xxii THE SUGAR INDUSTRY AT A GLANCE, 1944

(a} In the fourth column, for the words and figures " plus Rs. 7-4-0 per
cwt." the words and figures "plus Rs, 6-12-0 per cwt." shall be substituted;

(6) In the last column, for the figures " 1939" the figure " 1941 " shall be
substituted.

It is hereby declared that it is expedient in the public interest that Clause 3 of
this Bill shall have immediate effect under the Provisional Collection of Taxes
Act, 1931.

By the Protective Duties Continuation Act 1942, the import duty on sugar
was continued on the same level up to 31st, March, 1944.

By the Protective Duties Continuation Act 1944, the existing protective
duties on sugar [as also wood pulp, paper, silk manufactures, gold and silver
thread and wire, (including the so-called gold thread and wire mainly made of
silver), and iron and steel manufactures] were continued for a further period of
two years, that is, t4pto 31st March, 1946.

It was observed in the Statement of Objects and Reasons that " in the present
unsettled conditions no suitable date on the basis of which enquiries by a Tariff
Board can be instituted is available. In the absence of such enquiries it is not
possible to ascertain the quantum of protection required during normal years and
the object of this Bill is to maintain the status quo for a further period of two
years, that is, upto 31st March, 1946.

Note ; The total import duty on sugar (including the equivalent excise duty
of Rs. 3 per cwt. and the surcharge of 20 per cent imposed with effect from the 1st
April 1942) amounts to Rs. 11-1-7 1/5 per cwt. with effect from 1st April 1944.
It will be continued upto 31st March, 1946.

SUGAR EXCISE DUTY ACT, 1934

(incorporating amendments made upto March 1940)

An Act to provide for the imposition and collection of
an Excise Duty on Sugar.

(For Text of the Act, refer to earlier issues of the Annual.)

INTERNATIONAL SUGAR AGREEMENT.
India does not join after September 1942.

" India was a party to the International Sugar Agreement which was
concluded in 1937 with a view to establishing and maintaining an orderly
relationship between supply and demand of sugar and to regulate the world
prices of sugar. Under this agreement India undertook to prohibit exports of
Indian sugar by sea elsewhere than to Burma.

India was released from this obligation not to export sugar by sea, with
effect from 1st September 1942, the Government of India having decided
not to join, in, the prpposed extension of the International Sug^r Agreement

THE SUGAR INDUSTRY AT A GLANCE, 1944 xx iii

U. P. AND BIHAR GOVERNMENTS' ACTS

SUdAR CONTROL BOARD (1944-45)

The following persons have been nominated members of the reconstituted
Sugar Control Board of U. P. & Bihar by a Notification dated 26th June, 1944,
for a period of one year from 1st July, 1944.

The Adviser to H. E. the Governor of U. P., Revenue; The Adviser to H. E.
the Governor of Bihar, Development; Mr. D. R. Narang, Basti Sugar Mills Ltd.,
Basti; Mr. C. O'Malley, Begg, Sutherland & Co. Ltd., Cawnpore; Mr, R. L.
Nopany, Calcutta; Lala Gurusharan Lai, Gaya Sugar Mills Ltd., Bihar; Mr. N.
A, Shervani, Etah; Lala Har Sahai Gupta, Shanker Agricultural Farm, Bilari
(Moradabad); Raja Raghuvendra Pratap Narain Singh, M.L.A., Gonda; Mr.
Nasiruliah Rafaman Kidwai, Bara Banki ; Mr.-Jamuna Karjee, M.L.A., Darbhanga,
Bihar; Chaudhury Kalika Prasad Roy, Bihar ; Mr. Satyapal Varma, Cawnpore;
Secretary to the Government of Bihar, Development Department and Employment
Department; Secretary to the Government of U. P. in the Agricultural
Department.

U. P. AND BIHAR SUGAR COMMISSION

In August 1940, the U. P. and Bihar Governments set up a joint " Sugar
Commission, which would be the final authority, subject to Government control,
on all matters connected with the production and sale of sugar, as well as other
matters regarding cane prices, etc." It may be observed that since the institution
of Central Control over the industry, the Sugar Controller for India exercises
some of the powers relating to sale, cane price fixation, etc. in the interests of an
all-India policy and to that extent directs the Sugar Commission and its Chairman
in the discharge of their duties.

The Chairman of the Commission is Mr. K. R. Malcolm, I.C.S., who succeeded
Mr. J. E. Pedley in 1944. The Cane Commissioners of U. P. and Bihar are
ex-officio members of the Commission. They are also ex-officio members of the
Board of Directors of the Indian Sugar Syndicate Ltd. The office of the Sugar
Commission is located at Cawnpore.

The Chairman of the Commission also acts as Provincial Sugar Controller
for U. P.

U. P. AND BIHAR SUGAR FACTORIES CONTROL ACT

During 1942 the Bihar and U. P. Governments proposed an amendment to
the Control Acts with a view to maintain the continuity of work and to continue
the operation of the Acts till the end of the crushing season 1946-47. A copy of
the Statement of Objects and Reasons was given in the previous Annual.

In November 1944, the United Provinces Government made certain
amendments to the U. P. Sugar Factories Control Rules, 1938. Under the new
amendment a Technical Committee consisting of six members was proposed to bo

xxiv THE SUGAR INDUSTRY AT A GLANCE, 1944

set up to plan and organise and direct the technical problems concerning the sugar
industry in U. P. The Director of Imperial Institute of Sugar Technology and
the Cane Commissioner of U. P. shall be appointed as exofficio members of the
Committee and the remaining four shall be nominated by the Government after
consulting the Indian Sugar Syndicate Ltd.

The functions of the Technical Committee shall be to advise the Provincial
Government with regard to (a) the establishment of new sugar factories in the
Province or additions or alterations in the existing plants of the sugar mills (b)
and to advise on any other technical and incidental matters connected with the
sugar mills referred to it from time to time by the Sugar Commissioner or the
Provincial Government. The office of the Technical Committee is to be located
at Cawnpore.

if,

^GOVERNMENT OF INDIA : DEPARTMENT OF FOOD
SUGAR AN^UGAR PRODUCTS CONTROL ORDER, 1943
- (As amended upto 30th June, 1945)

No. 1-Sc. (l)/43 : In exercise of the powers conferred by the Sub-rule (2) of
Rule 81 of the Defence of India Rules and in supersession of the Sugar Control
Order, 1942, published with the Notification of the Government of India in the
Department of Commerce, No. l-SC(6)/42, dated the 29th June 1942, and
modified by subsequent notifications the Central Government is pleased to make
the following Order, namely:

v/f. (1) This Order may be called the Sugar and Sugar Products Control
Order, 1943.

v/r (2) It extends to the whole of British India.
v' (3) It shall come into force at once.

^'2. In this Order unless, there is anything repugnant in the subject or context,

^(a) "Controller" means the person appointed as the Sugar Controller for
India by the Central Government, and includes any person authorised by the
Controller to exercise all or any of the powers of the Controller under this Order;

y (b) "dealer" means a person carrying on business in the purchase, sale or
distribution of sugar or sugar products;

/ (c) "^-factory price" means price of sugar inclusive of excise duty, packed in
accordance with the usual market practice, and loaded at the buyer's option, on
buyer's carts, lorries or other means of transport, or into railway wagons at the
railway station or siding generally used by the producer, and all incidental charges
including those for siding and forwarding, being on account of the ex-factory seller;

V(d) "producer" means a person carrying on the business of manufacturing
sugar or sugar products or both with the aid of electrical energy or any other form
of energy which is mechanically transmitted, and is not generated by human or
animal agency;

(e) "recognised dealer" means a dealer who has been recognised $$ such by
the CpBtrolier for purposes of this Order ;

THE SUGAR INDUSTRY AT A GLANCE, 1944 xxv

\/ (f) "sugar" means any form of sugar containing more than 90 per cent of
sucrose ;

^(g) "sugar product" means any article manufactured from, and containing
sugar not less than 50 per cent of its weight.

3. No producer shall, dispose of, or agree to dispose of, make delivery of,
any sugar, except

(1) to or through a recognised dealer, or

(ii) to a person specially authorised in this behalf by the Controller to acquire
sugar on behalf of the Central Government or of a Provincial Government or of
an Indian State.

v ' 4. (1) If the Controller has reason to believe that the production of special
types of sugar or sugar products is likely to affect adversely the production of
adequate quantities of ordinary sugar, he may, by general _pr spec i a 1 Q rd^r^pr oh i b i t ,
or limit to such quantities as may be specified in the order, the manufacture by any
producer or by producers generally of such types or grades of sugar or sugar pro-
ducts as the order may specify, and no producer to whom such order applies shall
manufacture any sugar or sugar products in contravention thereof.

* (2) For the purposes of sub-clause (l), "producer" includes a person carrying
on the business of manufacturing any form of sugar containing more than 90 per
cent sucrose including Khandsari sugar, Desi sugar and Bura.

^ r 5. Every producer and dealer shall comply with such directions regarding
the sales, stocks or distribution of sugar or sugar products as may from time to
time be given to him by the Controller.

lt /6. (1) The Controller may, from time to time, fix by notification in the
Gazette of India the price or maximum price_at which any sugar or sugar, grodjict
may be sold or deliveredjjind different prices may be so fixed by him for different
areas or different types of grades of sugar or sugar products.

(2) Where the price or the maximum price has been so fixed :

(a) the price at which such sugar or sugar product may be sold for delivery
otherwise than ex-factory shall not exceed the price or the maximum price as the
case may be fixed under sub-clause (}) for sale ex-factory plus such charges in
respect of transport to or in specified areas and other incidental charges as are
approved by the Controller ;

(b) no person shall sell or purchase or agree to sell or purchase such sugar
or sugar product at a price higher than that fixed under the provisions of sub-
clause (1).

(1) The Controller may, from time to time

allot quotas of sugar or sugar products or of both for the requirements of
any specified province, or area, or market,

(ii) issue directions to any producer or dealer to supply sugar or sugar pro-
ducts to such provinces, areas or markets or sych persons er organisations, in

xxvi THE SUGAR INDUSTRY AT A GLANCE, 1944

quantities, of such types or grades, at such times, at such prices and in such
manner as may be specified by the Controller, and

(iii) require any producer or dealer to keep in reserve stocks of sugar or sugar
products in such quantities and of such types and grades as he may direct from
time to time.

Provided that where price or maximum price of any sugar or sugar product
has been fixed in accordance with sub-clause (1) of clause 6 the Controller shall in
respect of such sugar or sugar product specify the price or maximum price under
para (ii) of this sub-clause accordingly.

(2) Every producer shall, notwithstanding any existing agreement with any
other person, give priority to, and comply with, any directions issued to him under
sub-clause (1).

v/S. (1) No sugar shall be transported, or offered or accepted for transport,
whether by rail, road or water, and whether by a railway servant, common carrier
or other person, except under and in accordance with the terms of :

V(a) a general or special permit issued by the Controller in this behalf; or
(b) A Military credit note.

Provided that nothing in this sub-clause shall apply to the transport of
sugar not exceeding 20 seers as part of the personal luggage of a bona-fide
traveller.

(2) A permit issued in pursuance of sub-clause (l) shall be returned by the
consignor to the Controller on completion of despatch, or on expiry of the period
of its validity, whichever is earlier, with the particulars of actual despatches in the
prescribed form.

(3) For the purposes of this clause "sugar" means sugar manufactured by any
process, including sugar made in vacuum pan factories from cane or gur or
palmyrah jaggery, as well as khandsari sugar, sugar candy (misri) and Bura.

9. The Controller may, by notification in the official Gazette, make rules for
carrying into effect the purposes and objects of this Order.

v/10. Notwithstanding the supersession of the Sugar Control Order, 1942, all
notifications, rules, orders, authorizations, quotas, requirements, and directions
issued thereunder shall, so for as they are not inconsistent with this Order, be
deemed to have been made hereunder, and they shall continue in force until
rescinded or modified hereunder.

11. If any person contravenes the provisions of this Order, then without
prejudice to any other punishment to which he may be liable, any court trying the
offence may order that any stocks of sugar or sugar products, together with the
packages and coverings thereof, in respect of which the court is satisfied that the
offence has been committed, shall be forfeited to His Majesty.

THE SUGAR INDUSTRY AT A GLANCE, 1944 xxvii

GOVERNMENT OF INDIA : DEPARTMENT OF FOOD
GUR CONTROL ORDER, 1943

(With amendments up to date)

No. 1 l-S,C.(6)/43-I : In exercise of the powers conferred by sub-rule (2) of
rule 81 of the Defence of India Rules, the Central Government is pleased to make
the following Order:

1. (1) This Order may be called the Gur Control Order, 1943.

(2) It extends to the whole of British India.

(3) It shall come into force at once.

2. In this order, unless there is anything repugnant in the subject or context,

(a) "Controller" means the person appointed as Gur Controller for India by
the Central Government, and includes any person authorised by the said Controller
to exercise all or any of the powers of the Controller under this Order;

(b) "dealer" means a person dealing in the purchase, sale, or distribution of
Gur;

(d) "Gur" means articles commonly known as Gur, Gul, jaggery, palmyra
jaggery, shakkar and rab, and includes raw sugar as also uncrystallised sugar in
any other form comprising of original and convertible molasses and other

'impurities,- inherent or foreign, prepared by boiling cane or palmyra juice;

(e) " Sugar " means any form of sugar contaiping more than 90 per cent of
Sucrose.

3. The Controller may, from time to time, fix by notification in the official
Gazette for any specified area the maximum prices at which Gur may be sold or
delivered, and different rates of prices may be so fixed by him for different areas
or different types or grades of Gur.

4. Every producer and dealer shall comply with such directions regarding
the production, sales, -delivery, stocks, distribution or prices of Gur as may from
time to time be given by the Controller.

5. If in the opinion of the Controller the unregulated production of Gur in
any area is likely to affect adversely the production of sugar in quantity which in
his opinion is required for the needs of the community, he may, by order published
in the official Gazette, provide for all or any of the following matters:

(a) prohibit or restrict the export of sugarcane to any place outside that area;

(b) direct that cane growers in that area shall deliver sugarcane to a specified
-sugar factory or factories in accordance with such conditions in regard to quantity,
price, and time of delivery as may be specified by the Controller;

(c) prohibit, or restrict to such quantities or qualities or both as may be
specified by the OrcTer, the manufacture of Gur by all or any class of producers in
the said area.

6. (1) The Controller may, from time to time

(i) allot quotas of Gur for the requirements of any specified province or area,
or of any specified market, and

xxviii THE SUGAR INDUSTRY AT A GLANCE, 1944

(ii) issue directions to any producer or dealer to supply Gur to such areas or
markets or such persons or organisations, in such quantities, of such types, or
grades, at such times, at such prices and in such manner as may be specified by
the Controller.

(2) Every producer or dealer shall, notwithstanding any existing agreement
with any other person, give priority to, and comply with, any directions issued to
him under sub-clause (1).

7. No Gur, shall, after such date and from such area as the Controller may
notify in this behalf, be offered for transport by railway or in any manner
whatsoever by land or river by a consignor or accepted by a railway servant or by
any person whatsoever for transport or trasported by rail, road or river except
under a permit issued by the Controller in such form and subject to such conditions
and in respect of such areas as he may from time to time prescribe :

Provided that this clause shall not apply to the transport by railway or in
any manner whatsoever by land or river of Gur (a) by a bona fide traveller as part
of his personal luggage or (b) under and in accordance with military credit notes
or (c) under and in accordance with a permit issued by a Provincial authority
before the date of this Order.

Explanation. For the purposes of this clause Gur not intended for the
personal use of the traveller and members of his family shall not be deemed to be
his personal luggage.

8. The Controller may, by notification in the Official Gazette, make
regulations for carrying into effect the purposes of this Order.

9. If any person contravenes the provisions of this order, then without
prejudice to any other punishment to which he may be liable, any court trying
the offence may order that any stocks of gur, together with the packages and
coverings thereof, in respect of which the court is satisfied that the offence has
been committed, shall be forfeited to His Majesty.

Control over Movement of Gur

Under a Food -Department Notification No. II S.C. (9)/44 dated the 25th
March 1944, Gur Controller for India announced that no gur shall be offered for
transport by railway by a consignor or accepted by a railway or transported
otherwise by land or water from any place outside the area specified by him to
any other place except under a permit issued by the Gur Controller for India.

The specified areas are Gur surplus areas from which no gur could be
moved to other provinces except under a permit from the Government. The
order placed a ban on all private movement of gur from one area or province
to another.

THE UNITED PROVINCES MOLASSES CONTROL ORDER, 1944

With a view to regulate the prices and disposal of Molasses in U.P., the
Government promulgated by a notification dated the 13th March 1944, the
United Prpvinces Mplasses Control Order, Similarly the Bihar Government

THE SUGAR INDUSTRY AT A GLANCE, 1944

also instituted control over molasses and directed disposal of them. A summary
of the important provisions of the U. P. Molasses Control Order is given here:

Clause 3 of the Order reads:

(i) Every owner or occupier of a sugar factory shall furnish to the
Excise Commissioner, U, P., in a specified manner returns relating to
stocks of molasses in his possession as required.

(ii) Any person, other than the owner or occupier of a sugar factory,
holding stocks of molasses shall furnish to the Controller such returns relat-
ing to the stocks of molasses in his possession as required.

Clause 4 of the Order lays down that no persop shall export, or cause to
be exported by rail, river or road, molasses outside the United Provinces
except on such terms and conditions as may be prescribed by the Excise
Commissioner or Controller as the case may be.

Under clause 6 of the Order no person shall move by rail or river from
any place in the United Provinces to any other place in the United Provinces
except with the permission of the Excise Commissioner or Controller as the
case may be.

In pursuance of clause 8 of the United Provinces Molasses Control Order,
1944, the Governor was pleased to direct that the molasses mentioned in the
statement below shall not be sold or offered for sale in the area noted against each
at prices higher than those mentioned against it. The prices are ex-factory
prices and inclusive of the cost of loading a tank wagon where transport is by rail
and of filling the containers where transport is (a) by rail but not in a tank wagon
or (b) by any means other than by rail.

Serial

No.

Kind of Molasses

Area

Maximum Price per maund

Ordinary or
liquid molasses

Cheeta or
concentrated
molasses

Cane molasses the final residual by-
product of sugar factories manu-
facturing sugar. from sugar foctories.

Meerut Division.

Rs. a. p.
, 6

Rs. a. p.
100

Cane molasses the final residual by-
product of sugar factories manu-
facturing sugar from sugar-cane
served by railway stations on the
Broad Gauge or by stations both
on the Broad Gauge & the Metre
Gauge.

Any place in U.P.
except the Mee-
rut Division.

040

Cane molasses the final residual by*
product of sugar factories manu-
facturing sugar from sugar-cane
served by railway stations on the
metre gauge only.

Do.

020

080

Gur molasses the final residual by-
product of sugar refineries operating
on vacuum pan system.

Any place in U.P,

060

xxx THE SUGAR INDUSTRY AT A GLANCE, 1944

INDIAN CENTRAL SUGAR-CANE COMMITTEE FORMED IN 1944

The Government of India announced their decision to set up a Central Sugar-
cane Committee by a resolution No. F 41-24/43A dated 6th June 1944, of the
Education, Health and Lands Department.

The following is the text of the Government resolution, dated 6 June 1944,
published in the Gazette of India.

Taking into account the expansion of sugar-cane research work and envisaging
considerable further developments in the near future and the need for post-war
re-adjustments, the Sugar Committee of the Imperial Council of Agricultural
Research in October 1941, recommended that a Central Sugar Committee should
be constituted on the lines of the Indian Central Cotton Committee and with
somewhat similar powers and functions. This resolution was endorsed by the
Governing Body of the Imperial Council of Agricultural Research in July,
1942. The Government of India agreeing with the Sugar Committee and the
Imperial Council of Agricultural Research, have accepted this recommendation in
principle and decided to set up a Central Sugar-cane Committee, which will be a
body corporate registered as a society under the Registration of Societies Act
(XXI of 1860) with Head Quarters at Delhi or such other place as the Committee
may decide.

Functions ; The functions of the Indian Central Sugar-cane Committee will
be to undertake the improvement and development of the growing, marketing and
manufacture of sugar-cane and its products in India and of all matters
incidental thereto. This includes items such as agricultural, technological and
economic research on sugar-cane, gur, sugar and their by-products, the improve-
ment of crop forecasting and statistics, the production, distribution and testing of
improved varieties, the adoption of improved cultural practices, enquiries and
recommendations relating to banking and transport facilities and transport routes,
the maintenance of an Institute of Sugar Technology and other similar matters.
The control over the Institute of Sugar Technology will vest in the Committee
along the lines indicated later. The Committee will also advise the Central and
Provincial Governments concerned on any points which may be referred to it by
them, provided the subject matter of the reference falls within the prescribed
functions of the Committee.

Constitution: It is desirable that the growers, the manufacturers and the
traders should be fairly represented on the Committee. Subject to a reserve power
of nomination by the Governor-General -in-Council so as to permit of appointments
to the Committee to meet requirements that may vary from time to time, the
Committee will be constituted as follows :

(1) The Vice-Chairman, Imperial Council of Agricultural Research, who
shall be ex-officio President of the Committee.

(2) The Agricultural Commissioner with the Government of India.

(3) The Director, Imperial Agricultural Research Institute,

(4) The Director, Imperial Institute of Sugar Technology.

(5) The Agricultural Marketing Adviser to the Government of India.

THE SUGAR INDUSTRY AT A GLANCE, 1944 xxxi

(6) The Imperial Sugar-cane Expert.

(7)-(l4) The Directors of Agriculture, Madras, Bombay, Bengal, United
Provinces, Punjab, Bihar, Mysore and Hyderabad or their nominees.

(15)-(16) The Cane Commissioners, United Provinces and Bihar.

(17)-(25) Nine representatives nominated by the Indian Sugar Mills
Association, of whom at least two shall be representatives of the Indian
Sugar Producers' Association, one representative of the Deccan Sugar
Factories Association, one of the Indian Southern Provinces Sugar
Marketing Board and one of the Bengal Sugar Mills Association.

(26) One representative of Sugar Factory Owners nominated by the
Governor-General-in-Council.

(27)-(30) Four representatives of the Gur and Khandsari Industry
nominated by the Governor-General-in Council.

(3l)-(38) Eight non-officials representing agricultural interests, one
nominated by the Government of Madras, ofte by the Government of
Ben|al, two by the Government of United Provinces, one by the
Government of Punjab, one by the Government of Bihar and two by
the Governor-General-in-Council to represent other areas.

(39)-(41) Three representatives of Sugar Trade one nominated by the
Bombay Sugar Merchants' Association, one by the Cawnpore Sugar
Merchants' Association and one by the Indian Sugar Syndicate.

(42)-(44) Three representatives nominated by the Governor-General-in-
Council to represent the consumers.

(45) One representative of Sugar Technologists nominated by the Governor-
General-in-Council.

The tenure of the appointment of the members of the Committee other than
those who are appointed by reason of the office or appointment they hold, will
be three years with effect from the 1st April of the year in which they are
appointed or such lesser period as may be specified in the notification.

The Secretary of the Committee, who will not be a member of it, will
be appointed by the Governor-General-in-Council, but he will be paid
from the funds of the Committee. The Director of the Institute of Sugar
Technology will continue to be a servant of the Government of India. His
salary and allowances will also be paid from the funds of the Committee, but the
Government of India have agreed to meet his leave and pension contribution.
The Committee will continue to employ at the Institute of Sugar Technology
from its own funds such staff as has been tent to the Institute by the Government
of the United Provinces on the same basis on which they are at present employed
by the Government of India, as also such other staff as are at present on contract
till such time as contracts expire.

The Committee will continue to maintain the Imperial Institute of Sugar
Technology both as a teaching and as a research institution and will be responsible
for the maintenance of sugar standards. Returns under the Sugar Production
Rules, the maintenance of sugar trade information services and any special work

xxxii THE SUGAR INDUSTRY AT A GLANCE, 1944

that may be required by the Central or by any Provincial Government will be
directly under the'control of the Director of Institute of Sugar Technology.

Funds of the Committee; The Government of India will finance * the
Committee by placing at its disposal the entire proceeds of the Sugar Excise
Fund ; the amount so credited shall continue to be one anna per cwt. of white
sugar produced in British India out of the excise duty levied on it. The question
of increasing this amount will be considered after the war. If the amount placed
in the Fund in any year falls short of the needs of the Committee, the Government
of India will automatically grant a loan free of interest to cover the deficit and
enable the Committee to incur expenditure upto a limit of Rs. 11.75 lakhs in the
year subject to the condition that the first charge on .any surplus occurring
thereafter will be the repayment of this loan. The Committee will meet all the
present liabilities of the Fund and take over all its assets.

COMPOSITION OF THE INDIAN CENTRAL SUGARCANE

COMMITTEE f

Under Department of Education, Health and Lands Notification No. F.
41-1/44A, dated the llth October 1944, it was announced that the following
persons had been nominated as Members of the Indian Central Sugarcane
Committee.

The first sixteen seats of the Indian Central Sugar-Cane Committee are given
to the Officials of the Government of India and the Provinces. The non-official
members representing various interests are:

Lala Gurusharanlal, Mr. R. L. Nopany, Mr. K. K. Birla, Lala Shanker Lai,
Mr. D. R. Narang, Mr. C. W. Tosh, Mr. Lalchand Hirachand, Mr. A. A. Khan,
Mr. B. P. Dalmia, Dr. Chr. H. Nielsen, Mr. Nasirullah Rahman Kidwai, Mr.
Banchhanidhi Kar, Sardar Iqbal Singh of Iqbalnagar, Mr. Jagdish Saran Agarwal,
Mr. V. T. Ramaswami Ayyar, Mr. Hamidul Haq Chowdhury, Raja Raghvendra
Pratap Narain Singh, Lala Har Sahai Gupta, Sardar Santokh Singh of Shakot,
Jullunder, Mr. S. Bose of Hasanli concern, Rao Bahadur Shembhedkar, Mian
Abidul Huq, Seth Maneklal Ujamshi, Lala Daya Ram, Mr. Karamchand Thapar,
Mr. G. V. Deshmukh, M.L.A., Sir Muhammad Yamin Khan, M.L.A., Hon.
Mr. Hossain Imam, Sir T. S. Venkataraman.

Lala Shanker Lai was elected V ice-President.

RESOLUTIONS OF INDIAN SUGAR MILLS ASSOCIATION, 1944

Some Important Resolutions passed at the 12th Annual

General Meeting of the Indian Sugar Mills Association

held on 16th September 1944.

Shrinkage in Cane Acreage

This Association views with grave concern reports of shrinkage in cane
acreage for the season, 1944-45 particularly in Bihar and Eastern U. P. as a
result of low sugar and cane prices fixed last year by the Central and Provincial
Governments as compared to the general rise in prices of other competitive food
crops. The Association regrets that while Government did not agree to increase

THE SUGAR INDUSTRY AT A GLANCE, 1944 xxx iii

the cane prices inspite of Association's several warnings about the possibilities of
shrinkage in cane acreage, hardly any steps were taken to ensure that there was no
such fall in the 'area devoted to cane plantation. As a result, this Association
apprehends a considerable curtailment in the sugar production of the country in
general and in Bihar in particular, and, therefore, urges the Government of India
to take immediate steps to maximise sugar production during the season 1944-45,
and to ensure that there is an adequate increase in the cane plantation for the season
1945-46.

. Distribution of Sugar

This Association regrets that inspite of three years' Government control over
the distribution of sugar, its shortage continues and that, at many places people
have to pay more than the controlled rates for their requirements. This
Association is of considered opinion that besides the necessity of increased
production the existing machinery of distribution, which works through official
channels and seeks little co-operation from the industry and public, needs a thorough
renovation. This Association, therefore, strongly urges the Government to take
immediate steps in this direction.

Molasses Control Order in U. P. Bihar

This Association regrets that the Governments of U. P. and Bihar have
promulgated Molasses Control Orders to control the movement of molasses
although even the elementary conditions necessary for the control of a commodity,
such as shortage in supply or an abnormal rise in prices etc., are completely absent.
This Association has all along been opposed to the institution of any control on
molasses, because

(1) the supply of molasses in the U. P. and Bihar is far in excess of even
the increased demand for molasses.

(2) the average price of molasses obtained by the factories in these two
provinces was below the level of the prices of other commodities.

(3) the restriction on the movement of molasses has resulted in the accumu-
lation of huge stocks thereby putting the factories to serious difficulties as regards
its shortage, particularly, when new tanks cannot be constructed due to scarcity of *
materials.

This Association, therefore, urges the two Governments to withdraw the
Molasses Control Orders forthwith,

/
Levy of an Export Duty on Molasses in U. P. & Bihar

This Association protests against the action of the U, P. and Bihar Govern-
ments in levying an export duty of Rs. 2/- per maund which has befin lately reduced
to Re. I/- per maund. This Association is of the considered opinion that even the
reduced duty is disproportionately high as compared to the low prices of molasses
which vary between -/2/- to -/8/- per maund. *

XXXIV

THE SUGAR INDUSTRY AT A GLANCE, 1944

Restrictions on the Transport of Cane

This Association regrets that the Railways and the Provincial Governments
propose to impose restrictions on the transport of cane during' the next crushing
season which are likely to curtail the cane supplies to the factories very considerably.

This Association invites Government's attention to the peculiar conditions
prevailing in the Sug^r Industry such as the perishable nature of the raw material,
the seasonal nature of its working and the continuous process of manufacture
which render it essential that the crushing operations must be carried out within
certain time-limits and without any interruptions. .This, in the opinion of the
Association, is possible only if the Government extend to the sugar factories the
necessary transport facilities.

This Association, therefore, urges the Government not to enforce restrictions
on transport of cane.

RESOLUTION ON THE MAXIMISATION OF
SUGAR PRODUCTION (1945)

The Government of India, Food Department, convened at New Delhi, a
Conference of all the representatives of sugar interests and Provincial and State
Governments on the 5th February 1945, to consider measures for the maximisa-
tion of sugar production in the country. The Indian Sugar Mills Association
was represented at the Conference by Lala Shankerlal, Mr. K. K. Birla, Mr.
C. W, Tosh and Mr. Gulabchand Hirachand, The Conference adopted a number
of resolutions detailing the steps to be taken for the maximisation of sugar
production in India in the irrvnediate post-war years. It is understood that the
Government of India have promised to take necessary action to implement the
decisions arrived at the Conference.

A summary of the main decisions arrived at the Conference is given below:

1. That it is the intention of the Government to maximise sugar production
in India during the current season and the coming season. Steps shall be taken to
step up production during the next season of 1945-46.

2. That efforts would be made to arrange adequate supplies of the following
manures for the cane growers : (a) ammonium sulphate, (b) caustic cake, (c) ground-
nut cake, (d) superphosphate, and (e) neem cake.

3. That Government would also undertake distribution of subsidised manures
to cane growers through the factories.

4. That efforts would be made to provide adequate irrigation facilities to the
cane growers, In this connection, it was urged that the Government of U. P. be
urged to withdraw the increase in the irrigation charges, as enforced by them for
the cane growers only.

5. That agricultural machinery such as tractors, etc. would be made available
to the factories running their own farms.

THE SUGAR INDUSTRY AT A GLANCE, 1944 xxxv

6. That the Co-operative Societies undertaking the supply of cane to the
sugar factories should resort to Selective -harvesting, that is, selecting cane
cording to maturity so that factories receive fully mature cane giving maximum
recovery. This would enable factories to obtain higher recoveries.

7. That the minimum cane price would be declared in early September every
year.*

8. That facilities would be arranged for the factories which were shifting from
deficit cane areas to surplus cane areas to enable them to catch the next season.

9. That the Provincial Governments would not take any action without
previous reference to the Government of India, which might adversely affect the
sugar production. In this connection, it was also agreed that the Government of
Bombay be urged to exclude the cane growers, whether companies or individuals,
from the operation of the Bombay Growth of Food Crops Act, 1944, as that was
likely to curtail sugar output of the province during the 1945-46 season.^

10. That the lack of tranport constituted a serious bottleneck in obtaining
cane from outstations and, therefore, efforts should be made to arrange for
adequate supplies of trucks, petrol, tubes and tyres and to increase wagon supply
on the respective railways with a view to enabling the factories to draw as much
cane as possible.

It was also agreed, in this connection, that only a free supply of wagons could
improve production during the current season of 1944-45.

11. That steps would be taken to control both the price and movement of
Gur effectively.

12. That the sugar prices would be revised, if necessary, in the light of the
recommendations of the Joint Sugar Control Board of the U. P. and Bihar at
tlie end of this crushing season but with retrospective effect.

A WORLD SUGAR PICTURE AND INDIA'S
POSITION THEREIN

DO YOU KNOW (it would be interesting to know) that:

1. Sugar is one of the cheapest, most universally used and palatable seeten-
ing agent of proved high calorific value, unique for quick conversion into energy,
contains 100 per cent carbohydrate and its value as a prime and vital food is
enhanced due to the shortage of carbohydrate in general all over the world.

2. The world production of sugar 1944-45 was only of the order of 19
million tons as compared with 30 million tons in the pre-war year.

* The Editor of this Annual Mr. M. P. Gandhi, when he was a Member of the U. P. & Bihar
Sugar Control Board moved such a Resolution in 1938 emphasizing the necessity of an announce-
ment of cane prices, early in September, every year.

t We hope the Bombay Government will do this in the interest of the sugar industry in the
Province.

.txxvi THE SUGAR INDUSTRY AT A GLANCE, 1944

3. It is essential for India to produce larger quantities of sugar both for
meeting the increased internal requirements and also for exporting to neighbouring
countries which are starved of su^nr.

4. The drive for an all out production of sugar can easily result in produc-
tion of about 15 lacs tons of sugar with the existing capacity of factories in India.
When nee4 for further increase in capacity is felt, it would be desirable to locate
further factories outside U. P. and P3ihar in order to anange for a proper dispersal
of the industry all over the country.

5. If the industry continues to be encouraged, India may eventually become
a world sugar market, being one of the greatest sugarcane producers.

6. Approximately two-thirds of the sugar produced in the world is from
sugarcane and balance from beet. (90 per cent of the beet sugar comes from the
European countries.)

7. Production of sugar (including Gur) in India approximates to 26 per cent
of the total cane sugar production of the world and to 16 per cent of the total sugar
production in the world, both from cane and beet (This refers to pre-war period.) *

8. The area under cane in India, i.e. 4 million acres, which is only 2 per cent
of the cultivated area in India, is approximately 35 per cent of t!^ world's sugar
cane area.

9. Taking Gur and sugar together, India is the largest single sugar-producing
country of the world.

10. The total quantity of sugar transported by railways in India per year
conies to about one-thousandth of the total quantity transported by railways, viz.
90 crores tons.

11. A Sugar Research Foundation has been established in New York in
1943, comprising growers and processors of cane and beet sugar for research work
in increasing the consumption of sugar through the development of new industrial
uses, and establishment of a proper place of sugar in the diet.*

12. It is worthwhile to explore the possibilities of production of sugar and
gur through palm trees in India.!

13. The number of factories, working by the sulphitation process, in India
is 144 as compared with 17 working by the carbonatation process which latter can
produce superior quality of sugar at a slightly higher cost.

14. The Indian Sugar Industry the second largest national industry of the
country represents investment of capital to the extent of about Rs. 33 crores.

15. The total annual value of sugar and Gur produced is about 100 crores.

16. The industry gives employment to 3,000 graduates, 1,00,000 skilled and
unskilled workers, and interests not less than 20 million cultivators, and helps to

retain in the~petrtry a sum of Rs. 16 crores which was being sent abroad.

M. P. GANDHI

* Vide Chapter XIV.
t Vide Appendix III.

PROBLEMS OF SUGAR INDUSTRY IN INDIA

SCOPE AND PROSPECTS OF REORGANIZATION
IN POST-WAR PERIOD

BY M. P. GANDHI

CHAPTER I
THE INDIAN SUGAR INDUSTRY IN WORLD PERSPECTIVE

THE development of the modern sugarcane industry in India 1 during
the last decade from very small beginnings to a commanding position
both in the internal economy of the country and in the world's sugar
industry is* popularly acclaimed as an outstanding achievement of the
policy of " discriminating " protection which has literally revolution-
ised the industry. India's progress during a short period from being
a country mainly dependent on imports of sugar to becoming the
largest sugar-producing country in the world with an output equal to,
if not in excess of, its requirements 2 is, no doubt, a matter for great
satisfaction, and of inestimable advantage as an insurance against con-
ditions arising in times of war, like the present world war, and other
emergencies such as the possibility of shortage of supplies leading to
abnormally high prices. But behind this spectacular development lie
a variety of economic phenomena which are important not only to
the sugarcane industry in India and abroad, but to the Indian and
world economy as well. It is hardly necessary to say that the solution
of the problems of the sugarcane industry in India, whether they are
of the technical kind connected with the improvement of the recovery
percentage or the utilisation of molasses, or of the yield of sugarcane
per acre, or whether they are of the quasi-political kind such as provi-
sion of a fair price for the cane-grower, or competitive development
of this industry in various Provinces, is of the utmost national import-
ance. But it is not as well appreciated as it should be that the develop-
ment of the world's sugar industry during the last fifty years is in
itself an epitome of the problems and developments characteristic of
the period of transition through which world economy is now passing.
An understanding of the nature of these problems and developments
is of vital importance for a proper comprehension of the present phase
of the transition and also of the special problems which India will have
to face in the future in connection with her sugarcane industry.

1 The term " The Indian Sugarcane Industry," in this thesis should be taken
to include all the three interests concerned in it, viz. the manufacturer of white
sugar, the manufacturer of Gur and the grower of sugarcane, in India.

Also vide Representation of the Imperial Council of Agricultural Resarch,
dated 5th February 1930, to the Government of India, Commerce Department, in
Vol. I of the Indian Tariff Board's Report on the Sugar Industry, 1932, page 18.

a Vide Report of the Tariff Board, 1938, et seq.

Variety of Economic Phenomena in the History of the
World Sugar

The changes that have occurred in the world's sugar industry have,
in spite of their revolutionary character, attracted but little attention
among economists, statesmen, and businessmen. The problems of the
world's sugar industry have been dealt with by the governments con-
cerned and by International Sugar Conferences as little different from
the problems of overproduction, of which the post-war world had a
surfeit. In reality, the problem of overproduction in sugar which the
Brussels Conference of 1902 had to deal with was in a very essential
respect vastly different from the problem of overproduction in tin or
rubber or wheat. For overproduction was the result, not of an increase
in the productive capacity of the original sources of supply, but of
the success in the attempts of some of the consuming countries to find
a substitute for cane-sugar. Thus, although from the practical point
of view, the problem of overproduction in .sugar is not different from
that in other commodities, the trends and features which have been
characteristic of the development of the world's sugar industry will,
I venture to think, be characteristic of an increasing number of indus-
tries in the future.

Special Features of Overproduction in Sugar

Before proceeding to describe these trends and features, it is
necessary to examine the distinctive characteristics of the growth of
overproduction in the sugar industry. The development of commer-
cial production of sugar from beet in the years of the 1st world war of
1914-18, is, in all essential respects, different from the increase in the
production of wheat or rubber or cotton goods in the same period. For,
in the latter the increase occurred solely through the additions to the
necessary capital equipment or the expansion in the productive capacity
of the pre-existing centres of production or the establishment of new
producing centres. The same thing could be said of sugar, only if the
difference between cane and beet, which are the chief raw materials
for production of sugar, is altogether overlooked. _As a matter of fact,
beet as a raw material jfor commercial production of ~5tigar -industry
Is n6F^v p efTdtt~t-peCr with^alniyra"Juice7 The beet root, as it was found
in the beglnMng~gf~ifagjast cenlui'y, was hardly eligible for utilisation
TrTtne commer ciai ^pTnduction ol! sugar, as compared with cane which is
by far the older source of supply, its sucrose content then being only
abouJLp-cent. It was only by careful nursing and Development of a
virtually new species extending over half a century that the sucrose
content of beet was raised to 16 percent, a level at which it could
compete with cane as a* source of sugar production, though not without
the aid of high subsidies or other forms of protection like direct pro-
tective duties or preferential duties in its favour.

Invention of a Substitute Beet, the First Ersatz Industry

Beet, then, is the first instance of a substitute for an original
gift of Nature. And the beet sugar industry in itself and in its relation
to the industry manufacturing the natural product, viz. cane, is, if
one may put it that way, the first ersatz industry. The rapidity with

which beet sugar was perfected-~white^sugarfrom cane and beet, when

r^ is ir^tigaLjnJfrf^

^ obscure itsessentTalry erSfttz chafacfer.

And the wide distribution of production of beet sugar and the determi-
nation of the nations concerned to foster beet sugar production at
home have tended to create the impression that the beet sugar industry
is an instance either of the infant industry which is considered to be
the legitimate object of protection, or of the kind of perverse economic
nationalism which is supposed to have brought about the great
depression.

But if one looks closely into the matter, one will find that the
history of the world's sugar industry in the last fifty years and more
is the history of the invention of a quasi-artificial substitute for cane
sugar, its development through stages to a commercial basis, and its
establishment, side by side with the natural product, in the national
economy of the countries concerned, and in world economy. It is
against this background of the development of a substitute that even
the establishment and progress of the sugar industry in India must be
viewed. For in essence, both are part of the same development by
which the monopolistic position of a few favoured producers is broken
down by the inevitable rise of substitutes and the exploitation of
resources of each nation for the production of sugar. It might even
be suggested that because far deeper evolutionary forces were behincT
that diffusion of productive effort in the sugar industry, tEaFTiidia y s

would otheyyrige bp an incredibly short pprind. That IS, no doubt, to
take an unduly teleological view of developments in the modern sugar
industry. But the fact remains that earlier than any other industry,
sugar saw the rise of what in essence is an artificial substitute and the
consequent break-up of the old geographical division of labour and the
creation of a wide diffusion of productive effort. More and more modern
industries are today being subject to similar trends. It is no longer
fanciful to suggest that the textile industries as we have known them
till now will have to function in competition with fabrics made of
artificial material of different kinds of origin. Rayon is a well estab-
lished industry. But its best days still lie ahead of it. Glass bids fair
to become a source of textile material, and perhaps soon after the
present war, it may be a keen competitor of cotton in spinning mills.
In the dye industry, artificial dyes developed so rapidly that the natural
product has been driven out of the field. The possibilities of plastics
hold out distinct threats to many an industry which today would other-
wise have good reason for complacency. In the living present, the
emergence of Buna a synthetic rubber produced by uniting two
chemicals Butadiene (75%) and Styrene (25%) which has given
encouraging performances in 1942 in the United States almost unques-
tionably means that natural rubber will be a " deader " commodity at
the end of World War II, than natural nitrates were at the end of the
World War I of 1914-18. The cost of the Buna programme will " meet
and lick natural rubber ". The reason why this synthetic rubber
industry was not established till now, is due to cheapness of natural

U.K. Sugar Industry Inquiry Committee Report, 1915, page 4,

rubber. It was felt in the United States upto 1941, by those in Com-
mand that unless U.S. was cut off from the Far East, synthetic rubber
would be a waste of public money. 1

Changes in Sugar are Symbolic of Changes
in World Economy

In the economics of the sugar industry, one should therefore expect
to find an exemplification of the phenomena relating to the rise of
artificial substitutes and their establishment in the face of competition
from their natural rivals. Sugar brings out clearly the simple fact that
the impulse to find a substitute comes from the prevalence of war or
the anticipation of or preparation for it. The impact which the produc-
tion of a substitute makes on world economy is capable of being viewed
from the standpoint of economic theory, as similar to that of an infant
industry, which the Government concerned decides to nurse to health
and efficiency.

Difference between Infant Industry and Substitute Industry

It is true that, theoretically, the efforts made to develop a substitute
industry, the repercussions of these efforts on national and world
economy, the problems of costs and prices are all more or less wholly
similar to those connected with the protection of an infant industry.
But between the two, there is this difference, that a substitute industry
is closely linked to the problem of national security, through the provi-
sion of a requisite of warfare or a necessity of civilian consumption.
The claims of an infant industry, as economic science understands it,
rests on its potentiality for competition in the free market. But the
substitute industry starts on its career with a full emancipation from
the bonds of free competition. Though its capacity for free competition
may be as considerable as in any known instance of an infant industry,
State policy is on the whole indifferent to this aspect of the matter.
The practical result of that, is, that nations cling more tenaciously to
a substitute industry than to an industry ordinarily protected. 2 The
subsidies which the beet sugar industry in Britain has obtained from
the Exchequer are out of all proportion to what may be termed its
objective value. And Continental nations would have more readily given
in to the claims of free trade, so far as sugar is concerned, but for the
fact that the beet sugar industry was the only safeguard they had against
their being famished for sugar during a period of war. Even in India,
where Government have been not known for their willingness to help
indigenous industries, the sugar industry obtained a margin of protec-
tion so wide that the acceleration of progress in respect of its expansion
was phenomenal.

The difference between a substitute industry and a protected
industry is not only in the matter of the sentiment attaching to either.
A more vital difference lies in the fact that the infant industry is part

"Time", Weekly News Magazine from the U.S.A., July 20th, 1942.

2 " The most striking general characteristic of the sugar industry is the exten-
sive State encouragement of sugar production" U. K. Sugar Industry Inquiry
Committee, Report, page 10.

Also vide Encyclopaedia Britannica Volume XXVI, 1921 Edition, page 44.

of and subject to the dictates of Nature in respect of the distribution of
raw material and, through it, in respect of the distribution of productive
activity. The substitute industry, on the other hand, signifies the
attempt of industry to get over the limitations imposed by Nature.
When a substitute is found, it is, in the nature of things, capable of
being produced over wider areas of the world than the natural product.
It is in contravention of the " natural " division of labour and the
established distribution of productive activity. One can, therefore, look
for a wider diffusion of productive activity as a result of the successful
evolution of a substitute.

Effects of International Trade

When such a wide distribution of production is brought about by
the addition of a substitute to the natural product, international trade
in that commodity is naturally reduced to negligible proportions. The
changes in the importance of the main articles of direct human con-
sumption are a characteristic feature of the evolution of international
trade in the last fifty years or more and particularly of the depression
and the post-depression periods. It is interesting to reflect that a small
volume of international trade relatively to total world population may
be a characteristic as well of an advanced state of world economy as
of a primitive state. Before sea_coinniunication was established on a
considerable scale, every locality had to rely more or less wholly on
what it grew or produced within its own limits. Exchanges, with the
pre-requisite increase in the production of each locality, is possible only
in an age of reliable international communication. International trade
assumes proportions only when the value of geographical division of
labour is consciously understood or instinctively felt by the producing
nations. With the growth of settled political conditions, and the
improvement of the technique of production and exchange, international
trade blots out of perspective every other feature of world and national
economy, till geographical division of labour with the consequent inter-
dependence among the nations appears to be permanently ordained and
free trade seems an instance of a lav/ of the Medes and the Persians in
the realms of Nature.

Trend towards Self-sufficiency

But economic organisation, whether it is viewed nationally or inter-
nationally, is indisputably conditioned by the objective conditions of
economic life. If productive technique decrees at one stage of its evolu-
tion an intricate international division of labour, it may also at a later
stage force down the unwilling throats of Governments and of peoples a
measure of self-sufficiency which more or less negates all the notions
appropriate to an earlier period. How far the progress of scientific
invention and productive technique may enable the nations to push
farther on the path of self-sufficiency, no one can tell. The question is
difficult enough, even apart from the need to peer into the misty future
of world politics. But if the developments in world economy of the last
two decades are not a flash in the pan, it seems safe to suggest that
over vast areas of the earth's surface, self-sufficiency in main articles
of direct consumption has been very nearly achieved. The wider distri-
bution of wheat production since the last war, and the development of

the modern Sugar industry, to mention only a few, are instances in
point.

In the case of sugar, the trend towards diffusion of production has
been helped in the main by what I have ventured to call the develop-
ment of a substitute. It is impossible in the nature of things that the
production of sugar should become world- wide, when Nature limits the
production of the main raw material, viz., sugarcane, to the tropical and
sub-tropical regions of the earth's surface. The invention it has been
pointed out already that it is no less of beet sugar has made it possible
for almost every country in the world to aspire to being a producer of
sugar. There is, however, the simple fact that, while the beet sugar
producers were striving hard to foster the beet sugar industry, countries
like India, which are fitted by nature for the production of cane sugar,
were doing little to utilise their natural advantages. The dominant
position which Cuba and Java enjoyed till the growth of the sugar
industry in India only serves to show that till a recent time, sugarcane
and sugar had to be classed, from the point of view of economic organisa-
tion, with rubber and tin rather than rice or wheat or groundnuts.
Agricultural staples, which lend themselves to the kind of organisa-
tion indicated by the term " plantations ", afford scope for the growth
and entrenchment of economic interests which are not easily weakened
by adverse trends of deliberate economic policy or of natural economic
evolution.

It will be seen, therefore, that to the development of a large measure
of self-sufficiency in regard to sugar, two distinct, but not altogether
unrelated, tendencies had to make a large contribution. One is the
development of the beet sugar industry in the countries which can grow
beet root, and the other is the growth of the cane sugar industry on
the strength of adequate protection in countries like India and the
Philippines. 1 To both these forces, the World War of 1914-18 gave a
strong impetus. The result of these tendencies on world production
and consumption of sugar can be easily seen in Table No. 1 on next page,
which gives statistics of the percentage of consumption and production
of sugar in various important countries of the world during the years
1935-36 to 1939-40, upto which such comparative figures are available.

/ Indian Sugar and World Sugar A Possible Parallelism

A glanccTat this table will show that in the case of almost all the
countries mentioned therein, the difference between production and
consumption (expressed as percentages of the world totals) is exceed-
ingly small, which means that the sugar which enters into international
trade and which is known as the " free market " is but a small fraction
of the total production. For instance the " free market " for the year
1936-37 was estimated by the International Sugar Conference of 1937,
at 31,70,000 Metric tons.

The assumption that the sugar industry has an innate tendency to
resist localisation and to spread itself as far as natural conditions permit

1 The United Kingdom Sugar Inquiry Committee (1935), observe in their
report, page 10 : " There are accordingly very few important countries in the
world which do not produce some sugar." It adds : " Sugar beet can be grown
in most temperate countries, and sugarcane in most tropical and sub-tropical
countries."

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opens up a fruitful line of thought. For, what is true of the world as
a whole cannot be mysteriously negated in the case of a vast sub-
continent like India. If the history of the world industry has any
lesson to offer, it inevitably suggests the possible emergence, sooner or
later, of similar tendencies of diffusion within the frontiers of India.

Development of Beet Sugar in Europe

To see the Indian Sugar Industry in world perspective, it is neces-
sary to understand two important changes, firstly, the growth of the
beet sugar industry, and secondly the decline in the position of Java and
Cuba. As regards the former, it is useful to remember that sugar
from beet was first extracted in the middle of the 18th century, and
although the industry originated in Germany, the first important develop-
ment was witnessed in France, where as a result of the interruptions of
supplies of cane sugar owing to the wars of the period, Napoleon
initiated investigations and in 1811 instituted a definite scheme of State
assistance for the production of beet sugar. The policy of subsequent
French Governments varied from time to time, but some measure of
tariff protection was maintained throughout, and for half a century
France was the largest producer of beet sugar. Then followed Austria,
Hungary, Netherlands, Belgium arid Germany, which developed various
systems of open or disguised bounties for the export of beet sugar. 1
And by the end of the 19th century, thanks to the system of export
bounties, in several European beet sugar producing countries, produc-
tion was found to be in excess over domestic requirements. It is no
wonder, therefore, that after strenuous efforts the Brussels Convention
of 1903 was concluded (as a result of protracted negotiations set about
by the British Government, which saw in the bounty-fed exports a
great danger to her Colonial canesugar producers, and her own refining
industry). The abolition of all direct export bounties and the limita-
tions of other methods of State assistance, which were the principle
stipulations of the Brussels Convention failed, however, to arrest the
growth of the beet sugar industry. During the period of the first World
War of 1914-18, the Brussels Convention lapsed in practice, and the
Treaty of Versailles officially brought it to an end. After the World
War of 1914, beet sugar experienced a remarkable recovery. And the
production of cane sugar, too, which was increased during the war as
a result of the shortage of beet sugar, by bringing large areas of new
land under cane, (especially in Cuba) continued to be maintained, and
very soon amounted to three-fourths of the world's total output of
sugar.

Under the influence of the Brussels Convention of 1903, a stage of
equilibrium was reached and the beet industry shared about equally
the total world production of sugar. The first World War, however,
reduced very considerably the production of beet sugar in Europe, owing
partially to military operations in important areas of cultivation, and
partially due to the general disorganisation of production and, as pointed

Encyclopaedia Britannica, Volume XXVI, 1921, page 14 "Under the
bounty system by which the protectionist countries in Europe stimulated
the beet sugar industry by bounties on exports, the production of w sugar in bounty-
paying countries was encouraged and pushed far beyond the limit it could have
reached without State aid."

out before, this reduction in the European output provided an incentive
to increase sugar production elsewhere (mainly in cane sugar produc-
ing countries) , and by the crop year 1920, nearly 4/5 of the world sugar
production was of sugarcane origin, the European output being only
about 1/3 of its pre-war average. After the first World War there was
a rapid recovery in European production stimulated in many cases by
renewed State assistance and by 1927 it had recovered to approximately
its previous level. At the same time the development of cane sugar pro-
duction continued, partly due to the new lands being placed under cane
cultivation, especially in Cuba as observed before, and partly due to
the phenomenal success which attended the sugarcane breeding experi-
ments of which the most notable example is the success of the new
variety of cane in Java, P.O.J. 2878, which helped very largely to raise
the yield of sugar in that country. 1 The policy followed in important
countries in the world, before the war, of promoting production of sugar
on agricultural grounds as also for reasons of national safety in times
of war, was vigorously continued. In addition to those countries which
grew beet before the war, Great Britain at present accounts for the
production of very nearly G lakhs tons, while Russia achieved a pro-
gramme for the extension of beet cultivation from 56,000 tons of sugar in
1921-22 to over 2,300,000 tons in 1938-39. For similar reasons, Japan
also pursued this policy of sugarcane development in Formosa, where
the production approximated to 15,23,000 tons in 1938-39.

But as the position became alarming due to the relatively small
free market comprising largely the deficit of the beet sugar producing
countries by 1926, and in order to correct the balance between produc-
tion, which had outstripped consumption, attempts were made to secure
an agreed restriction of output. The initiative in the matter was taken
by Cuba, which was then the largest single producer. In 1926 the
Cuban crop was restricted by 10 % and restriction in that country alone
was continued in 1927 and 1928. Endeavours were made to widen the
scope of restriction by persuading other countries to take similar action,
but agreement was not then possible and it became clear that restric-
tion in Cuba alone would not be effective. By 1931 the surplus of export
sugar approximated to one-third of the annual world production and
the stocks reached alarming figures.

The Chadbourne Restriction Scheme

The depression in the sugar industry owing to the persistent increase
of production and keen competition between cane sugar and beet sugar
which was helped by tariff and other aids, was, as may be imagined,
very acute and severe, 2 and the position called for immediate attention.

1 Vide Tariff Board Report on Sugar, 1931, page 1.

2 Vide Tariff Board's Report, 1931, page 7, where they observe: "Generally
speaking, tariff and protective legislation is more intimately connected with the
beet sugar industry than with the cane sugar industry. Most cane sugar is pro-
duced where there is only a small home market and consequently has always to
face a world competition. The manufacture of beet sugar has always been started
primarily to meet a home demand and export of beet sugar is a development of
subsequent growth. As a consequence the beet industry has always been heavily
guarded and no beet sugar is now placed on the market except under some system
of protection. All important cane sugar countries have also introduced protective
duties but as most of them have but a small home market, the question that is of
importance is what treatment their products receive in the expprt markets."

In May, 1923, the sugar position was referred to the Economic Com-
mittee of the League of Nations for examination and a meeting of experts
was held in 1929,, The deliberations of this Committee facilitated
negotiations between representatives of producers for a more compre-
hensive scheme of regulation, although at first these efforts failed owing
to the continued refusal of Java to participate. Ultimately, however,
Java producers came to terms with Cuban producers and in concert
with the European countries and Peru, an agreement known generally
as Chadbourne Agreement was concluded in 1931. This agreement had
two objectives in view, both closely related, the first being to correct the
statistical position of the sugar exporting countries, as a preliminary
condition for obtaining the second objective, viz., stabilisation of a world
price at a reasonably remunerative level. A joint restriction of exports
and production with a view to liquidating existing stocks within 5 years
was agreed upon. Cuba, Java, Czechoslovakia, Germany, Poland, Belgium,
Peru, Jugoslavia and Hungary, 9 of the chief sugar producing countries
participated in this agreement. Although the preliminary purpose was
accomplished, as is proved by the fact that surplus stocks were eliminated,
it did not have the expected beneficial effect on prices partly because
consumption did not expand as anticipated, and partly because sacrifices
made by the parties to the agreement, particularly Java and Cuba, were
nullified by increase of production in countries outside the agreement,
particularly the United States of America (and dependencies) , and the
United Kingdom including its colonies and India. On the termination
of the plan, the representatives of the " Chadbourne Group " countries
suggested to the United Kingdom the convening of a world sugar con-
ference, as the British Empire constituted the largest sugar producing
area. At about this time the British Government made a statement in
the Parliament of July 30, 1936, 1 to the effect that they believed " that
the sugar producing countries can only hope to set the industry upon
an economic basis by means of an international agreement for the
adjustment of supplies to the requirements of the world market " and
that " their own domestic policy is in full accordance with this view."
This statement was very encouraging, coming as it did, from a country,
which was both a large producer of sugar in its own territory and
colonies as well as a large importer of sugar.

International Sugar Conference 1937-42

^The International Sugar Conference of 1937 concluded a compre-
hensive agreement in November 1937 for the regulation of world price
and production for a period of 5 years. 2 India was made a signatory to
this agreement against the" wishes of the industryand she was prohi-
bited from exporting sugar" by sea to any other country except Burma
for a period of 5 years ending on 31st August 1942. Since 1st September
1942 India has been released from this obligation as the Government
of India decided not to join the proposed extension of the International

[Contd. on page 13.

1 Vide page 33 of the Proceedings of the International Sugar Conference, pub-
lished by the League of Nations, Geneva, 1937 (Discussions on the second
preliminary meeting).

2 The text of this agreement will be found in the Sugar Industry Annual of
1938, by Mr. M. P. Gandhi.

Cane vs. Beet

It will be interesting to see the relative production of beet sugar
and cane sugar during the years 1900-01 to 1938-39 from the following
table, which has been compiled from " World Sugar Statistics " pub-
lished by F. O. Licht of Magdeburg in 1939, the latest year for which
statistics are at present available :

TABLE NO. 2
World Production of Sugar 1900/01 1938/39

Campaign-year

World produc-
tion of Sugar

Beet Sugar

Cane Sugar

Beet %

Cane%

1900 01

11,258,855

6,005,868 5,252,987

53'3

467

1901-02

12,643,448

6,880,875 5,762,573

54-4

45'6

1902-03

11,543,974

5,699,912 5,844,062

49'4

50-6

1903-04

12,101,316

6,066,623 6,034,693

501

49'9

1904-05

11,184,759

4,919,599 6,265,160

44*0

56-0

3905-06

14,003,288

7,274,098

6,729,190

51-9

48-1

1906-07

14,348,633

7,224,550

7,124,083

50'4

49*6

1907-08

13,705,575

7,062,551

6,643,024

51-5

48-5

1908-09

14,358,031

6,985,539

7,372,492

48-7

55'3

1909-10

14,690,241

6,648,082

8,042,159

45-3

54-7

1910-11

16,823,817

8,667,980

8,155,837

51-5

48-5

1911-12

15,517,728 6,947,131

8,570,597

44-8

55-2

1912-13

18,008,380 i 9,039,006

8,969,374

50-2

49'8

1913-14

18,714,726

9,053,561

9,661,165

48-4

51*6

1914-15

18,213,442

8,311,701

9,901,741

45'6

54-4

1915-16

16,721,086

6,110,774

10,610,312

36-5

63-5

1916-17

17,037,676

5,864,508

11,173,168

34-4

65-6

1917-18

16,863,065

5,153,113

11,709,952

30-6

69-4

1918-19

15,880,098

4,428,150

11,451.948

27'9

721

1919-20

15,212,872

3,350,392

11,862,480

22-0

78-0

1920-21

16,831,079

4,906,266

11,924,813

29'2

708

1921-22

17,869,580

5,129,597

12,739,983

28'7

71'3

1922-23

17,857,295

5,356,950

12,500,345

30-6

70*0

1923-24

19,579,214

6,059,212

13,520,002

31'0

69-0

1924-25

23,201,423

8,295,493

14,905,930

35*8

64-2

1925-26

23,758,502

8,617,960

15,140,542

36-3

637

1926-27 ,.,

23,211,177

7,896,189

15,314,988

34-0

66*0

1927-28

25,117,767

9,164,489

15,953,278

36-5

63'5

1928-29

26,800,799

9,612,881

17,187,918

35-9

64-1

1929-30

26,730,327

9,348,802

17,381,525

35-0

65-0

1930-31

27,853,321

11,910,883

15,942,438

428

57'2

1931-32

24,997,311

8,781,604

16,215,707

35'2

64.9

1932-33

22,736,208

7,994,375

14,741,833

35-2

64*8

1933-34

24,272,206

9,159,470

15,112,736

37*7

62.3

1934-35

24,633,795

9,791,624

14,842,171

39'7

60-3

1935-36

27,079,057

10,375,892

16,703,165

38-3

617

1936-37

28,912,934

10,231,429

18,681,505

35-4

64*6

1937-38 1

29,409,387

11,120,047

18,289,340

37'8

62-2

1938-39 2

28,605,066

10,553,393

18,051,673

36-9

631

iWhen comparing the above figures with those published in the table "World
Sugar Statistics", one must bear in mind that in the above table some important
cane and beet countries (Java, Italy, etc.) are represented by their national pro-
duction figures, whilst in the other table all figures are based on the campaign-year
September/ August.

2 Preliminary figures.

The following table gives the estimate of the world sugar produc-
tion from beet and cane during the years of 1931-32 to 1936-37 :

TABLE NO. 3

Estimate of the world sugar production by Dr. Gustav Mikusch
Campaign year September to August

(In 1,000 metric tons raw sugar value)

| 1931-32

1932-33

1933-34

1934-35

1935-36

1936-37

i
A-BEET SUGAR !

(a) EUROPE

Germany ... ... 1,596

1,091

1,428

1,673 1,676

I 1,800

Danzig ... ...' 22

22 26

i 33

Czechoslovakia ... ... 814

634 i 517

1 638

571

725

Austria ... ... 163 165 170

223

206

145

Hungary ... ...| 125 103 136

120

117

137

France ... ... 874 ; 1,022 946

i 1,223

924

910

Belgium ... ... 205 265 247

269

241

245

Netherlands ... ... 172 240 290

243 236

i 245

Poland ... ... 493 417 342

447 444

460

Denmark ... ... 122

192 254

90 245

| 220

Sweden ... ... 144

235 305

272 295

305

Italy ... ... 363

319 300

! 345 321

328

Spain ... ...; 402

260 242

, 349 198

250

Jugoslavia ... ... 83

85 74

63 90

Rumania ... ... 48

53 145

; 107 135

i 74

Bulgaria ... ... 26

29 45

i 2 18

Switzerland ... ... 6

7 9

United Kingdom ... ... 284

373 523

694 549

548

Irish Free State ... ... 6 27 35

75 89

Finland ... ... 4

6 i 7

12 9

! 11

Latvia ... ... 10 27 33

61 50

Lithuania ... ... 7 31 9

17 24

Turkey (European & Asiatic) ... 16 | 18 78

66 60

Azores ... ... 3

3 , 3

Soviet Union ... ... 1,689

796 1,460

1,460 2,612

2,000

(b) AMERICA

United States

1,175

1,363 1,648

1,178

1,188

1,300

Canada

Argentina

"...

Uruguay

1 3

Victoria (Maffra)

6 5

(d) ASIA

Japan (Hokkaido)

39 34

Manchuria

Turkey (Anatollia)

...

Iran

...

China

...

Total Beet Sugar Production ...

8,952

7,896

9,124

9,791

10,439

10,231

1 Figures marked for the year 1936-37 have been taken from Dr. Gustav
Mikusch's forecast of the world sugar production, Facts about Sugar. February 1937.

120

Estimate of the world sugar production by Dr. Gustav Mikusch
Campaign year September to August (Contd.)

(In 1,000 metric tons raw sugar value)

1931-32

1932-33

1933-34

1934-35

1935-36

1936-37*

B CANE SUGAR

(a) EUROPE

Spain

() AMERICA

Louisiana and Florida ...

166

240

232

245

345

342

Porto Rico ...

900

757

1,010

710f

843f

885

Hawaii ... ... ,

933

943

866

877

852

950

Virgin Islands

...

Cuba

2,678

2,053

2,340

2,611

2,603

2,900

Trinidad ...

123

107

120

157

150

Barbados

107

100

Jamaica

Antigua, St. Kitto, St. Lucia and

St. Vincent.

Martinique and Guadeloupe

Dominion Republic and Haiti
Mexico

457
262

390
190

414
209

467
285

495
331

446
330

Guatemala, Costa Rica, Honduras,

Nicaragua, San Salvador & Panama

British Guiana

128

151

144

134

181

185

Dutch Guiana

Argentina ...

m 346

348

316

342

386

431

Brazil

975

950

969

994

1,034

916

Peru

409

410

420

383

389

400

Venezuela, Colombia, Equador,

Bolivia and Paragua'y.

(d) ASIA

British India...

3,521

4,174

3,106

3,228

3,696

3.825

Java

3,004

2,760

1,504

701

564

610

Japanese Empire

1,154

797

802

1,156

1,088

1,190

Philippine Islands

999

1,152

1,434

630

902

985

China, Indo-China

262

270

264

423

451

455

(e) AFRICA

Egypt

147

170

154

152

147

160

Mauritius ...

167

251

265

183

285

250

Reunion

South African Union ...

296

326

355

325

379

605

Mozambique

Angola, Madeira, Madagascar,

102

107

Kenya, Uganda, Somali land,

Belgian Congo and Cape Verde.

(/) AUSTRALIA

Queensland and New South Wales

615

541

677

653

657

715

Fiji Islands

139

118

115

134

153

Total Cane Sugar Production

18,256

17,823

16,397

15,397

16,689

17,517

World Sugar Production

27,208

25,719

25,521

25,188

27,128

27,748

* Figures for the year 1936-37 have been taken from Dr. Gustav Mikuseh
forecast of the world sugar production (Facts about Sugar, February 1937).
f Figures marked with t include figures for Virgin Islands also.

Please see ERRATA
after Contents on page xviii

&
INDEX

after Contents on pages xix, xx and xxi,

& *

Substitute Chapter VIII on page 78
for Chapter IX (wrongly printed)

Contd from page 10]

Sugar Agreement, which is to be continued either for the duration of
the war and for one quota year after the date of termination of hostili-
lities or for a period of two years from August 31, 1942, whichever be
less. India will be thus free to export her sugar to any country she
likes by sea or by land, e.g. Ceylon, which was so far dependent upon
Java for her supplies. The Burmese market to which Indian sugar was
being sent is also now lost to India, but this loss would be made up
if it is possible for her to export sugar to Ceylon, where the approximate
consumption is annually about 85,000 tons. Exports of sugar to Ceylon
were prohibited, however, in 1942, by a Notification by the Govern-
ment of India, pending clarification of certain issues.

A perusal of Table No. 2 will show (1) that the production of sugar
spread throughout the world ; (2) that roughly 2/3 of it is from cane
from tropical and sub-tropical countries ; (3) that 1/3 is from beet in
countries situated in the temperate zone. It is also of interest to review
here, in passing, the many methods of State assistance adopted either
singly or in combination by the various countries of the world for
developing their sugar industry. The following may be noted : l

(a) The complete reservation of the internal market by the prohi-
bition of imports (e.g. Australia) .

(b) Protective Tariffs. This method is almost universal in
European countries and is also employed in the United States
of America and its dependencies, British India, Japan and other
countries as well as the United Kingdom.

(c) Tariff preference enjoyed in countries other than the country
of production (e.g. the Colonial preferences already mentioned
and the preference enjoyed by Cuba in the United States of
America) .

(d) Direct subsidy (e.g. in the United Kingdom, the Irish Free
State and the Netherlands) .

(e) Other differential advantages (e.g. the rebate of trade taxes as
in Czechoslovakia) .

A glance at Table No. 2 in this chapter will also show that there
are very few important countries in the world, which do not produce
some sugar.

Three groups of countries may be distinguished, viz. : (a)
Countries which have specialised in sugar production for export and
in which sugar forms an important proportion (sometimes nearly the
whole) of their exports. These include Cuba, Java, Peru, Santo
Domingo, certain British Colonies (Mauritius, Fiji, British Guiana and
some of the West Indian Islands) and the U.S. dependencies of Porto
Rico and the Philippine and Hawaiian Islands.

(b) Countries where sugar is grown primarily for internal con*
sumption but which normally have an exportable surplus. These include
several European countries (notably Czechoslovakia and Poland)
Australia, and the Union of South Africa.

1 Vide United Kingdom Sugar Industry Inquiry Committee Report, 1935 Page 11,
also 1931 Tariff Board Report page 4.

(c) Countries which produce sugar but have no exportable surplus
(e.g. the United Kingdom, the United States, and France). The total
production of this group accounts for the greater part of the world's
output. Some of them, such as France, normally import or export only
small quantities. Others, like the United Kingdom and the United
States, produce substantial quantities but also require large imports. 1

Beet Sugar Costs Higher than Cane Sugar

At this stage, a comparison of the cost of sugar produced from beet
and from cane would be useful and interesting. The report of the
United Kingdom Sugar Inquiry Committee, 1935, makes the following
interesting observations in this connection :

" At present, the lowest cost of producing beet sugar in any country
is put at between 12 and 14 per ton. The lowest cost at which
cane sugar can be produced, e.g. in Java, Santo Domingo, or Peru,
appears to be between 5 and 7 per ton, that is, about half as much,
while a number of other cane growing countries, for example, Cuba and
our own Colonies, can produce very large quantities of sugar at prices
much below the lowest cost of beet sugar. Both beet and cane costs
have varied considerably in the past, but at all times there has been
a margin in favour of cane. We understand that no beet sugar industry
has ever been brought into existence without artificial support and a
beet sugar industry, even when established, has only rarely carried on
in free competition with cane. Today no beet sugar industry in any
country in the world is able to stand without support. It has been
suggested that biologically, sugarcane, growing in tropical countries,
is a more effi.cienTinslrume'nt for the jtrodu^onjOjIpFihah the sugar
beet growing in temperate climates ami it appears clear that, in default
of some revolution in framing or manufacturing technique, or some
major economic change, cane sugar will remain the cheaper. Even
ignoring cane sugar, there seems no reason to suppose that this country
(the United Kingdom) is likely ever to be a specially cheap producer
of beet, having regard to the labour requirements of the crop. While,
therefore, actual costs and prices may vary widely in future, it is to be
anticipated that, taking a long view, assistance will always be needed
to maintain a beet sugar industry in this country and that assistance
will, on the average, have to be on a considerable scale."

may
Java.

Before passing to the main problems of sugar industry in India, we
p refer briefly to the position of the sugar industry in Cuba and

The Sugar Industry in Cuba

The sugar industry in Cuba was developed with special reference
to the United States of America. Cuba was practically assured a market
there by the reciprocity treaty as against all other foreign sugars, but

1 United Kingdom Sugar Industry Inquiry Committee 1935 Report. The position
of India is now changed, however, due to the great expansion in her industry
since 1937, when her production largely exceeded her consumption and she acquired
an exportable surplus of sugar.

since 1920, owing to the increase in home production, the United State?
of America increased the import duties in 1920, 1921 and 1929, the
result being that production in the United States, Porto Rico, Hawaii
and the Philippine Islands increased rapidly. In 1930, the Philippine
sugar was also made duty free and the limit of 3 lacs tons per year upon
the imports of Philippine sugar was removed. This gave a great impetus
to the sugar industry in the Philippines, and the production increased
from 229,000 tons in 1913-14 to 11,64,000 tons. The increase of the
Philippine sugar supplies in the United States markets necessarily meant
the exclusion of Cuban sugar. The table below gives the statistics of
sugar production in Cuba from 1930 to 1939 :

TABLE NO. 4
Sugar Production in Cuba 1

Year

Number of Centrals
operating

Sugar Production (Raw Sugar
in thousand long tons)

1930

157

4,671

1931

140

3,122

1932

! 133

2,603

1933

i 125

1,995

1934

i 135

2,274

1935

133

2,537

1936

147

2,588

1937

157

2,971

1938

158

2,950

1939

157

2,697

The production in Cuba has been reduced from 46,71,000 tons in 1930
to only 26,97,000 tons in 1939. The number of sugar factories has
remained about the same. The home consumption of sugar in Cuba is
only about one lac tons per year.

The United States of America is Cuba's best customer. In 1930,
she supplied about 44 per cent of the sugar consumed in the United
States of America. The total sugar consumption of the United States
of America was 55,99,000 tons in 1930 and 56,49,000 tons in 1939. The
per capita consumption in 1930 was 99 Ibs. and in 1939, 96 Ibs. The
percentage of the United States' requirements of sugar supplied by
Cuba was 44 in the year 1930 and only 25 in the year 1939. The pros-
perity of the Cuban sugar industry is largely dependent on the condi-
tion of sugar trade in the United States of America's market.

Let us now review the position of the sugar industry in Java. The
following table shows the number of factories operating, the areas under
cane in acres, and cane and sugar production in Java from 1930 to
1939:

i Vide Indian Trade Journal, dated 7th May 1942.

TABLE NO. 5

Number of Factories Working, Areas under Cane, and Production of
Cane and Sugar in Java l

Year

No. of !
Factories
operating

Area
under ,
Cane ;
in acres

Cane harvested

Sugar produced

Tons

Tons
per acre

Tons

Tons
per acre

Percent
Cane

1930

; 179

489,984

25,253,775

51*54

2,969,269

6-06

11-76

1931

! 178

493,721

26,019,096

5270

2,842,642

5-76

10-92

1932

166

423,924

22,573,953

53-25

2,610,782

6*16

11-56

1933

208,947

10,909,122

52-21

1,401,327

6-71

12-84

1934

i 47

93,613

5,149,651

55*01

646,245

6-90

12-55

1935

66,515

3,881,374

56-65

513,554

7-49

13-23

1936

85,076

4,640,045

54-54

592,390

6-96

12-77

1937

211,788

11,910,957

56-24

1,414,500

6-68

11-87

1938

210,799

11,880,631

55-36

1,398,927

6-64

11-77

1939

234,480

12,875,296

54-91

1,575,353

6-72

12*23

Java Industry Ruined in 1942 ; Us Repercussions in the Future

A glance at the above table will show that the number of mills
working in Java has been reduced considerably from 179 in 1930 to
only 84 in 1939. The production has also suffered a considerable fall
from the peak of 1930 when it was 2,969,000 ions. The production was
lowest in the year 1935 when it fell to 513,000 tons. It is understood
that the production of sugar in Java in 1942 would have been about 17
lacs tons, but as a result of the surrender of Java to Japan early in
1942, a large number of factories, warehouses and transport facilities in
Java were destroyed, the consequence being the almost complete
annihilation of the century old and celebrated Java sugar industry, the
absence of which will have a very serious repercussion on the future
supplies and development of the sugar industry in the world. 2

Principal Features of World's Sugar Industry

To recapitulate : The principal features of the history of the
world's sugar industry may be said to be the rise of a virtual substitute
enabling the extension of sugar production from the most tropical and
the sub- tropical countries (from cane) to all the most temperate regions
of the world (from beet), the rise of a system of State aid to sugar
both from beet (as for example, in Germany, France, Czechoslovakia,
Soviet Russia), and from cane (e.g. India, Japan and Formosa), the
continued undermining of the position of the big producers of cane
sugar and last but not least, as the present World War drew nearer,
anxiety to develop domestic sources of sugar as fully as possible as a
result of the world wide policy of State assistance to this industry, both
as a measure of insurance against shortage and development of an
agricultural industry.

One has only to state these features to see in the rise of the
Indian sugar industry, under liberal protection, a natural denouement
of these century old developments all over the world.

1 These figures have been taken from the Supplement to the Indian Trade
Journal, dated 7th May 1942.

2 Also vide International Sugar Journal, London, Monthly issues of 1943.

CHAPTER If
UNREALITY OF FISCAL CONTROVERSIES

A STRICTLY objective account of the origin and growth, together with
the vicissitudes of the Sugar industry can by itself reveal little either
of the forces which brought about the establishment of the industry or
of the nature of the problems regarding its future. For one thing, a
strictly objective account is not easily formulated or prepared. To the
average Indian, the position of India as the largest producer of sugar
seems so natural that any different state of affairs indicates the opera-
tion of unnatural and, to that extent and, in that sense, uneconomic,
factors and forces. It is true that India is the home of the sugarcane
industry. 1 It is true, too, that at no time was this country an altogether
insignificant producer of sugarcane. But the fact remains that it was
only during the last decades that India attained a prominent position in
the world's sugar industry, and that, too, by methods which are by no
means unexceptionably economic.

Protectionist Polemics

The place of fiscal protection in the economic development of India,
which is the principal obstacle in the way of formulating a strictly
objective history of the sugar industry, has provided the most happy
hunting ground of economic theoreticians. Just as at the present time
it is a moot problem of economists whether protection to the Sugar
industry has been adequately or even reasonably recompensed, in the
period before the grant of protection, the claims of the industry to
such State-aid were disputed by all but the most enthusiastic protec-
tionists. Of those, as for example, the Indian Sugar Committee, which
advocated the development of the Sugar industry in 1920, not a few
were actuated by quasi-political motives like those of adequacy of
internal supplies during times of war. This is hardly a matter for sur-
prise ; for, in every case of claim for protection, plenitude of raw
material and other natural advantages form an argument which really
cuts both ways. For, while the protectionist may see in it a call to
the Government to take on hand the exploitation of these advantages,
the free trader is tempted to warn the authorities against ignoring the
obvious inferences to be drawn from the fact that over centuries these
advantages have been more or less wholly infructuous.

The Rival Schools

This applies in toto to the sugar industry and it is necessary to
clarify the relation which the fiscal controversies in their century-old
form bear to the problem of the sugar industry in India. It would serve
little or no purpose to go over the beaten track of such controversies.

i Vide Indian Sugar Industry, Its Past, Present & Future, by M. P. Gandhi, p. 2L
Also Encyclopaedia Britannica Vol. XXVI.

What is important is the limits and limitations of theoretical reasoning,
the validity of the assumptions made by each school both in their state-
ments of pure theory and in its comparatively concrete applications to
particular cases. On the side of the free trader, there is always the
tendency to overlook the fact that the free trade theory is valid only
in conditions of full employment and that even in conditions of full
employment, fortuitous advantages like those derived from political
power or from removable handicaps of possible rivals may serve to
perpetuate an intrinsically uneconomic division of labour among the
nations. Likewise, protectionists, at any rate in India, are not anxious
to estimate costs of protection except for purposes of current controversy.
Where estimated costs are out of proportion to the certain benefits of
protection, they do not hesitate to press into service extra economic
arguments like those covered by the term " political considerations ".
There is, above all, the subjective value which nationalists of all shades
attach to the possession of an industry within the borders of one's own
country.

The Free Trader in Modern Conditions

Protectionists and free traders in India have not, therefore, come to
grips. Changes in economic policy during the last one decade and,
what are more, the economic exigencies created by the developments of
international politics, have had the effect of keeping free traders at
bay. It must be said to their credit, however, that they are only too
eager to fight with their backs to the wall. But the trends of world
and national policies will be such that free trade theories may not have
for a long time to come a fair chance to vindicate themselves. The
more State policies deviate from laissez jaire, the more impractical and
visionary will seem the advocacy of free trade doctrines. The free
trader will be hard put to it to prove his point to the hilt and the pro-
tectionist will complacently assume the honours of the battle,

State Interference A New Factor

It is precisely in such conditions that the merits of the free trade
should be given careful consideration. For, the value of the free trade
theory lies not so much in its wholesale applicability to particular claims
for protection or for other forms of State aid as in its emphasis on the
importance of a wise distribution of scarce means among competitive
ends. 1 With the increasing interference of the State in economic life,
the conscientious free trader can do no more than make an increasingly
forlorn plea for the resuscitation of laissez faire in each country and
for the resumption of free trade in international commercial relations.
His ability to demonstrate the wastefulness of protection in each instance
must necessarily dwindle, when the major part of the economic life
of all nations is State-regulated. Pari Passu with this decrease in the
strength of the free trader, the protectionist feels, not quite reasonably
though, the ground stronger under him.

1 Lionel Robbin's definition of economics as the science which deals with the
distribution of scarce means among competitive ends rescues economics from its
dependence on " free " markets as an indispensable presupposition of economic
thought. The relevancy of free trade theories to a communist economy can be
seen only in the light of such a wide definition of The Scope and Nature of
Economic Science.

The Problem of Costs A New Approach

But this is no reason for the feeling that an economic regime of a
totalitarian kind has no problem of costs to face, or that the problem of
costs changes from one of calculation of costs in terms of given monetary
standards to one of checking up the inventories of stocks in communal
storehouses. For, the problem of costs arises not from the availability
of the requisite materials during a given period, but from the possibility
that these materials may have a more fruitful venue of productive
activity than what the authorities may be having in mind. In the
absence of revolutionary or astounding changes in productive technique,
such a possibility is easily tested in the light of the structure of prices
in conditions of economic freedom. The need for this guidance increases
in direct proportion to the increase in State interference in economic
life. It is thus the duty of even those who are protectionists in regard
to particular economic problems, not to speak of unswerving free
traders, to impress upon the public and on the governments alike the
importance of deferring to the truths contained in the free trade
theory.

Assessing the " Cost of Protection "

At the same time, it must not be overlooked that with the growing
regulation of economic life in accordance with the requirements of
economic security and progressive standards of life, the question of
distributing scarce means among competing ends must be deemed to
pass more and more into the hands of technicians and research workers.
The control which the price system of free markets imposes on produc-
tive activity and the economic fortunes of the human race as a whole
and of particular communities appears to the free trader as an unexcep-
tionable means of rationalising economic life. But few attempts are
made to estimate the costs of this control even in terms of prices, not
to speak of the intangible values indicated by the term, " Social costs ".
The free trader is precluded by his own hypothesis from such an attempt.
It is only the modern technocrats that have formulated for themselves
an objective scale with which to measure the balance of regress and
progress in the alternations of depression and boom or to gauge the
difference between the actual achievements of the individualistic system
in production and consumption on the one hand and on the other the
capacity of the existing capital equipment of each nation. The protec-
tionist is but an amateur technocrat who takes into account not the
equipment of plant and machinery but the fertility of fallow land and
the capacity of idle hands. The protectionist argues that when indus-
tries are fostered by the State, costs should be reckoned not in terms
of the price of imported products, but in relation to economic stability
and the multifarious benefits which the nationals of a country can
derive from a well established large scale industry. The benefits of
such industries are not restricted to the goods which they directly pro-
duce. They are, in fact, a long chain of economic activities which come
into being and bear fruit only over a long period. Such benefits can-
not be even envisaged fully by a Tariff Board in its initial enquiries.

It is important to note that in the conditions of the last decade, even
these calculations of restricted scope cannot be made with any approach

to accuracy. It is only when the major part of the world preserves the
policies of laissez faire and free trade, that the costs of particular pro-
posals of protection can be accurately appraised. When prices have
ceased to be a reliable yardstick of objective economic values, the old
controversy of free trade vs. protection loses all but an elemental
academic value.

Post-Depression Thought

The period which followed the great depression is remarkable for
the evangelical zeal with which free trade doctrines were preached by
orthodox economists and not less for the tremendous pressure which
the developments in world economic life were exerting on national
policies in the direction of economic nationalism. It is no doubt true
that this pressure was itself the result of the deviations from laissez faire
which the nations had been guilty of in the pre-depression period. But
nothing can be gained by denunciation of economic heresies, and the
student of human history as a whole, as distinct from the purely economic
part of it, may well wonder whether in economics, too, as in religion
or politics, the heresy of one generation may not become the orthodoxy
of the next. In this context, it is not without significance that an
economist like Sir J. M. Keynes has begun to see a new wisdom in the
discarded Mercantilism of the middle ages. Subjective estimates of the
relative value or benefits of rival policies can by themselves do little,
where the destinies of vast aggregations of men are concerned. It is no
solution of the problem of war, to embark on refinements of pacifist
doctrines. The fact must be recognised that free trade has come to bear
the same relation to national and international economic life that paci-
fism bears to the problems of international politics. The value of any
theory to Governments and social leaders lies not in its internal con-
sistency but to the closeness of its relation to the objective facts of
life. For, it is only when the theory has such a close relation that it can
be employed as an instrument of the desired change. In the case of free
trade, it was at one time a description of conditions which obtained in one
part of the world, at another it was indistinguishable from the croak-
ings of a Cassandra. This is by no means a refutation of the theory of
free trade ; for free trade can hardly be refuted, being in the main
tautological expositions of premises in their inter-relation. In fact, the
whole of equilibrium economics is a mental construction of which the
practical economist has to make wise use without either denying its
validity or exaggerating its application to real life.

The Applicability of the Three Theories to Present conditions

Like all products of man's logical mind, equilibrium economics has
a degree of correspondence with the facts of life. But the free trade
doctrine often suffers from a confusion between temporary states and
permanent states and between the hypothetical and the laudably ideal.
It is one thing to presuppose laissez faire as a hypothesis of equilibrium
economics. It is quite another to regard it as the bedrock of sound
economic policy. When the facts of economic life are quite opposed
to the pre-suppositions of equilibrium economics and aspirations of
human societies reach higher than the claims that can be theoretically

made for the policy of free trade, it is no wonder that the familiar
controversy of free trade vs. protection has lost nearly all reality. Today
it is not alone free trade that is at stake, it is the whole concept of
governmental functions signified by the term laissez! faire that is thrown
overboard by a race increasingly conscious of man's ability to control
his economic destinies. Likewise, it is not protection that is the aim
of those who clamour for the establishment of new industries. The
demand is for the fullest development of economic resources and the
regulation of economic life as a whole.

The Rise of Dumping and the Shift in Protectionist Argument

The chasm between the free trader and the " protectionist " has
thus hopelessly widened. For, theoretically, the infant industry argu-
ment is the uncontested common ground of both the free trader and
the protectionist. It is in perfect accord with the whole body of equili-
brium economics. The free trader concedes nothing when he concedes
the claims of infant industries to State protection during the initial
period. In the same way, the protectionist did not seek to storm the
citadel of laissez faire when he advanced the claims of infant industries.
But what distinguishes the post-depression ftfom the pre-depression
period is that protectionist claims surpass the bounds of moderation set
on them by the admitted claims of infant industries, because the dis-
tinctive feature of international trade during this period is the rise
of dumping on a large scale and in an acute form. So long as competi-
tion is fair, and the rules of international commerce recognise the right
of a government to afford protection to an infant industry, protective
duties can be so fixed as to preserve competition between the protected
industry and the importer. Such a handicap tournament has both an
economic and aesthetic value. But, once dumping raises its head, the
industry advances the claim to what is termed adequate protection,
which, in concrete terms means, a level of duties which can completely
shut the importer out of the home market. Public opinion, with its
emphasis on security, is far from being unwilling to support the new
claim. Once the claim is conceded, anti-capitalist sentiment seeks vent
in laying new obligations on the protected industry. Thus is the inroad
into free trade converted into a breach in the walls of laissez faire.
The growth and development of the sugar industry and the problems
connected with it can hardly be followed, unless it is remembered that
the industry came in in the post-depression period.

Sugar A Typical Post-depression Industry The
Contrast with Cotton Textile, Steel, Etc.

All the tendencies described above are fully reflected in the history
of the sugarcane industry in India. For, the sugar industry is, in every
respect, an offspring of the economic policies of the post-depression
period. Though, the first official enquiry into its possibilities was made
soon after the last war, i.e. in 1920, 1 it came on the list of protected
industries only in 1932. Its birth and growth have little in common
with those of the great protected industries of India like cotton textiles
or iron and steel. In the case of the last two, protection was grudging

*Vide the excellent and detailed Report of the Sugar Committee, 1920.

and halting. It took nearly twenty-five years for a second steel com-
pany to be formed. In cotton textiles, the pre-eminence of Bombay
and Ahmedabad was not shaken by an outburst of new mills in other
parts of the country till the early * thirties of the century ' and that too
to a small extent. And till the outbreak of the present World War II,
neither the cotton textile nor the iron and steel industry was able to
achieve the same degree of self-sufficiency for the country as the
sugar industry in respect of its products.

Liberal Protection to Sugar not an Accident

For no Indian industry has the same pace of growth to show as
sugar. If the high level of protective duties is a necessary and suffi-
cient explanation of it, it must be remembered that the grant of such
duties is by no means a historical accident. Not only would it be incon-
ceivable in any earlier period, but it was made possible by that nexus
of political, financial, economic and broadly social circumstances which
characterised the post-depression period. While the Government soon
came to depend on the sugar industry for a considerable amount of
revenue in the shape of the sugar excise duties, the public, too, came
to regard its link with agriculture as the starting point of the much
needed rationalisation of Indian agriculture. In fact, the policies of
"the U. P. and Bihar Governments in respect of the price of cane and
the organisation of the industry in respect of sales are even more
characteristic of a new industry of the post-depression period than even
the high level of protective duties. The controversy regarding the right
of the various provinces to encourage their own sugar mills regardless
of the fate of the U. P. and Bihar Mills may be viewed as the repetition
of the history of the world sugar industry within our frontiers. 1

1 Vide Discussion at the Simla Conference of 1934, referred to in a later chapter.

CHAPTER III

ECONOMICS OF DISCRIMINATING PROTECTION SOME
CRITICISMS ANSWERED

THE most important and noteworthy fact about the development of the
sugar industry during the first seven years of the period of protection
is that the progress it has been able to make has not sufficed, though
it has exceeded the sanguine expectations of the first Tariff Board, to
reduce the extent of protection required to meet the competition of
Java. As we have shown elsewhere, that is due to the further reduction
in the price at which, according to the Tariff Board, Java sugar could
be landed at the Indian ports. Here, then, is the issue of protection jgs.
freejtr^d-jn a very illuminating facet. The orthodox free trader ancl
tHepassionate opponent of protection in India would naturally argue
from this that, the possibilities of improvement in Java's costs are un-
limited, and that, therefore, the Indian industry can never catch up
with Java and must be content for ever to walk on protectionist crutches.
As we have pointed out in another chapter, the reduction in the price
at which Java sugar can be landed at Indian ports in the present con-
ditions is in itself an unreliable guide to the price which the Indian
consumer would have to pay for imported sugar in the absence of a
sugar industry at home. Nothing that Java can do with her costs of
production can alter the basic facts of the economic situation in India,
which, taken by themselves and in juxtaposition to the facts of the
sugar industry in other countries, form a strong case for the attempt
to develop an Indian sugar industry according to the principles and
methods laid down by the Fiscal Commission.

It would be apposite and relevant at this stage, generally to examine
the policy of discriminating protection, and particularly in relation to
the criticisms that have been made against it in recent years. The
Fiscal Commission laid do wn^hr^ conditions which industries applying
for protection have to satisfy : (1) that the~ industry possesses natural
advantages, (2) that without the help of protection it is not likely to
develop at all or not so rapidly as is desirable, (3) that it will eventually
be able to face world competition without protection. These three con-
ditions are only a translation into the practical terms necessary for
administrative application of the principles underlying the well-known
infant industry argument. But the Fiscal Commission claims that its
policy of discriminating protection is an advance on the infant industry
argument. It should be remembered that the infant industry argument,
strictly speaking, cannot make a difference between a big industry and
a small one. Wherever there are, demonstrably, potentialities of un-
aided competition with imported goods, protective aid must, according
to the infant industry argument, be deemed to be due. But the Fiscal
Commission was concerned less with economic theory than with the
question of ensuring the industrial development of India in consonance
with the country's natural resources. The Commission, therefore, laid
down that the volume of employment which the protected industry

would be capable of creating should be considerable. It is interesting
that there have been instances of industries whose application for pro-
tection was turned down on the ground that the extent of new employ-
ment that would be created was too small to warrant the imposition of
protective duties.

The emphasis on the extent of employment, which the Fiscal Com-
mission laid down and which the Tariff Board has scrupulously followed
has, however, led to the idea that the employment which a protected
industry is capable of creating constitutes the main defence of the policy
of discriminating protection. 1 In this form, it becomes one of the fami-
liar and fallacious arguments in favour of protection, one which the
free trader finds it so easy to dispose of. In the context of Indian
economic development during the last two decades, the argument
becomes even more puerile. In a country in which the population is
in the vicinity of 400 millions and industrial workers number only two
millions, it is ludicrous to suggest that the additional employment which
any one protected industry can immediately create or even all of them
in any one specific period, can create, can be an adequate cure for the
colossal unemployment and under-employment prevailing in the
country. Foreigners, who cannot hide their interest in the import trade,
but who claim to look at the whole question from the point of view
of India, have always sought to discredit the protectionist policy by
calculating the additional employment which might be created in the
country if all the imports of cotton textiles, sugar, iron and steel and
other products of industries which enjoy protection in India were to be
produced at home. By making out that the addition to employment
would be negligible, while the repercussions of a fall in imports on
India's export trade and economic well-being would be incalculable, they
try to establish that the whole policy of discriminating protection is a
wasteful and dangerous folly. 2

Indian economists like Dr. H. L. Dey and Mr. B. P. Adarkar have
trailed the path of the Bengal Chamber with additions appropriate to
their academic attainments. There can be no doubt that claims for
protectionist policies are always apt to be pitched too high. On the one
hand, applicants for protection not only exaggerate their case, but the
public, too, is rarely able to follow the merits of each case. The argu-
ments against protection are usually of the kind which make the edu-
cated classes suspicious of the indigenous industrialist and the ordinary
man uncritically enthusiastic in his opposition to import of manufac-
tured goods. The argument that protection tends to increase employ-
ment is one that appeals to the masses. Likewise, the free trader's reply
that more is lost in other spheres of productive activity than what is

iProf. B. P. Adarkar has calculated the extent of additional employment pro-
vided by the sugar industry in his excellent volume on " The Indian Fiscal Policy,"
and has propounded the view that the total direct or primary employment comes
to 130 lakhs of workmen, and that out of this at least 25 lakhs of persons may have
been provided new employment by protection. He estimates further indirect
employment at 25 lakhs of workmen, and concludes "Is this not a result worth
achieving at the cost of the considerably smaller burden on the comparatively
richer element in the population which consumes sugar in India ? "

Vide B. P. Adarkar's "Indian Fiscal Policy", p. 202 et seq.

2 Vide Pamphlet of the Bengal Chamber of Commerce, " Economic Milestones."

gained in one industry leaves the educated man who sympathises with
indigenous industry in great confusion about the merits of the question.

It is time, therefore, that the relation between the volume of
employment and the claims of an industry to protective aid was pre-
cisely understood. An examination of the various reports of the Tariff
Board will show that the volume of employment was regarded rather
as a criterion by which to judge the importance of an industry, than
as a major item in the calculation of costs and returns of the policy
of protection. At the time the Fiscal Commission was appointed, there
was not only the eagerness to speed up industrial development, but
also the fear that the adoption of a protective policy might lead to a
repetition in India of the abuses of the tariff system in the United
States of America. The Fiscal Commission was careful to emphasise
the dangers of protection. It was specific and emphatic on the point
that the contribution of the protectionist policy to the solution of employ-
ment should not be exaggerated. Likewise, the Fiscal Commission did
not make the mistake, which is attributed to it by Dr. H. L. Dey, of
regarding the establishment of industries through protection as reducing
the incidence of famine on the masses of this country. It is essential
to stress these facts firstly because much of the criticism of the policy
originating with the Fiscal Commission accepts without question the
economic crudities commonly attributed to the supporters of protec-
tionism. Such an assumption renders it easy to criticise the policy
with an air of superior academic wisdom. It is interesting that Dr. Dey
devotes a number of pages in dispelling the supposed misapprehension
that industries can relieve the hardships of famine. 1 The Fiscal Com-
mission observe on the other hand, " It is necessary, therefore, to recog-
nise that industrial development alone will not solve the problem of
famine. The real remedy lies in the development of irrigation, and
the scientific development of agriculture to which industrial develop-
ment by raising the general economic level of the country is only sup-
plementary." 2 It is difficult not to believe that the temptation to make
the opponent's case conveniently easy was too strong for Dr. Dey to
resist.

Nevertheless, the volume of employment has been regarded through-
out the history of the Tariff Board as an^important criterion of judging
the fitness of an industry for the grant of protection. Indeed, it was
specifically laid down by the Fiscal Commission that new industries
should not as a rule be granted protection. In these circumstances, one
can only conclude that the emphasis on volume of employment is a logi-
cal consequence of the principle of discrimination which was to qualify
and modify the policy of protection that was recommended for the
Government's acceptance. Once it is laid down that no industry can
lay claim to protection unless its importance in the economic life, both
at present and potentially in the future, can be demonstrated by the
volume of employment it can create, the mad rush of applications for

Dr. H. L. Dey, "The Indian Tariff Problem", p. 27.
2 It should perhaps be pointed out here that the principle of employment was
clarified and established by the successive Tariff Boards, since the Report of the
Fiscal Commission has no specific references to it, though there are passages which
suggest that the Commission was aware of its importance as a guiding principle.

protection which every country with an indiscriminate policy of pro-
tection has experienced would be provided against.

The Fiscal Commission expected protectionist policy in India to be
effectively discriminating through (1) the choice of industries for grant
of protection, (2) the regulation of the protective duties at not more
than the requisite level, and (3) the certain prospect of termination of
protection.

It may be said, as indeed, many of the critics of the Fiscal Com-
mission have said that the authors of protectionist policies all the world
over have made similar claims which subsequent experience has wholly
disproved. Such an argument, it is necessary to point out, would only
show an unfortunate failure to grasp the spirit in which the Fiscal
Commission approached its problem. A perusal of the report will show
that it is one of the most unpretentious of documents which have deter-
mined the economic history of any country. Nowhere in its 200 and
odd pages is there any attempt on the part of its authors to display
anything like profound knowledge of economic theory. The fact that
the Commission had to do without the counsels of so eminent an
economist as J. M. Keynes may probably explain it. But the fact
remains that the Commission was content to refer in a few pages to the
Free Trade vs. Protection controversy and to accept what is at once
sound commonsense and impeccable theory, the infant industry argu-
ment. The Commission, in fact, took one more step in the direction
of caution. It applied the infant industry argument not simply to infant
industries, but to what may be called the infant industrial nation. Hence
the deduction that protection is to be accorded to industries which are
not merely infant industries in themselves, but which are also capable
of securing the development of an infant industrial nation. It would
not do if the industry could some day hold its own against foreign com-
petition. Its development must be a definite aid to the industrial deve-
lopment of the country. Unemployment is sought to be cured, not
immediately nor by the establishment of a few industries, but by the
ultimate industrialisation of the country which no one could envisage,
nor can even today, without a policy of discriminating protection. It
is unfortunate that this sapient and prudent provision about the volume
of employment should have exposed the authors of the policy to this
criticism. If it is realised that addition to employment on the scale
sufficient to relieve unemployment is not one of the claims made for
the policy of discriminating protection or the industries which it has
led to, then it will be seen that the attack on the policy on the score
of poor employment is altogether misdirected.

Yet, the opponents of protection in India, used as they are to the
protectionist controversies in the advanced industrial nations of the
West, repeat the arguments not only to make their reasoning internally
sound, but also to spare themselves the trouble of thinking out the
Indian economic problem realistically, and, in the true sense of the
word, originally. They thus overlook the emphasis which the policy of
discriminating protection, both in its original conception by the Fiscal
Commission and in its subsequent application by successive Tariff
Boards, has laid on buttressing the infant industry argument with what
I have ventured to call the infant industrial nation argument. The

essence of the latter idea lies in the fact the establishment of industries,
which can use our resources on about the same scale on, which Nature
has endowed this country with them, will help to initiate that process
of industrialisation which, when it works itself out fully, will solve
those problems of famine and unemployment which neither a free trade
policy nor a protectionist policy as it is ordinarily understood can ever
solve. It is well at this stage to note that the starting point of the
enquiry of the Fiscal Commission is not the unreasoned lament of the
economic nationalist that the country is flooded by foreign manufactures,
but that " the industrial development of India has not been commensur-
ate with the size of the country, its population and its natural resources
and that a considerable development of Indian industries would be
very much to the advantage of the country as a whole."

As I said, the Commission did not aim at any stage at sharpness
of theoretical outline either in the apprehension of the problem or the
formulation or exposition of their remedies. They were content to see,
on the one hand, the enormous poverty of the country, the large extent
of unemployment and economic want, and on the other, the vastness of
certain kinds of economic resources. They were alive, too, to the large
body of highly respectable economic thought which urged the illusive-
ness of all hope of adding to the wealth of a country through protected
industries. Prompted by sound commonsense, which often obviates
the need for close scrutiny and fine calculation, they availed of the
infant industry argument to find themselves a way out of the dilemma
in which economic theory and the facts of Indian economy contrived to
place them. They were careful to make no exaggerated claims for the
policy which they recommended. At the same time, .they provided
more than one safeguard against the pitfalls with which the path of
protection is reputed to be only too full. If that policy has failed to
fulfil the hopes which its authors entertained of it, the reason is to
be sought in the errors of its application or its working and nothing
can be gained by attributing to the Fiscal Commission errors which
they were careful to disown and guard against as far as they could.

To examine the defects in the working of the policy of discriminat-
ing protection is outside the scope of this work. But it is relevant
to point out here that, if the aim of the Fiscal Commission, viz., to
shorten the period of protection by timely and appropriate revision of
the protective aid, had been faithfully pursued and if unnecessary delay
had not been caused in the establishment of industries, new or related
to those in existence, the results of the policy during the last two
decades would have been far different.

Inasmuch as the policy of discriminating protection has not been
followed as a consistent policy with organically inter-related parts, but
has been allowed to be seen as desperate attempts to establish a few
industries through protective aid, opponents of the policy have found
nothing wrong in employing the apparatus of free trade thought to
criticise the policy as a merely protectionist policy, without considera-
tion either for the special circumstances of India or for the qualifications
specified by the Fiscal Commission. It is as a rule assumed that
emphasis on the special circumstances of a country is a betrayal of
ignorance of the universality of the laws of economics. It is forgotten

that while the laws of economic science have unquestionable universal
validity, prescriptions of practical policies based on the suggestions a
priori of economic laws in their simple forms can have no such universal
validity. Equilibrium economics is so much a body of hypothetical
reasoning that it is as unhelpful to emphasise its logical consistency and
compactness as it is idle to look for fallacies in it. If this body of
reasoning suggests laissez jaire and free trade as obviously the best
economic policy for nations and governments to follow, it can in the
nature of things mean no more than that these policies have the least
risk of being vitiated by errors and illusions which people unequal to
following closely the labyrinthine course of economic causes and effects
are bound to make. The free trade doctrine can, therefore, expect to
have no more than a prima facie case set up for it by the science of
classical economics. Economic science can only set up a presumption in
favour of laissez faire and free trade. The finest analysis cannot destroy
the importance of the facts of a situation or provide adequately for
the changes in the human factor. For the free trader to presume that
economic science is on his side or assume that every supporter of pro-
tective duties is, regardless of the conditions of the support, ignorant
of, or purblind to, the truths of economic science is to betray a serious
misunderstanding of the nature and content of scientific economic
thought.

It will be realised, therefore, that if the advocacy of laissez jaire
and free trade came closely in the wake of the formulation of economic
thought, it was not because the relation between the two was as logically
close as it is thought to be by the opponents of protection in India, but
because laissez faire and free trade suited admirably the conditions in
which they were recommended. It suited the conditions of the coun-
tries to which those economists belonged ; and though they were care-
ful in formulating the principles of the theory without bias, they were
enthusiastic in establishing and preaching them because they were in
their country's interest. It should not be forgotten that, though spatial
limitations like countries are not important in the formulation of theory,
in the advocacy of practical policies, their respective countries become
important, for, as Sidgwick aptly points out, " it is only in the ciase
of foreign trade that the investigation of the conditions of favourable
interchange excites interest." (Quoted by Jacob Viner : Studies in the
Theory of International Trade, p. 599). The early free traders like
John Stuart Mill, who saw this relation clearly, sought to provide for
the difference in circumstances by the evolution of the theory in regard
to infant industries. This part of classical economic thought has un-
fortunately come to be known, not as an important part of the struc-
ture of economic thought, albeit unimportant in the structure as it had
then been completed, but not designed, but as an unimportant proviso
which will rarely, if ever, become operative. This result is to be attri-
buted to the frequency and widespread nature of controversies between
free traders and protectionists. As a result of these controversies, what
was intended to be a warning against a heedless application of hypo-
thetic reasoning to concrete situations came to be known merely as
the " infant industry argument ", a sort of spurious exhibit in a vexa-
tious piece of litigation.

An element of empiricism is often sought to be provided by the
reference to the working of protective policies in other countries. But
it is significant that in no country is the protective policy said to have
failed to achieve its purpose of bringing about the establishment of an
industry to which the country is suited by its natural resources. Such
an allegation must be deemed to be implicit in the contention that no
country has found it easy to remove protective duties once they have
been laid. But it is obvious that the non-removal of protective duties
after a reasonable time can be held to be a charge rather against the
political system and the system of government of the country concerned,
than against the economic character of encouragement of young indus-
tries through protection. And it may be observed in passing that the
danger of protective duties overstaying their popular welcome and
economic justification is the least of the political dangers against which
this country has to be on guard. That danger compares so favourably
with the danger of palsy setting in on the limbs of India's body
economic ! How far the Indian political system will be able to resist
the poisons which its fiscal system may generate is a question on which
it is both futile and inexpedient to be dogmatic. But it is certain that
according to this criterion of facility of timely removal, a system of
bounties has no advantages over a system of protective import duties.
Dr. Dey in his impatience for the end of protection avers that "it is
much easier and more practicable to terminate a system of bounties
than one of protective duties. " Considering the financial strain which
the Government of India has experienced during the last one decade
and more, it is perhaps a matter for satisfaction that protective duties
were as a rule preferred to bounties and Indian industries were not
brought to an untimely end on the score of financial stringency. Few
in India would care to dispute Dr. Dey's contention about bounties so
far as the conditions of the last decade and more are concerned. But
if it is suggested that, in the kind of political constitution that is
indicated for the future, bounties will be easily ended in the interest
of the general taxpayer and to the detriment of a profiteering indus-
trialist, Dr. Dey's honours as a prophet will certainly be so many gains
to the country. Such optimism, however, is not given to all.

Whether protective aids are or are not discontinued in time is
a purely political problem which, though it is not irrelevant to practical
decisions on fiscal policies, should not be allowed to prejudice the
merits of the purely economic issue between free trade and protection.
And it should not be forgotten, too, that the continuance of protective
duties after they have ceased to be indispensable for indigenous
industry may often be inspired by the desire for security from the
intrusions of foreign competitors who are not unlikely to adopt
questionable methods of competition. In such cases the fleecing of the
consumer is not an inevitable result of the failure to remove the
protective duties ; for, in a large country like the U.S.A. with a big
home market, internal competition may achieve for the consumer all
the benefits which the free trader seeks to ensure for him through
obvious risks to the stability of the indigenous industry and all that
it can serve. This is a simple fact which free traders conveniently
overlook ; and it is interesting to recall The Economist's contention
in the recent controversies on the safeguarding of industries that the

protectionist in Britain should not quote the U.S. example in his
favour, since the U.S., by virtue of its being the largest area over
which complete freedom of trade prevails, constitutes an impressive
illustration of the virtues of free trade. It should be readily
recognised that what The Economist said of the U.S. is true in a large
measure of India, too. If internal competition has not secured the
same advantages of progressively lower prices, the reason is to be
found not in the uniqueness of economic phenomena, but in the simple
fact that productive efficiency is at an inordinately low level.

The economic problem of India is the incomparably low efficiency
of all factors of production. And this is at the root of all the ills of
India, whether it be the average incidence of famine, the low returns
of agricultural pursuits or our incapacity for competition in industry.
If this were the whole of the picture of our economic position, then
economists as well as politicians could advise the people to resort to
a Stoic resignation to the poverty that is inevitable. They could them-
selves look on with philosophic equanimity on the processes of Nature
working themselves out remorselessly on the teeming millions of this
country, reducing them, through Malthusian checks, to the minimum
which can make a bare living by scraping the surface soil. But side
by side with this appalling inefficiency, and in spite of the enormous
age of agricultural land, there is a plentitude of natural resources
and aptitude of the people for an infinite variety of economic occupa-
tions, which counsel against Stoic resignation to the drift of things.

While on the one hand, the natural resources suggest that the
problem of improving the efficiency of the people can be faced and
solved,, on the other, the potentialities for further deterioration of
the economic position through the growing hiatus of productive efficiency
of India and other countries suggest that the problem can be neglected
only at grave peril to the life of a country as a whole. For opponents
of protection who forget that the aim of the policy is industrialisation
and not a mere handful of industries, do not appreciate this vital
difference between India and the various countries which in the past
have resorted to protection for the development of their industries.
Only in the case of the U.S.A. in the early decades of the nineteenth
century, could it be said that the aim was industrialisation. In the
case of Germany specific industries were aimed at, though of French
economy it could be said that it inclined too heavily on the side of
agriculture, which called for correction. But none of these countries
was faced with the problem which we in India have of a general
inefficiency, born of the failure to study the technique of productive
activity as such in all its phases and details and to acquire the capacity
to effect timely improvements therein.

From this standpoint the distinction between agriculture and
industry, which free traders in India employ as a handle to turn against
protection is altogether unreal, even if it has a semblance of logicality.
This distinction has passed unquestioned despite its unreality merely
because of the fact that India has a considerable export trade in a few
agricultural staples, while in the sphere of industry, she uses manu-
factured goods which are either imported from abroad, or produced
at home by protected industries. But the existence of an export trade

only serves to mark the inefficiency of the factors of production in
agriculture. It is an incontrovertible fact that, wherever India's agri-
cultural products have had to meet the challenge of foreign competi-
tion, they have not been more successful than the products of Indian
industry. The efficiency of land and of the cultivator is not more in
his sphere than the efficiency of the industrialist and the industrial
worker in industry. The export trade has been made possible more
by the peculiarities of agriculture as an occupation than by the com-
petitive capacity of the Indian agriculturist. The reports of Indian
Trade Commissioners invariably stress the point that Indian exports
have been losing ground wherever they have to contend against the
competition of rival sources of supply. When it is said that the appeal
of the Indian product is its low price, meaning thereby not a competi-
tive price for comparable values, but the attractions of mere unrelative
cheapness, it will be realised that from the point of view of competition
which alone concerns the free trader, the Indian agriculturist, will
soon be, even if he does not seem to be now, in a position not mate-
rially different from that of the industrialist. The consequences of
the collapse of our export trade in agricultural staples when it comes
about can only be imagined. Those who suggest that in the absence
of protected industries, India will develop her agriculture as the pursuit
in which she has natural advantages, are guilty of a parrot-like repetition
of text-book lessons. They forget that what free trade can ensure is
the division of avenues of productive activity according to natural and
differential advantages, that, even as the law of Nature of which it
is only a derivative, it will send the productively inefficient to the wall.
For, those who are equally inefficient in all branches of production,
cannot expect to have anything allotted to them in the division of
labour which free trade will ordain.

Given this productive inefficiency in agriculture not less than in
industry, how is the problem to be tackled ? In so far as productive
inefficiency may be traced, not to lack of intelligence, but to lack of
familiarity with scientific methods, lack of organization and most of all,
to the lack of an environment in which efficiency is prized, sought
after and assiduously developed, industry, and not agriculture, is marked
out as the sphere in which efforts at improvement can be usefully and
hopefully begun. For, agriculture by its very nature, its diffuseness
of operations; \ the amorphous character of the producing classes, its
more tenacious attachment to tradition and proneness to conservatism
does not lend itself to the inculcation of a new spirit. If Indian agri-
culture is ever to become scientific and progressive, it will be only
because the scientific spirit, begotten and nurtured in the sphere of
industry, invades with irresistible force the adjacent realms of agri-
culture. In industry, the scientific attitude to production can grow
more easily because there, unlike in agriculture, it is not a matter
of choice, but of compulsion, it appears not as an extraneous imposition
but as the very essence of the productive processes. When industry
grows and industries increase and expand, the environmental conditions,
in which productive efficiency is prized, sought after and assiduously
developed, are created ; and agriculture catches the infection, firstly
because some departments of our agriculture are closely related to

industry and, thereafter because of the very pervasiveness of the
scientific spirit.

The cost of promoting the scientific spirit, therefore, is one which
the whole country has to meet as. without it, its very * survival is
threatened. The efforts to raise productive efficiency through the
development of industry is a charge on the whole of the national income.
List saw the possibility of such conditions and allowed himself to
transcend the narrow boundaries of economics ordinarily understood,
when he said, "The nation must sacrifice and give up a measure of
material prosperity in order to gain culture, skill and powers of united
production ; it must sacrifice some present advantages in order to insure
to itself future ones."

John Stuart Mill expressed the same idea ir comparatively narrow
terms, "The superiority of one country over another in a branch of
production often arises only from havh A< 3 begun it sooner. There may
be no inherent advantage on one part or disadvantage on the Q^ier,
but only a present superiority of acquired skill and experiences. A
country which has this skill and experience yet to acquire may in
other respects be better adapted to the production than those which
were earlier in the field."

It will be obvious from the above that the original thinkers of
classical economics were not unaware of conditions like what obtain
in India. But it may be asked whether, if industry holds the key to
productive efficiency, it necessarily follows that protection is the best
method of pronging industry. Dr. H. L. Dey, who is one of the few
opponents of protection who have tried to tackle the economic problem
of India instead of merely expatiating on the familiar theoretical
aspects, has approached the question from two different points.

On the one hand, he considers the cost of projection as an expendi-
ture out of the annual national income and examines the priorities
among the various charges on the national income. On the other, lie
argues that there are other methods, which he claims far less costly
and far more efficacious and effective, in bringing about the establish-
ment of industries. On both these points, Dr. Dey's views nxerit care-
ful consideration. Taking for convenience the latter, namely, that
there are better ways of securing industrial development than the
imposition of protective import duties, Dr. Dey argues that " the com-
petitive weakness of Indian industries is largely traceable to grave
defects in the principle and structure of business organization, injtde-
quate and unsatisfactory technical equipment both in personnel and
machinery, the failure to adopt modern methods of marketing, and last,
but by no means least, over-capitalisation and the consequent excessive
burden of fixed charges. Since these deficiencies are obviously, in
a large measure, the inevitable result of the lethargy, thoughtlessness
and mistakes and miscalculations of those who are individually and
collectively responsible for the management of industrial enterprises
in India, it is hardly necessary to labour the point that the application
of the principal remedies must also be initiated and carried out by
them. These remedies, as has been indicated in connection with each
one of the threct industries examined in the previous chapters, are

largely matters of intelligent planning and effective co-ordination in
respect of production and distribution both for the individual units of
an industry as well as for the industry as a whole. In fact, it is neces-
sary for the industrial leaders of India to replan and reconstruct whole-
sale the industrial structure of India by adopting, in full measure,
the new technique of business organisation, known as ' rationalisation ',
which was unanimously recommended by the leading business and
economic experts of the world at the International Economic Confer-
ence of 1927, and which is being applied with increasing success by the
ablest and foremost business organisers in the U.S.A., Germany and
Great Britain, and also by the State in the U.S.S.R."

It is difficult to find in the above any concrete remedy capable of
being adopted by those who are anxious to provide against the dangers
indicated by India's productive inefficiency. We have shown that pro-
ductive inefficiency is not confined to industry ; and though in a different
context Dr. Dey shows himself aware of the danger to agriculture, he
has confined inefficiency to industry and comes out with the suggestion
that the only way to remedy it is to remove the evil. Dr. Dey can
hardly complain if those, who look for concrete remedies, regard his
observations only as an elaborate form of petitio principii.

However, there is one concrete suggestion in regard to the question
of the sugar industry which, in so far as it is capable of application
to other industries, may be deemed to be a comparatively precise
prescription of Dr. Dey for the ills of Indian industry as a whole.
Dr. Dey argues : " The evidence of history as well as the data of
comparative costs would thus strongly indicate that the protective tariff
is ^neither the most effective nor the most expeditious instrument for
the development of the sugar industry in India. On the other hand,
as is so well shown by the examples of Java and Hawaii, an appropriate
organisation for guiding, controlling and co-ordinating extensive and
continuous research and experiments on the different phases of the
agriculture and the manufacture of the sugar industry will undoubtedly
function as a much more efficient and trust worthy "machine for achieving
the desired development."

It is not unfair to deduce from the above that according to Dr. Dey
the remedy for competitive weakness lies in instituting research into
the problems which the protected industries are expected to solve
during the period in which they are helped to keep themselves alive
by the protective duties. The cost of such research will compare most
favourably with the cost sustained by the nation in the attempt to
develop industries through the imposition of protective duties over
a long period. No one can deny that ; but the question is not how best
to reduce the immediate outlay of the nation on industrial development,
but how to secure industrial development. Industrial development and
the growth in the people of India of qualities, which will render them
more fitted for the struggle for life, and enable them to acquire com-
petition are large scale social developments which can be brought about
only if the appropriate stimuli and responses are evoked in the people
at large. To most free traders, the growth of industry is a simple result
flowing from the working of certain simple laws of economics. But the
industrialisation of a country, even the birth and growth of particular

industries are complex social phenomena ; and the facts pertaining to
them, which form the subject of study for the economist, can only be
said to have been abstracted for the purpose of the study. It is neces-
sary, therefore, that even an academic economist, when he enters the
field of practical policy and tackles a specially difficult problem such as
the inculcation of the spirit of competitive efficiency in the Indian
masses and classes, should note the more important deviations of life
from the more or less unreal abstractions of his study and try to see
how the processes he recommends will work in actual life. It is clear
that Dr. Dey has not troubled to visualise the actual working of the
remedy he advocates. To suppose that an industry with the maximum
competitive efficiency can be brought into being all of a sudden, if all
the pre-requisite research is completed in advance, is to show that
the idea has neither been reasoned out fully from the arm-chair nor
tested in the light of recorded attempts in that direction.

While the case of India may be regarded as too crude to serve as
an illustration in this regard, there have been cases even in advanced
industrial nations like Great Britain where the lead in some of the
new industries has been gained by others who have had the advantage
of being the birth-place of the original inventions, "pie United States,
for instance, has enjoyed such a lead in some of me new industries
like the radio and motor cars. Germany had the lead in the dye
industry. Knowledge among the British scientists and technicians of
the facts pertaining to these manufactures did not obviate the need for
expensive trials and failures and in some cases such as motor cars
for even protective tariffs. The lead that America secured in the film
industry could not be made up by the British industry except by the
adoption of quotas. That such was the case with advanced industrial
nations shows clearly that the actual utilisation of technical knowledge
in effective and successful functioning of industry is materially differ-
ent from its acquisition in a laboratory. The birth and growth of an
industry, the actual experiencing of different problems and their pro-
gressive solution in the course of the industrial operation, the training
of men in numbers appropriate to the needs of each stage and the
acquisition on their part of the skill necessary for their operations, the
incorporation of that skill into the complex personality of the worker
and the subtle creation of what may be called the atmosphere of
industrialism, all these are vast, fundamental and complex changes,
which are neither circumvented nor short-circuited by compressing the
problems of a hundred factories into the four walls of a laboratory.
To suppose that a modern industry can be produced all of a sudden
in a country like India, like Pallas Athene from the head of Zeus, is
to mistake the essential nature of industrial development.

It would be useful to illustrate the point in reference to the sugar
industry ; and it is fortunate that Dr. Dey's prescription is specially
intended for the problems of the Indian sugar industry. Dr. Dey
argues : " It is more than a decade ago that the Indian Sugar Com-
mittee outlined a well-devised scheme for the organisation of a repre-
sentative Sugar Board, which would promote a Sugar Research Institute
and a Sugar School. It may also be mentioned that the Sugar Com-
mittee's outline scheme was based upon the accumulated experience

6f the principal cane-sugar-producing countries of the world. That
scheme has been so long held in abeyance largely no doubt on account
of the lack of necessary funds. But since it has now been decided to
accelerate the growth of the sugar industry through a large measure
of public assistance, and since that assistance can be rendered more
effectively for the industry concerned and more economically for the
taxpayers of the country at large, through the proper functioning of
an organisation like the Sugar Board than by means of a protective
tariff, there is at present a much stronger case for the establishment
of the Sugar Board with the Associated Research Institute and School
than there was ten years ago." It may be doubted whether Dr. Dey
realises that the failure of the Government to implement the recom-
mendations of the Sugar Committee is an argument that is more in
favour of protection than of the position taken up by him. The Sugar
Committee was appointed when the memories of the sugar shortage
of the last war were quite green in the public mind. The Committee
went into the question and made specific recommendations. Dr. Dey
suggests that the failure to adopt them was due to lack of funds. But
whatever the reason, it may be reasonably held to suggest that economic
problems of practical importance are tackled, whether by the people
or by the Government, only under stress of practical expediency created
by industries in existence and not worked abstractly like mathematical
problems in the seclusion of a laboratory. Besides, it is not accurate
to suggest that the findings of the Sugar Committee were altogether
overlooked. The work in the Coimbatore farm owes its inspiration
directly to the Sugar Committee, and the evolution of the improved
varieties of cane, while it has enabled a surprising improvement in the
recovery percentage of the sugar factories also brings out the fact that
no experimental farms, however ably conducted, can wholly anticipate
the problems which will be thrown up by actual working on commercial
lines. If this is true of the agricultural side of the industry, how much
more true should it be of industry itself ?

Laboratory and research, invaluable in themselves, are not a short-
cut in industrial efficiency ; and in a country in which among other
causes, financial stringency stands in the way of adequate provision for
them, it is futile to point to them as an alternative to the apparently
costly methods of helping industries to function in real life through
the provision of protective aids.

It is necessary to refer to the other approach of Dr. Dey to the
problem of productive efficiency in India. The strategy he adopts in
his attack on protection may be best described, in the language of
modern warfare, as a pincer movement. On the one side, he argues
that with the national income and national expenditure as they are,
the expenditure incurred on protection as a means of industrial develop-
ment is not only heavy, but takes an unjust precedence over prior
necessaries of national existence such as education. On the other side,
he argues that more expenditure on education can be relied on better
to cure the people of productive inefficiency than the large scale ex-
penditure incurred through protective import duties. Perhaps, it is
too much to expect anyone to delineate in some detail the system of
education which can so induce efficiency as to eliminate the need for

protection. But in the remoteness and circuitous nature of its relation
to productive efficiency, this remedy of education bears a striking
contrast to the directness with which preliminary research is supposed
in another part of Dr. Dey's book to bring efficient industries into
existence overnight.

The truth, however, is that attempts to evade the unquestionably
enormous price which a backward nation has to pay for economic
development must land one in patently unsuitable suggestions which
will not bear a moment's scrutiny. It is as absurd to suggest that the
cost of protection is recovered by the gains of additional employment
as to contend that there are other and far less costly ways of teaching
an economically primitive people to function as an industrially
regimented modern nation. The bill is there for the nation to foot ;
and the hoary wisdom of the very authors of free trade theories has
laid down that, " a protecting duty, continued for a reasonable time, is
the least inconvenient mode in which the nation can tax itself for
the support of such an experiment " (John Stuart Mill) . Soviet Russia
had to go without some of the common necessaries of life before she
could push her Five Year Plans to success. And in India, we have so
far made no heavier sacrifice for our industrial development than a
higher price for some of the luxuries of life. And since the consumers
of sugar and cotton textiles come from the very intelligentsia which is
most insistent on economic Swaraj, even the charge of taxation without
representation or consent cannot be laid against the protective duties
in India.

The charge of being an odious form of regressive taxation is, how-
ever, laid against them by Dr. Dey. No supporter of protection in
India need feel called upon to hold a brief for the system of taxation
in this country, which is yet to acquire the features of a progressive
system either in its technical or in its ordinary sense. But it is sur-
prising that after noting the fact that the successive increases in the
import duty in sugar led, not to decrease, but an increase in the
imports of sugar, Dr. Dey should proceed to argue that the import
duties lay the burden of taxation on shoulders least able to bear it.

It will be seen that the more attempts are made to find simple alter-
natives to protection, the more strongly will the conclusion emerge
that for the industrialisation of a backward country there is no means
except the establishment of industries ; and since industries are not
started in a spirit of selfless national service and cheerful preparedness
for certain loss, protective duties will have to be levied. The need
for them in a country like India is all the greater and all the more
indubitable, because inefficiency is not confined to one or two classes
of people or producers nor one or two departments of productive
activity. In the case of the sugar industry, as we shall show at greater
length in a later chapter, competitive efficiency does not rest with the
factory alone, but also with the cultivators, with those who supply
them with seeds and manures, with the general background of industrial
development in the country as may be evidenced by the ability to
utilise by-products. This nexus of relations can be seen and appraised
and the problems issuing therefrom tackled only in the context of the
actual working of a large scale industry. To simplify these problems

in terms of prices of imported products and cost to the consumer may
be useful as correctives to undue exaggeration of the value of rival
systems of thought. But it should be realised that the justification
of the policy of discriminating protection lies, not in the mere decline
of prices but in the creation of an atmosphere of scientific application
to the problems of production, without which not only Indian industry,
but also Indian agriculture, in fact, the whole of the national economy,
must sooner or later experience a complete collapse. We shall have
occasion to show that in the sugar industry the industrial and agricul-
tural problems appear together in an illuminating and practically useful
conjunction ; and if only for this reason, the claims of the sugar industry
to protective aids is unquestionable. And as for the contentions of
*the free traders, which are no doubt weighty in their narrow compass,
we have, for our part, maintained at the outset that in the conditions
of internal trade and world economy today, the old controversy between
free trade and protection has a sterile unreality, that in the calculations
of the price paid by the consumer and the loss sustained by him as
a result of protection, there is an element of speculation about the
price he would have to pay in the absence of an indigenous industry,
speculation which must necessarily vitiate the arguments ; that, on the
whole, taking all circumstances into account, there is good reason for
suggesting that the consumer has not been hard hit and that, last but
not least, the gains of protection should be judged from the national
standpoint and not from any narrower standpoint.

CHAPTER IV

HISTORY OF SUGAR INDUSTRY IN PRE-PROTECTION PERIOD
A COMPARATIVE STUDY

ENOUGH has been said in the last two chapters of both the world's sugar
industry and of Indian economic policy in the post-depression period
to indicate what distinctive features are to be looked for in the history
of the sugar industry in India. It has been observed that as the sugar
industry is the offspring of the post-depression period, public policy
in respect of its protection was actuated by aspiration of a far reaching
kind. That, however, is in regard to the present and the recent past.
Sugar production has, however, been carried on in India from an im-
memorial past. 1 And among the great protected industries, sugar has
much in common with the cotton textile industry and little or nothing
with iron and steel. For, sugar is at once the oldest and the newest
of India's great industries. The position differs from that of cotton
textiles, in so far as the manufacturing processes of spinning and
weaving are in essence the same both in the cottages and in the factories.
In sugar, on the other hand, the methods o modern sugar mills are
a far cry from the manufacture of gur which, one may reasonably
presume, has been carried on by more or less the same methods for
nearly two thousand years. It is probably because of this difference
that- the cotton textile industry was an applicant for protection, while
protection had, so to say, to play the midwife at the birth of the
sugar industry in India. The difference cannot obscure or alter the
fact that both the sugar and the cotton textile industries are natural
growths in the Indian soil. For sugar mills were not lacking even in
the pre-protection period, though neither in number nor output can
they compare with the cotton mills of the last century. Both have
strong links with agriculture, though Indian cotton has only recently
developed a high degree of dependence on the home market and im-
proved sugarcane has been to some extent a creation of the mills'
demand. A comparative study of Indian cotton and sugarcane may
yield a number of points to economic statesmanship ; but it can hardly
be attempted here. Suffice it to say that there was nothing in the case
of sugar manufacture in the past which could serve in the same way
as handlooms in the case of cotton textiles which formed a link
between the methods of the past and the advanced manufacturing
technique of modern times. At the same time, the sugar industry lent
itself to that combination of plantation and factory which gave enormous
advantage to the interests which developed the sugar industry in Cuba
and Java. This made it impossible for unaided private enterprise to
build up the sugar industry upto a point and then make an irresistably
importunate demand on the Government for protection. The sugar
industry could not, therefore, develop on the lines of the cotton industry.
Nor was it like iron and sllel of such vital importance to warfare that

i Vide Indian Sugar Industry, Its Past, Present & Future, 1934, by M. P. Gandhi.

it could enjoy the spontaneous solicitude of the Government. The
logic of events more than the logic of facts or of argument had to be
felt before the sugar industry could be enabled to take a long step
forward.

Hoary Pa&t of Indian Sugar

Though there is room for diversity of opinion as to when exactly
the manufacture of sugar began in this country, the word occurs in
the Atharva Veda and in more than one place in the Ramayana and
it is thus indisputable that sugar was known to the Hindus earlier than
to any other race. Sugarcane has thus been known to India for at
least 3,000 years ; and there are, besides, several indications that
Northern India is the home of sugarcane. 1 The earliest reference t(V
this in Western countries dates Jback to^p27 4.0, when sugar figures
among the spoils taken by the Byzantines after their conquest of
Dastagerd in Persia. It is also on record that the Chinese Government
during the reign of Emperor Tai Tsung (627 to 650 A.D.) sent a batch
of Chinese students of agriculture to Bihar to study the method of
cultivation of sugarcane and manufacture of sugar. From the Mahom-
medan writers we learn that sugarcane was introduced by the Arabs
into Sicily about 703 A.D. and that it spread from there to other Western
countries, especially Spain, as early as 755 A.D.

About the thirteenth century, sugarcane cultivation spread over all
the countries round the Mediterranean ; and these places became the
sources of supplies of cane sugar to Europe and Africa. It also appears
quite certain that, about the time of the second voyage of Columbus,
cane was introduced into America ; and it is extremely probable that
the local type now used only as chewing cane in Brazil was the variety
known as " Puri " in Bengal. Later, with the introduction of sugar-
cane cultivation in many parts of America by the Spanish, the Portu-
guese and Dutch, the production of sugar increased so rapidly that it
became an article of common consumption.

The sugar industry in India throve fairly well up to the time of
Napoleon, i.e. up to the beginning of the nineteenth century, and a
large quantity of sugar was exported to European countries even then. 2
But, when Napoleon was starved of sugar supplies from outside owing
to the naval blockade, he engaged scientists to select from out the sweet
vegetables growing in Europe a crop capable of producing sugar. This
research and the subsequent improvement in cultivation led to rapid

1 Etymologically * sugar 'is of Indian origin, the earliest form of the word
being, Sharkara in Sanskrit, and Sakkara in Prakrit. Thence it can be traced
through all the Aryan languages, as Schakar in Persian, Sukkar in Arabic, Suicar
in Assyrian and Phoenician, Saccharum in Latin, Azucar in Spanish and Portuguese,
Zuchero in Italian, Sucre in French, Zucker in German, etc. Vide The Indian
Sugar Industry Its Past, Present and Future, 1934, by M. P. Gandhi.

2 Up to the 17th century, cane-sugar was the only kind known in commerce.
But in 1747, Margraf demonstrated the existence of about 6 per cent sugar in
beet-root ; and in 1795, Achard manufactured beet sugar on his own farm in
Silesia, and presented leaves of refined sugar to Frederick William III of Prussia
in 1799.

expansion of sugar-beet cultivation which proved an obstacle to further
growth of manufacture of cane sugar in India. But even at the end
of the nineteenth century almost all the villages in India produced a
sufficient quantity of crude sugar for their wants. With the spread of
civilisation, however, the people of India gave up their prejudice against
imported sugar and started consuming it in preference to the indigenous
sugar, which was more costly. The increasing importation of cheap
refined sugar from abroad operated to the detriment of the sugar
manufacturing industry of India. The history of modern sugar may
be said to begin from 1791*- in which year, the massacre of almost all
the white population in the black rebellion in Hayati and San Domingo,
led to the disappearance of the largest producers and exporters. The
price of sugar rose rapidly ; and the East India Company took advantage
of this rise to export sugar from India to England, not as producers
but merely as merchants, buying in open market and exporting. In
1791 four parcels were exported from Bengal to serve as loaf sugar
for tea. This sugar was sold at Rs. 88-6-0 to Rs. 150-6-0 per cwt. Even
then the East India Company lost money on the first parcel and gained
only 6 per cent on all the four.

The economic policy of the British Empire now began to influence
the sugar industry in India. There were two groups of producers, the
West Indian Merchants and Planters and the East India Company. The
former seemed to have been more influential because the duties favour-
ing the West Indian producers were in force for many years. An ad
valorem duty of 37-16-3 was levied on sugar, being a manufactured
article. This was much in excess of the duty specifically levied on
West Indian Sugar. In 1821 there was a modification of the duty and
in 1836 East and West Indian Sugar entered, England on equal terms.

Following the emancipation of the slaves, the West Indian Planters
were faced with the dislocation of business and this change of policy
naturally evoked a violent protest from that quarter. As a consequence
of the equalization of duties, considerable capital was invested in India,
and West Indian and Mauritian planters were attracted here. So much
so that by 1846 the export of sugar from India to Britain had reached
60,000 tons. Factories were established at Azizpore, Motihari Balsund,
Barachakia, Gorakhpore, and Rosa in the West Indian plain, for pro-
ducing sugar direct from sugarcane.

Enterprises depending on Gur Refinery were started in Bengal
and of this, those at Doobah at Cossipore, Albion and Ballicoll seem
to have been the largest. Doobah, which in one year turned out 7,000
tons of sugar was believed to be the largest and the best equipped in
the world. About this time enterprises were started in Madras under
Messrs. Parry & Company, which still exist and the Aska Factory which
was started by Messrs. Binny & Company in 1865 developed into the
first cane-sugar diffusion factory.

In 1846, under pressure of the Manchester School, British tariff
policy swung violently towards free trade ; the slave-grown sugar was
admitted into Great Britain on equal terms with that produced by free

labour ; and in^a few__y ears the industry in India entirely disappeared^ 1
It took anotheiTSO years for a revival of interest in the sugar industry
of India. Modern sugar factories were started in Bihar, from about
1903. Since then there has been a slow and steady growth of the
industry, although it must be said that no help was given by the Gov-
ernment either by a protective tariff or by any other means. The
imports were increasing considerably from 1,900 onwards and the
only check that they suffered was in the war years when the import
was reduced considerably, due to high prices. The imports in 1914-
18 averaged 5,31,713~tons valued at Rs. 13.48 crores as compared with
an average of 7,23,915 tons valued at Rs. 12.71 crores during 1910-14.
But the tendency to expansion of imports began again in 1923-24 and
reached the highest figure 9,39,600 tons in 1929-30.

With these preliminary observations, we may now turn to the
history of the industry during the twentieth century, to the tariff duty
on the imports of sugar during this period, to the circumstances which
led the Government to investigate into the possibility of the establish-
ment of a sugarcane manufacturing industry in the country.

Import Duty upto March 1932

Let us see the changes in the import duty on sugar till 31st March
1932. The importjiuly on sugar in India from 1894-95 to 1915-16 was
only 5 per cent and was a revenue duty. In March 1916, the duty on
sugar was increased to 10 per cent. In March 1921, it was again raised
to 15 per cent, and in March 1922, to 25 per cent. In June 1925, the
import duty on sugar which was on an ad valorem basis, was converted
into a specific one and the rate was raised to Rs. 4-8-0 per cwt. This
remained in force up to February 1930. It was raised to Rs. 6 per
cwt. in March 1930, and to Rs. 7-4-0 per cwt. in April 1931. by the
Finance Act, 1931. It was raised to Rs. 9^0 inmi'lsLgggtember 1931,
by the supplementary budget. Even up to March 1932, me lJufy~\vas
Rs. 9-1-0 per cwt. of which Rs. 7-4-0 was the protective duty, and
Re. 1-13-0 constituted the surcharge duty of 25 per cent imposed for
revenue purposes since September ISSl.^

The only change introduced by the Sugar Industry

Act 3 1932. passed on 8th April 1932, in the duTy~bn sugar was to transfer
sugar and sugar candy from the revenue to the protective tariff. These
duties were, in the first instance, to have effect upto 31st March 1938,

1 The export of sugar during 1874-75 to 1878-79 was as follows:

Cwt. Rs.

(In thousand)

1874-75 . 498 31,92

1875-76 . 420 25,39

1876-77 . 1,093 92,51

1877-78 . 844 74,58

1878-79 . 279 20,43

The sugar exported was of a very inferior quality used mostly in brewing in
England.

Vide The History of the Indian Tariff (1924-39) by B. P. Adarkar, being a
bulletin issued by the office of the Economic Adviser to the Government of India,
in 1940.

3 The full text of the Act is given in the Sugar Industry Annuals, 1935, 1936,
1937, 1938.

but statutory provision was made for offsetting duties, if at any time
during the currency of the Act, it was found that foreign sugar was
being imported at a price likely to render the protective duty ineffective.

TABLE NO.

Sugar excluding confectionery

1. Sugar, crystallised or soft 23 D.S, and 1

above

2. Sugar crystallised or soft inferior to X

23 D.S. but not inferior to 8 D.S. ... |

3. Sugar below 8 D.S. and sugar-candy ... J

4. Molasses

Molasses:

1. Imported in bulk by tank steamer

2. Otherwise imported

Protective duty from April, 1932

Rs. 910 per cwt.

Ad valorem 31-1/4 per cent

Tariff values from 1-1-1934
Rs. 1-20 per cwt.
Rs. 1-100 per cwt.

For duties in subsequent years* see Table No. 1 in Chapter IV

We may now see the statistics of the quantities of sugar imported
from 1920-21 to 1939-40.

TABLE NO. 2

Imports of sugar in India during the Post-war period. (Sugar oj all kinds,

excluding molasses)

Period

Quantity in Tons

Value in lakhs of Rupees

1920-21 to 1922-23

4,09,000

1923-24 to 1925-26

5,82,000

1926-27

8,26,900

1,836

1927-28

7,25,800

1,450

1928-29

8,68,800

1,586

1929-30

9,39,600

1,551

1930-31

9,01,200

1,054

1931-32

5,16,100

601

1932-33

3,69,500

412

1933-34

2,61,300

270

1934-35

2,22,900

211

1935-36

2,01,157

189

1936-37

13,979

1937-38

12,698

1938-39

33,470

1939-40

2,46,681

311

Table No. 3 on next page shows the value of imports of sugar,
revenue derived from imports, and the rate of import duty from 1920-21
to 194041.

TABLE NO. 3

Value of Imports of Sugar, Revenue from Imports, and Rate of Import Duty
on Sugar from 1920-21 to 1942-43

Value of foreign sugar

Revenue from

Year
April-March

(net) imported in
British India in lakhs

Import Duty
on Sugar in

Rate of Import Duty

of Rupees

akhs of Rupees

1920-21

1,850

185

10 per cent Ad valorem.

1921-22

2,750

412

1922-23

1,549

487

25 ,

1923-24

1,545

486

9^
*-' t ft tt

1924-25

2,090

578

25 , ,,

1925-26

1,520

659

Rs. 480 per cwt.

1926-27

1,534

744

> tt

1927-28

1,450

653

tt t tt

1928-29

1,586

782

tt >

1929-30

1,836

846

tt t M

1930-31

1,047

1,081

Rs, 600 per cwt.

1931-32

590

798

Rs. 910 per cwt.

(Rs. 74 being protective,

Rs. 1-130 being revenue sur-

charge from 1st September, 1931).

1932-33

422

685

tt tt tt

1933-34

270

472

tt tt tt

1934-35

210

381

Rs. 910 per cwt.

(Rs. 7120 being protective,

Rs. 1150 being excise duty

from 1st April, 1934).

1935-36

190

324

it tt tt

1936-37

tt tt tt

1937-38

Rs. 940 per cwt.

(Rs. 740 being protective, and

Rs. 200 being equivalent

excise duty from 28th February,

1937).

1938-39

tt tt tt

1939-40

331

396

Rs. 8120 per cwt.

(Rs. 6120 being protective.

Rs. 200 being equivalent

excise duty. With effect from 1st

April, 1939).

1940-41

Rs. 9120 per cwt.

(April to

(Rs. 6120 being protective,

January, 1941)

Rs. 3 00 being equivalent

excise duty. With effect from 1st

March, 1940).

1941-42

107

1-9

1942-43

Rs. 11 171/5 per cwt. with

effect from 1st April, 1942 (in-

cluding 20% surcharge).

It should be observed here that from 1916 onwards sugar has been
subjected to an increasingly heavy duty in India ; and further it can
be seen from Table No. 2 that the increase in the quantity of sugar
imported from abroad has taken place in spite of a heavy import duty.
As can be seen from Table No. 3, the import duty on sugar has yielded
a vast amount of revenue to the Government of India. In 1900-01 it
yielded only Rs. 53,000 whereas the amount produced in 1929-30

i Vide Trade Journal, 30th May 1940.
Burma excluded from 1937-38.

Rs. 870 lacs. 1 The quantity and value of imports as also the revenue
show a rapidly declining tendency after 1929. It may be noted that
the highest value of imports of sugar was Rs. 18 crores in 1929-30. It
must be observed here, however, that the high duty on the import of
sugar in India is by no means exceptional, as still higher duties are
found in various other countries of the world. A statement has been
given in Table No. 4 below, showing the import duty on sugar in several
countries of the world. Recently, various countries have increased the
import duties, i.e., the United Kingdom, many of the Continental Euro-
pean States, Canada and China, while several others have adopted more
far-reaching methods of regulation through state monopolies or the
adoption of quota systems for the regulation of imports, e.g., Soviet
Union, Australia, Turkey and Latvia.

TABLE NO. 4

Import Duties on Sugar in the Principal Countries in the World
GREAT BRITAIN *

Exchange Rates

General Duty
per cwt.

Preferential
Duties uncerti-
ficated
per cwt.

Dominion
Colonial
Certificated
per cwt.

Excise Duty
per cwt.

GREAT BRITAIN

Sugar of Polarization ex-
ceeding 99

Do. 98 not exceeding 99
Do. 97 98
Do. 95 96

s. d.

14
(Rs. 7 8 0)
14
(Rs. 6 13 9)
10 8-8
(Rs. 5 4 2)
10 2'0
(Rs. 4 15 9)

3. d.

8 2
(Rs.4 0)
7 12
(Rs. 3 7 8)
6 9'5
(Rs.3 5 3)
6 5.2
(Rs.3 2 5)

s. d.

4 8-7
(Rs.2 5 0)
3 10'3
(Rs. 1 14 3)
3 7'6
(Rs. 1 12 6)
3 5*2
(Rs. 1 10 11)

s. d.

4 7
(Rs. 2 3 11)
3 71
(Rs. 1 12 2)
3 6
(Rs. 1 11 5)
3 3'8
(Rs. 1 10 0)

Note. Assistance afforded to the farmers is included in the best price paid
by the factories which was based on sugar contents. The actual rate of assistance
to the factories is related to a price for raw sugar in the open market of 4s. 6d.
per cwt. (Table contd.)

1 The yield from import duty is consistently decreasing, as will be seen from
the following Table. During 1931-32 it only yielded Rs. 7.97 lacs, in 1933-34,
Rs. 4.72 lacs, in 1940-41, Rs. 18 lacs, and in 1942-43, Rs. 56,000 only.

Year
Apr.-Mar.

Yield of Rev.
Rs.

Year
Apr.-Mar.

Yield of Rev.
Rs.

Year
Apr.-Mar.

Yield of Rev.
Rs.

1931-32
1932-33
1933-34
1934-35

7,97,63,000
6,84,79,000
4,72,04,000
3,81,35,040

1935-36
1936-37
1937-38
1938-39

3,24,16,000
50,52,000
25,33,000
45,22,000

1939-40
1940-41
1941-42
1942-43

3,96,08,000
18,24,000
1,94,000
56,000

Burma excluded from 1937-38.

* Vide International Sugar Journal, May 1939, and subsequent increase in duty
in Great Britain in September 1939, as a war measure.

TABLE NO. 4 Contd.

Import Duties on Sugar in the Principal Countries in the World

UNITED STATES

Rates of Duty in cents per Ib.

Raw 96 polarisation

Refined

Full Duty

Cuban Duty

Full Duty

Cuban

Duty

UNITED STATES

4*90 dollars = 1 according to the
latest federal Legislative Act,
September, 1934

1-875
(Rs. 432)

90
(Rs. 203)

1*9875
(Rs. 472)

954
(Rs. 222)

Note. Hawaiian sugars have been admitted to the United States free of duty
since 1876.

CUBA

In pesos per 100 Kilos

Minimum

Maximum

4'90 pesos = 1 sterling. Import Duty Raw Sugar...
Refined Sugar

I'O
(Rs. 103)
0-9375
(Rs. 15 3)

2-0
(Rs. 206)
1-875
(Rs. 1 14 6)

II. Preferential duty : Not existing.

III. Consumption tax : 1.50 centavos per Spanish pound of refined sugar and
sugar exceeding 96J degrees (Rs. 3-5-0 per md.)

GERMANY, HOLLAND, ITALY, RUSSIA

Original Currency

Consumption ta-

Total charge

Exchange Rates

Country

Import Duties

xes to be paid
for imported

imposed by
duties and

sugar

charges

Raw

Refined Raw

Refined

Raw

Refined

Reich

mark

Reich

imark

Reicl

imark

12 18 marks ==1

Germany

Rs.

(11 6)

(13 1 2)

(8 9 3)

(19 9. 9)

(21 10 5)

Guilders

68 guilders = Rs. 100 ...

Holland

240

27 1 33-75

36-15

Rs.

Rs. Rs.

Rs.

(151)

(14 13 1)[ (18 8 4)

(14 13 1)

(19 13 5)

Paper Lire

93-02 Lire = 1

Italy

110-10

16515

364

380

474-10

545-15

Rs.

(5 14 3)

(8 13 4)

(19 7 6)

(20 5 3)

(5 59)

(29 2 7)

Ad valorem

Russia

80% j 150%

85-87%

83-86%

...

Note. There have been several changes in the Import Duties on sugar in various
countries since the outbreak of the World War in 1939.

TABLE NO. 4 Contd.
Import Duties on Sugar in the Principal Countries in the World

JAPAN

Rate of
Import Duty

Specific Duty
by Law No. 4
of 1932

17 Yen = 1 (a) Under No. 11 Dutch Standard
(b) Under No. 22
(c) Other
(d) Rock candy, sugar, cube, loaf sugar
and similar sugars

Yen per 100 kin

2'50
3'95
5'30

7-40

Rs. per maund

133
1 14 6
2 8 10

391

Appointment of the Indian Sugar Committee m(l929J

Although a high revenue duty existed on sugar, its effects on the
sugar manufacturing industry of India were not examined by the Gov-
ernment before 19|9. The national importance of sugar in the country
was not paid any attention to until after the Great World War, when
the desirability of utilising the sugar resources of India were examined
without any tangible result by the Government of India.

In February, 1919, Mr. Wynne Sayer of the Indian Agricultural
Service was appointed to compile relevant data, statistical and otherwise,
as regards the best method of exploiting the advantages which India
possessed in respect of sugarcane. Immediately after that in 1920 the
Governor-General-in-Council appointed the Indian Sugar Committee.
The resolution of the Government dated 2nd October, 1919, in appoint-
ing this Committee stated that regarding the desirability of expansion
of the sugarcane and sugar manufacturing industry, there could be no
doubt, that the annual consumption had been increasing steadily for
many years in India no less than elsewhere. It was also recognised
that the sugarcane was indigenous to India which until very recent years
stood first of all countries In the world"In"the area under cane. It was
also notorious that the yield both of cane and raw sugar" per acre and
the percentage of available sugar extracted from cane were depressingly
low. While, therefore, India should be in a position, as she was in the
past, to produce a surplus of sugar for export, she had, in fact, had
to supplement her own supplies by imports, whose tendency to increase
had been checked only by the War. The Government were also aware
of the difficulties in extending the sugar industry, apart from the diffi-
culties attending the cultivation and manufacture of cane sugar in all
countries. There were several problems with which the Indian industry
was confronted and which were peculiar to India. The systems of land
tenure exhibited great variety and were complicated by the customary
laws of inheritance and joint ownership. The bulk of the sugar pro-
duced in India was consumed in its crude state as Gur or Jaggery and
this fact had also a bearing on the prospects of a successful venture for
the production of factory sugar in any particular locality. The Govern-
ment of India felt that the time was opportune for the appointment of
a representative Committee to investigat^into theproblem in cill its
bearings and to advise whether a dsdSjiitFl^^ could

be laid down for the promotion of further development and appointed
a Committee under the Chairmanship of 3Vh\ J. MacKenna, Agricultural
Adviser to the Government of India, to examine the various sugarcane
growing tracts of India with a view to Determine the nature of the
expansion possible in such tracts either by the development of a factory
industry or by improvements in the existing indigenous methods ; to
review .tha-position of India with regard to the world's sugar supply
and to formulate recommendations for the improvement of the position,
etc. The Sugar Committee submitted a very favourable and compre-
hensive report laying great stress on the importance of sugar in the
national economy of India.

The next stage in the progress of the Industry opened in 1929
due to the existence of the remarkably high revenue duties on sugai
imports. The high import duty on sugar subsisted- for many years,
but it must be observed that the Government never cojnprehended the
full significance of the development of sugar-manufacturing industry
to the agricultural, rural and industrial economy of the country. They
did evince some interest in this matter spasmodically, but no sustained
effort w$s made to raise the sugarcane and the sugar industry to their
legitimate place in the national economy. The Imperial Council of
Agricultural Research, however, deserves credit for persistently draw-
ing the attention of the Government to the feasibility and necessity of
the establishment of this industry in the country.

Imperial Council of Agricultural Research

The establishment of the Imperial Council of Agricultural Research
may well be regarded as an epoch-making event in the history of agri-
cultural improvement in India. The inaugural meeting of the Council
was held in June, 1929, and at this meeting representatives of the various
provinces reported the progress made by the provincial governments
in the preparation of a scheme for assisting the Sugar Committee. In
this Committee the Council has a qualified and a representative body to
which are referred jill questions affecting the welf ar^qf_thg^jugarcane
industry .in .the caiiniryV The SiigaF Committee 1 met generally once a
year, and has had fourteen sittings till December, 1941. This Com-
mittee received a general mandate from the Council to examine and
report on measures, necessary for the development of the sugarcane
industry in India. One of the recommendations of this Committee,
which met for the first time in October, 1929, was that the Government
should be asked to institute a Tariff Board enquiry into the question
whether protection should be given to the Indian sugarcane industry.
This recommendation was accepted by the Council and its representa-
tions were successful in inducing the Government to order a Tariff

1 This Committee consists of 12 members, and includes representatives of manu-
facturers, agriculturists, and of Government. The Committee has also co-opted
about 10 members to maintain its representative character. In 1933, the Committee
co-opted two members representing the Indian Sugar Mills Association of Calcutta.
A ( few more additional members have been taken since 1938. Its present strength
is 30.

NOTE : This Committee was dissolved in 1944, owing to the appointment of the
Indian Central Sugarcane Committee, (consisting of 44 members) in 1944. For
details, see M. P. Gandhi's Indian Sugar Industry Annual for 1943, page Ixiv.

s Board enquiry into the question whether protection was required, and
if so in what measure for the Sugar Industry in India. This enquiry
was referred to the Tariff Board in May, 1930. In making this applica-
tion, the Imperial Council of Agricultural Research had taken into con-
sideration the fact that the three provincial governments, which were
widely interested in the sugar industry, viz., the United Provinces, the
Punjab, and Bihar and Orissa, (representing 80 per cent of the sugar-
cane area in British India) together with the Government of Bombay,
had asked for a Tariff Board enquiry. 1

The Sugar Committee of the Imperial Council recognised in 1929
the fact that a steady increase in the import of White Sugar had occurred
in spite of the existence of a certain measure of protection which had
been afforded by the specific duty on Sugar. Despite an increase in
the cane area, and the yield per acre in some tracts and the amount
of the White Sygar manufactured in the country, India was very little
nearer to being self-supporting in 1929 in regard to sugar produced,
than in 1919 when the Indian Sugar Committee submitted its report.
The magnitude of the issue will be clear from the fact that the area
under sugarcane in India in 1929 was 2.3/4 million acres pr about
25 per cent of the total area under sugarcane in the world. The value
of sugarcane products produced in India in 1929, on the basis of the
prices prevalent in that year was approximately Rs. 48 crores, while in
addition, about Rs. 21 crores were paid annually for imported sugar.

The Sugar Committee also considered that the time had come when
the Import Duty should definitely be made a protective duty instead
of a revenue duty, and further that definite protection to the sugarcane

Eying industry should be given for a period of 10 years or so in
first instance. They also felt that Indian agriculture was passing
ugh a period of reconstruction and the time was opportune for the
jlopment of the Indian sugarcane industry. It was also pointed
out that a good deal of the preliminary work, necessary for placing the
Indian Sugar industry on a sound foundation, had been carried out. As
a result of the work of the Coimbatore Cane-Breeding Station, the
Shahjahanpur Sugar Research Station, and the Sugar Bureau, Pusa,
seedling canes of real merit had been produced, and distributed and
were being grown on considerably wide areas.

Within two years of the great depression, the stage was thus set
for the grant of protection to the sugar industry and for the achieve-
ment of a rate of growth unparalleled in the history of Indian industry.
The two forces which were working in this direction are firstly, the
increase, under phenomenal financial pressure, of the import duties on
sugar, and secondly, the notable evolution of improved varieties of
cane by the Coimbatore Research Station. Thus did History shove
the file of " Protection to Sugar " on to the table of the Hon'ble Com-
merce Member of the Government of India.

Volume of written evidence before Tariff Board, 1931.

CHAPTER V

HISTORY OF SUGAR INDUSTRY IN POST-PROTECTION
PERIOD (1932 ONWARDS)

ENOUGH has been said in the last chapter to show that by the time the
question of protection to sugar was referred to the Tariff Board, the
revenue duties had grown so high that the question had almost a faintly
academic tinge. But the formal grant of substantive protection after
an expert enquiry into the extent of protection needed is a matter of
the greatestjmpor.t-tQ ajiascent industry ; and the earlier developments
can only be reviewed as^caTculated to weaken and break down the usual
resistance of the 1 Government of India to proposals for protection.

The First Tariff Board Enquiry, 1930

It is only to be expected, therefore, that when the Tariff Board sub-
mitted its report in 1931, its recommendations were accepted by the
Government, though, as usual, with certain alterations. An important
point of dissent was the guarantee of protection to the industry for a
period of fifteen years. The Tariff Board recommended that the industry
was to enjoy protection for a period of fifteen years from 1932, and
thaf in the first seven years, the duty on imported sugar was to be Rs. 7-4
per cwt. and for the^i^inainliailpiriod Rs. 6-4 per_cwt. But tHe~Sugai
Industry (Protection) Act, 1932, provided for a protective duty at the
rate of Rs. 7-4 per cwt. on all classes of sugar till March, 1938, -when
a further enquiry was to be made to ascertain whether the protection
to the industry during the period from April, 1938, to March, 1946,
should be continued at the same level or to a greater or lesser extent.
The Governor-General-in-Council was also empowered to increase the
duty imposed by the Act if he was satisfied fcfter such an enquiry that
sugar was being imported into British India at a price which was likely
to nullify the benefits intended to be conferred by the protective duties.

The Table l on next page indicates the numerous changes that took
place in the tariff on sugar since the- grant of protection in 1932 upto
1943 :

Recommendations

The recommendation of the Tariff Board to levy a duty of Rs. 7-4
per cwt. was only of a formal character, and the revenue duty was
formally declared a protective one without any change in the level.
The levy of the surcharge of 25 per cent according to the supplementary
budget of September, 1931, gave considerable impetus to the development
of the industry.

1 Also vide Table No. 17, M. P. Gandhi's Indian Sugar Industry Annual, 1941 ;
for the duties in the period before 1932, vide M, P. Gandhi's Indian Sugar Industry
Its Past, Present and Future, 1934, p. 350.

TABLE NO. 1
Changes in Duty (Import and Excise) on Sugar from 1932 to 1942.

Year

Rate of Protective
Import Duty
Per cwt.

Additional
Revenue Duty
or Excise Duty

Total Import Duty
Per cwt.

Rs. a. p.

Rs a. p.

Rs. a. p.

1932-33 (31st March)
1933-34

740
740

1 13
1 13 (Equivalent
Excise
Duty)

910
910

1934-35 (27th Febr.)
1935-36
1936-37

7 12 (0-8-0 be-
7 12 ing addi-
7 12 tional mar-
gin)

150
150
150

910
910
910

1937-38 (31st March)
1938-39

740
740

200
200

940
940

1939-40 (29th March)

6 12

200

8 12

1940-41 (31st March)

6 12

300

9 12

1941-42 (1st April)

8 1 7-1/5 (includ-
ing 20%
surcharge)

300

11 1 71/5 (Roughly
equivalent
to Rs. 7-1-9
per maund)

The duties were applied to sugars of all kinds and sugarcandy
out any gradation (excluding confectionery) . The difference in the
amount of the protective import duty in the years 1934-35 to 1936-37 is
due to the levy of the emergency surcharge of eight annas ; and had
this surcharge not been in force, the industry would have claimed addi-
tional protection in 1937. According to a recommendation of the Tariff
Board, the Government were empowered to levy an additional duty
of eight annas per maund if the ex-duty price of Java sugar imported
in Calcutta fell below Rs. 4 per maund. (Sugarcandy was separated for
purposes of levy of duty from sugar from February, 1934, and importers
had to pay a revenue duty of Rs. 10-8 per cwt. on sugarcandy) .

The rapid progress of the industry behind the Tariff wall caused a
decline in imports and the revenue from this source^cterftned progres-
sively from Rs. 10 crores in 1930-31 to Rs. 25 lakhs in 1937-38, (vide
" Gandhi's Indian Sugar Industry Annual, 1941 ", Table 42) . l Govern-
ment, therefore, wanted to recover to a certain extent a portion of the
lost revenue from this source. Legislation for the fixation of minimum
price of cane was also considered necessary.

jT^Y

Accordingly, an excise duty of Re. 1-5 per cwt. was levied in 1934.
The amount of the excise duty was determined according to the follow-
ing method. It was not considered prudent that the whole of the reve-
nue surcharge of Re. 1-13 should be levied as excise duty. After allow-
ing for the additional protection of eight annas, the figure of Re. 1-5
was reached. There was naturally considerable opposition to the
imposition of the excise duty on a nascent industry when protection

1 In 1942-43, the revenue was only Rs. 56,000.

was in force. The Government pointed out that the duty was only
intended for revenue purposes and that this indirect tax could be passed
on to the consumer. The countervailing duty of Re. 1-5 which left the
total import duty at the same figure of Rs. 9-1 per cwt, they said, did
not affect the measure of protection. Before the industry could settle
down and adjust itself to the new tax on production, there was an
increase in the excise duty to Rs. 2 per cwt. in March -1937, with the
result that there was a considerable dislocation. With large over-
production and a high level of duty, the industry was almost on the
verge of collapse. This crisis was met by concerted action of members
of the industry and the support lent by the Provincial governments of
U. P. and Bihar.

The total import duty at the end of the first period of seven years
of protection was thus Rs. 9-4 per cwt.

The Second Tariff Board Enquiry, 1937

As originally proposed by the Government, a Tariff Board was
appointed in March 1937 to go into the question of protection for the
remaining eight years and review the progress achieved in the first seven
years. The Board completed its enquiry in December 1937 and sub-
mitted a report, which however did not see the light of day before
March, 1939. It was decided that the duty then existing should be
continued till March 31, 1939. Accordingly, the Sugar Industry
(Temporary Extension) Act, 1938, was passed.

The second Tariff Board based their recommendation of a duty
of Rs. 7-4 on the basis of the cost of production of sugar of Rs. 6-13-10
per maund plus 9 annas per maund for freight and 5 annas per maund
for the difference in quality. As the ex-duty price of Java sugar was
Rs. 2-7 per maund, the difference between the two prices, viz. Rs. 5-5
per maund or Rs. 7-4 per cwt. was recommended as the protective duty
for the rest of the period of protection.

The main recommendations of this Tariff Board were as follows :

The fair selling price of Indian sugar was Rs. 6-13-10 per maund,
to which was added 9 annas per maund for freight and 5 annas for
quality, making roughly Rs. 7-12 per maund. Java sugar could be
landed at Rs. 2-7 per maund, and the protection required was, therefore,
Rs. 5-5 per maund or Rs. 7-4 per cwt. This amount of protection was
to be granted for a period of eight years.

Permission should be accorded for the manufacture of power
alcohol on the understanding that it was to bear the same rate of duty
as petrol. /

No special protection was considered necessary for the " guf "
industry, apart from the protection granted to sugar.

Research work on the agricultural side was considered inadequate,
and an allotment of 3 annas per cwt. from the excise duty was recom-
mended to be made for central research and assistance to provincial
agricultural departments.

A marketing survey of the sugar industry was also recommended
to be undertaken. (This was completed in 1942, and a report was
published in 1943.)

Government's Criticism of the Tariff Board's Recommendations

The Resolution 1 published by the Government of India along with
the Tariff Board report pointed out that the " figures proposed by the
Board for certain items, notably manufacturing costs and profits and
for adjustment of the difference in quality are susceptible of reduction.
They also considered it questionable the assumption that Java sugar,
the fair selling price of which so vitally affects the measure of protec-
tion, could be sold ex-duty at as low a figure as Rs. 2-7 per maund.
The Board's figure was based on special and purely temporary condi-
tions in Java and is no longer accurate." The inclusion of a minimum
price of Rs. 2-7 per maund for Java sugar by the Board, as the Gov-
ernment of India points out, was not based on special and purely tem-
porary conditions in Java. At the time the enquiry was being made,
the quotation for Java sugar in Calcutta was Rs. 3-15-2 (26th August,
1937) . But the Board pointed out that with the cost of production as
low as Rs. 2-7 including freight, interest on capital and taking into
account the progress of the industry in Java since the last enquiry, it
was quite likely that, for the duration of the remaining eight years of
protection, Java sugar offered keen competition.

The Government's comments on the Tariff Board's observation on
the effects of the excise duty were not quite justified. The Tariff Board
pointed out : " The additional excise duty levied in 1937 has had un-
fortunate consequences for the cane grower and manufacturer. At the
prevailing level of prices, the present rate of excise duty is out of pro-
portion. It cannot be denied that the excise duty had a disorganising
effect on the industry in 1937 and that the incidence of the duty was
mostly on the cane-grower and manufacturer. To deny that the incid-
ence of the duty was heavy on the cane-grower and the manufacturer on
account of the unduly low level of prices consequent on overproduction
does not improve the position."

The Effects of the Excise Duty

The excise duty was levied, according to the Government, to check
over-production, but it only added to the confusion in the industry ;
and but for the general improvement in world markets in subsequent
years, it would have been very difficult for the industry to get over the
shock. The contention that " in the absence of foreign competition it
is the natural inevitable tendency for indirect taxation to be borne
'ultimately by the consumer" cannot hold good. It is not in every
case that it is possible to pass on the duty to the consumer. It depends
on the nature of the demand for the article on which the duty is levied.
If, by reason of the increase in the price to the extent of the duty, there
is a contraction in demand, the incidence of the duty is both on the
consumer and the producer.

The Government were extremely touchy regarding the observations
of the Board about the excise duty which was levied purely for revenue

the text of the Resolution of the Government of India No. 127-TC2/387
dated 30th March, 1939, (Vide Gandhi's Sugar Industry Annual, 1939 and 1940).

purposes, and which was, therefore, outside the scope of the enquiry.
If the excise duty had the effect of nullifying to a certain degree the
measure of protection afforded to the industry, it cannot be denied that
the Board was justified in examining the effect of the excise duty on
the progress of the industry. To levy a high level of duty on internal
production at a time when the industry was in a formative stage and
the demand for sugar had to be stimulated, appeared to be tantamount
to watering down the policy of protection, if not a complete negation
thereof.

Moreover, in para 305 of the Fiscal Commission's Report, it is
pointed out that one of the Board's ordinary functions is " to consider the
effects of the excise duties on Indian industries." The Tariff Board
was, therefore, quite correct in including within the scope of its enquiry
a consideration of the effect of the excise duty on the growth of the
industry and was justified in its observation that " the additional excise
duty levied in 1937 had unfortunate consequences for the grower and
manufacturer."

The Government did not however agree with the findings of the
Tariff Board and pointed out that a very low price for Java sugar had
been assumed and that conditions in the world sugar market had con-
siderably improved. At the same time, there were developments within
the industry which, according to Government, called for a lower level
of protection.

The figure of Rs. 6-12 per cwt, eight annas below the figure recom-
mended by the Tariff Board, was therefore fixed from 1st April 1939.
With the outbreak of the World War in September, 1939, and the need
for more revenue, the excise duty was increased to Rs. 3 per cwt. from
1st March, 1940, and the total import duty therefore came to Rs. 9-12
per cwt. A further increase was effected in the import duty from 1st
April, 1942, as a result of the imposition of a general surcharge of 20
per cent on all imports (with certain exceptions), and the total duty
on sugar was thus Rs. 11-1-7.1/5 per cwt. At the time when it was decided
by Government that there should be a reduction in the level of the
protective duty from Rs. 7-4 to Rs. 6-12 per cwt. they also announced that
there would be another enquiry before the end of 1940. The Sugar
Industry (Protection) Act, 1939, gave effect to tjpis decision. But as a
result of the outbreak of war in 1939, it was announced by the Govern-
ment in September 1940 that no further enquiry was to be undertaken
in the abnormal conditions. This duty was continued at the existing
level, first up to 31st March, 1940, and then up to 31st March, 1942. In
April, 1942, the duty was further increased by 20 per cent and was
fixed at Rs. 11-1-7.1/5 per cwt. up to 31st March, 1943. It is certain
that no Tariff Board enquiry will be made in the industry before 1946.

To gauge the progress of the industry after 1932, one has only to
look at the following Table (Table No. 2) showing value of sugar
machinery imported during the eight years ended 1939-40. Publication
of statistics of value of imports of sugar machinery after 1930-40 is
stopped by the Government of India.

TABLE NO. 2

Total Value of Sugar Machinery Imported in British India
(In thousands of Rupees)

Source

1932-33

1933-34

1934-35

1935-36

1936-37

1937-38

1938-39

1939-40

U. K.
Other countries ...

Rs.

91,48
61,63

Rs.

1,95,87
1,40,51

Rs.

73,60
31,84

Rs.

49,70
16,00

Rs.

68,49
26,66

Rs.

43,15
26.21

Rs.

30,16
31,20

Rs.

Total ...

1,53,11

3,36,38

1,05,45

65,70

95,16

69,37

61,36

50,84

The above Table is an indication of the pace at which the Sugar
Industry grew after the requisite stimulus of protection was given by
the Government in 1932. More direct evidence is furnished by the
following Table (Table No. 3) which gives not only the number of
factories and the volume of production, but also the imports of sugar
from year to year from 1931-32 to 1941-42 :

TABLE NO. 3

Number of Cane Factories working in India, including States, and Production of

Sugar from Cane Factories, Gur Refineries, Khandsari, Net Import of Sugar

in British India and Import in Kathiawar Ports during the last

11 years, and estimates for 1943-44

Net Im-

Year
(Nov.-
Oct.)

No. of
cane fac-
tories
working

Cane fac-
tory pro-
duction
(Nov.-

Sugar
Refined 1
from Gur
(January-

Khandsari
(Conjec-
tural esti-
mates

Total Pro-
duction of
sugar in
India

ports (Ex-
cluding
Re-ex-
ports) of

Imports of
sugar in
Kathiawar
Ports

in India

Oct.)

December)

(Nov.-Oct.)

sugar in
Br. India

(Nov.-Oct.)

Tons

Tons Tons

Tons

1931-32

158,781

69,539

250,000

478,120

438,797

95,678

1932-33

290,177

80,106

275,000

645,383

321,081

68,649

1933-34

112

453,965

61,094

200,000

715,059

233,366

87,094

1934-35

130

578,115

39,103

150,000

767,218

197,775

113,364

1935-36

137

932,100

50,067

125,000 1,107,167

86,962

45,218

1936-37 4

137

1,111,400

19,500

100,000

1,230,900

11,160 6

12,870

1937-38

136

930,700

16,600

125,000

1,072,300

9,410

12,284

1938-39

139

650,800

14,200

100,000

765,000

254,400

76,819

1939-40

145

1,241,700

31,700

100,000

1,373,500

35,2603

28,856

1940-41

148

1,095,400

48,500

125,000

1,268,900

(11 months)
5,000

(5 months) 6

1941-42

150

778,100

13,800

150,000

941,900

1942-43

150

1,070,000

10,000

214,000

1,294,700

...

1943-44?

152

1,260.000

10.000

100,000

1,370,000

* Figures of gur production for calendar year 1932 are added to figures for
1931-32, and so on.

2 Our estimates.

* Figures of gross imports (not net) available; Statistics discontinued.

- actories in Burma > an <* production of sugar in Burma, are excluded from
1936-37 season.

5 Imports in Burma excluded from April, 1937 onwards.

6 Statistics discontinued from March, 1940.

With the beginning of this decade then, India may be safely
regarded as having achieved complete self-sufficiency in regard to sugar.
Indeed, the stage was reached when the action of the Government in
making India a party to the International Sugar Agreement was bitterly
resented as imposing an unmerited handicap on the expansion of the
Indian Sugar Industry. The nightmare of shortage of sugar which the
last war raised was dispelled just when the approach of the present war
should have made it more harrowing than ever to the public at large.
That the industry was sometimes troubled by the nightmare of over-
production and large carry-overs is, however, a different matter. What
is important is that the aim of utilising India's resources to develop an
indigenous sugar industry and to render the country self-sufficient in
this respect, which was formulated during the first World War, was
realised, if somewhat belatedly. That all this was done within less than
a decade may not be a matter of unmixed satisfaction to the Indian
people considering that the tariff walls were raised to insurmountable
heights and the consumer was made to pay prices far higher than the
imported product. But the satisfaction that so important a provision
for war time was made, as it were, at the last moment, will not be
toned down by considerations of cost which lose much of their force,
even if they are not irrelevant, in a war economy. For good or other-
wise, India now possesses a sugar industry which is the second largest
industry in the country. India, it should be remembered, is the biggest
producer of sugar (including Gur) in the world since 1931. (Vide
Gandhi's Sugar Annual, 1941, Table No. 7). The industry has wide-,
spread ramifications, in agriculture, in government and in the politics
of important political parties. It has, doubtless, its problems, some of
them as thorny as one could imagine. Nevertheless, the stage has been
reached when the familiar" slogan of ^Mend or End " has to be dropped
once and for all. For the " end " of the sugar industry on the ground
that dubious comparisons of costs seem to suggest such a course is out-
side the pale of serious discussion. Once the sugarcane industry forms
so large a part of the fabric of our national economy, there are only
three tasks to which practical statesmanship has to turn : (1) To
appraise past experience, in respect of costs and yields so as to give
restraint and guidance to similar aspirations in the future. (And this
is where the apparatus of economic reasoning suggested by free trade
theories is most useful, provided it is judiciously handled.) (2) To
investigate the technical problems of the working of the industry in its
narrow sense, and in a larger sense, of its functioning as a part of our
economic machinery, and (3) To examine and solve from time to time
the questions of policy which arise from the position and prospects of
the industry. To these we may now turn our attention.

CHAPTER VI
THE COSTS OF PROTECTION TO SUGAR INDUSTRY

WE have so far dealt with the growth of the sugar industry since the
grant of substantive protection in 1932 and the preceding changes in
the revenue duty which made of protection more or less a jait accompli
when the Tariff Board was instructed to enquire into it. If the rate
of increase in revenue duties was particularly high and the tariff walls
well nigh insuperable, the growth of the sugar industry, too, exceeded
all expectations. There are thus special features of the sugar industry
for which adequate explanation can be sought only in the broader his-
torical trends of recent times alike in national and world economy.

These trends were delineated and examined in the earlier chapters
of this thesis, and the conclusion emerged that in the conditions of
national and world economy, in the depression and post-depression
periods, the old controversy between free traders and protectionists had
lost much of its reality, that while free trade was tending to be more
and more a forlorn cry, protectionism was gravitating towards more
complete forms of industrial regulation and that, in these circumstances,
the question from the practical point of view was how to derive the
utmost benefit from an established large-scale industry. It was insisted,
however, that the general apparatus of reasoning invented by equili-
brium economies should be employed to make sure that no serious
blunders have been committed, or persisted in, in the distribution of
scarce means among competing ends. It is to this task of appraising
the costs and yields of protection to sugar that attention must now be
turned. But it is well to remember while on this enquiry firstly, that
in the economic conditions of modern times, the absence of free prices
serves to complicate the task and secondly, that any enquiry into costs
of protection is of necessity limited to a comparison of prices of the
indigenous product and of the imported product and that it cannot take
into account all the potentialities which the new industry may be deemed
to have opened before the nation. To a large extent, the free trader's
test is the more or less crude test of results.

It is idle to cavil at such an attitude. For an enquiry into the costs
of protection has not necessarily to be carried out at a certain point of
time ; and the actual achievements up to that time alone can be taken
into account. While the protectionist may reasonably argue that the
enquiry is premature and therefore unjustified, and that the industry
must have more time to prove its worth, he cannot calculate the results
of protection on a purely imaginary basis. It is in this respect that the
advocates of industrial regulation, as distinct from mere protection, are
on surer ground.

In the case of the sugar industry, the Tariff Board of 1931 may be
said to have taken a position midway between the protectionists of the
old school and the regulationists of modern times. While the Board
satisfied itself that at the end of the period of protection which it recom-

mended "the cost of manufacturing white sugar in India should not
exceed that in any other country except Cuba and Java " 1 it also
envisaged a general diffusion of the benefits of protection to agriculture
and the realisation of a number of indirect benefits to the national
economy. Inasmuch as the date of the second tariff enquiry was
hastened by action of the Government by as much as eight years, it
might well be contended that an enquiry into costs of protection within
six years of the grant of protection is premature and can neither be fair
to the industry nor light the path of its future. Such a view can only
serve to emphasise the importance of bearing these considerations in
mind while enquiring into the costs of protection. It is also useful in
stressing the difference between results so far achieved and the poten-
tialities that still remain.

After all, little is gained by shirking, with whatever justification or
under whatever pretext, the acid test of costs. And all that can be
urged from the point of view of the protectionist is that the cost to the
consumer should not be confused with the cost to the nation. For it
is just possible in certain cases that, while the consumer pays more for
a protected article than he might have had to pay for the imported
product, the nation as a whole may be a gainer from the establishment
of the protected industry. In the latter event, criticism of protection
on the ground of cost to the consumer would prove to be misdirected, as
it would only be a criticism of the system of distribution. And it would
also serve to illustrate the fact that what may appear uneconomic accord-
ing to the criterion of " costs to the consumer " will be seen from the
wider standpoint of the national economy as a whole to be fully justified.
In fact, the price paid by the consumer is the narrowest view to take
of the results of protection ; and by itself is invalid as a test of the
economic character of the protection granted to the industry. For the
price may, for various reasons, be a distortion of the cost of production,
actually incurred by the industry. Taxes and other factors originating
in State action, defective marketing and other circumstances tend to
render prices as distinct from costs uneconomic. Even when prices
bear a reasonable relation to costs, they have to be compared to the
price which the consumer would have been obliged to pay, had there
been no national industry. The reasoning has thus a hypothetical and
even speculative character and opens the door to a flood of uncertainties
that weaken the claims of this comparison to ready acceptance on all
hands.

It will be seen from all this firstly, that the advocate of protection
has a number of preliminary objections to the case being taken up at
all at any rate, by the tribunal of the moment, that he puts forth his
arguments without prejudice to certain crucial contentions of his and
that he is all the time stressing the importance of the supreme considera-
tion of national, as distinct from consumer or other sectional, interest.
Here, in this chapter, it is the arguments in the case, for and against,
that are the preliminary concern. The various criteria may be set down,
however, for convenience in the ascending order of importance : (1)
The price paid by the consumer. (2) The cost of production compared

i Tariff Board Report 1931, p. 37.

to costs in producing countries which are similarly placed. (3) The
benefits flowing from protection, no matter by what channels, to the
nation at large together with the privations. (4) Further potentialities
of the industry. Costs of protection in the widest sense of the term
can be assessed only if all these different points are adequately
considered.

Taking first the question of the price paid by the consumer, and
keeping in mind the fact that it has only a bearing on, and cannot be
conclusive of, the case for or against protection, we may begin by noting
here the considered finding of the Tariff Board, 1937, that " the con-
sumer has every reason to be satisfied with the policy of protection.
He is paying less for sugar than he paid before the advent of protection.
The price of sugar in India is today cheaper than in any country
in the world except Cuba, Java and Brazil." 1

Protectionists are prone to exaggerate the value, for their purposes,
of this statement. For in these terms, the Board's defence of protection
can hardly carry conviction to the ardent free-trader. For, according to
him, the consumer could feel satisfied only when he obtains the goods
at the lowest price which is economically possible. Even the certainty
of supplies during war time which must weigh with the average con-
sumer as a human individual and not a mere abstraction of the
economist is to the free-trader an altogether irrelevant consideration.
To say that he is paying less for sugar than before the advent of protec-
tion is, therefore, no proof of the contention. Nor does it suffice that
the price of sugar in India is today cheaper than in any country except
Cuba, Java and Brazil. For it is precisely from the first two the third
is not an exporter of sugar that the free trader would have the Indian
consumer meet his needs of sugar. And the admission that the costs
are higher than the costs in Cuba and Java may be tantamount to
giving up the whole case for protection.

The Tariff Board's remark, then, is no tower of strength to the
protectionist, so far as this particular issue of cost to the consumer is
concerned. It would be more effective, at any rate, more to the point,
if the protectionist emphasises that the price of sugar in India ought to
be compared with what the price of sugar might be in the absence of
sugar production in India. It would then be open to him to draw atten-
tion to the predominantly hypothetical character of such comparisons
and to insist that nothing can be proved by speculation on the possible
level of prices of imported sugar. In ordinary economic discussions,
attempts are, no doubt, made to exhaust all possibilities by taking into
account every recognisable factor of change, while making the requisite
calculations. It is easy, enough to add the revenue duty and railway
freight to the c.i.f. price of imported sugar. The actual ex-factory price
of Java or Cuba sugar at a given time is also easily computed. But he
would be a bold man who would be dogmatic about the costs and prices
of foreign sugar in certain hypothetical conditions, e.g. in the absence
of a large-scale industry in India, and in the decay of the subsidised beet
sugar industry in some, if not all, of the various countries of Europe.
Who can say what allowance should be made for the increase in the

1 Vide Tariff Board Report, 1937, Summary, p. 167.

bargaining strength of the producing countries consequent on the
decrease in competition and the increase in demand ? The diffusion of
sugar production in the world reduced Cuba and Java to a desperate
plight and led in turn to the phenomenon of dumping ; and nothing is
so characteristic of dumping as the lack of any relation between costs
and prices. In the same way, the rise of a quasi-monopolistic position
for Cuba and Java may bring about a similar absence of relation between
costs and prices, and in the direction of unconscionably high prices
instead of unconscionably low prices as in the case of dumping.

Apart from the subjective factor of the attitude and policy of the
manufacturers, there is the objective fact that, as the scope for economy
in production is extremely limited in the case of Cuba and Java, they
cannot meet the increase in demand without subjecting themselves to
the law of diminishing returns.

Bearing in mind these important considerations, we may take note
of the more important of the facts relevant to the question of price to
the consumer. The following Table gives the retail prices of sugar in
the principal countries of the world in 1938 :

TABLE NO. I

Retail Prices of Sugar (1938)
(From International Sugar Journal, April 1939, p. 160.)

Country

| Price in Rs. per maund converted
at the then exchange rate

1 Rs. a. p.

Argentina

12 12 7

Brazil

6 14 8

Chile

994

Cuba

7 13 5

Egypt

12 3 3

South Africa

i 14 15 8

Australia

14 13 2

Dutch East Indies

6 12 7

Philippines

672

China

12 10 5

Japan

12 12 11

Czechoslovakia

1 21 3 3

France

16 6

Germany

30 9 8

Italy

35 3 6

Netherlands

27 6 6

Norway

16 6

Poland

19 2

Switzerland

9 13 3

United Kingdom
Canada

10 7 4
13 3 4

U.S.A.

12 1 5

India

10 4

The countries mentioned in the above Table fall into three natural
divisions : (1) those which produce for internal consumption, (2) those
which produce mainly for exports, and (3) those which maintain pro-
tected industries at home and have to supplement the internal produc-
tion with imports from abroad. Prices in countries belonging to the

last category obviously do not lend strength to the anti-protectionist
case as they are twice as high or even more than those in India. If
we may distinguish the United Kingdom and the Dominions from the
Continental beet sugar countries, even they, it will be seen, cannot claim
to have obtained their requirements of sugar, at prices which compare
favourably with the price to the consumer in Inida. The cane sugar
exporting countries alone remain for comparison with Indian prices.
Here it should not be forgotten that the marketing policy is not in favour
of uniformly economic prices in all the foreign markets. Lower prices
in one market are offset by higher prices in protected markets in certain
other countries. The consumer can have no grouse against protection
to sugar only on the ground that his counterpart in some other country
is able to get sugar at a lower price. That fact by itself can prove
nothing. The question is whether in the absence of a protected sugar
industry in India, the course of events would have led to the satisfac-
tion of the Indian demand at substantially lower prices. That, it has
been repeatedly emphasised, is an unduly hypothetical or speculative
question. Even the most cautious and circumspect reasoning would
have to be wound up with a distressingly large dose of dogmatism. For
purposes of national policy which takes account of consumer interest
only in a broad view, it should suffice, firstly, that the Indian price is
less than the price in all but the more important exporting countries ;
secondly, that the two countries which produce sugar more cheaply than
India cannot be depended upon in the absence of an Indian sugar
industry, either to retain in full the differential advantages in produc-
tion which they now have or to pass on their benefits substantially to
the Indian consumer ; and thirdly, that the consumer pays less for his
sugar than before the advent of protection. That is as good a case for
a protective policy as one could wish.

Hitherto the results of protection to sugar have been considered
from the standpoint of the price to the consumer. The question of cost
of production is clearly distinguishable from price to the consumer, not
only because prices and costs are not identical but also because this
question opens up a vista of other considerations as well. Here, again,
a mere comparison of the costs of production in India and in some other
sugar-producing country, or between the Indian sugar industry today
and some time ago will hardly suffice for the purpose of determining
whether protection to the sugar industry is justified or not. For the
cost of producing any particular commodity does not depend solely on
the producers of that commodity or on their efficiency. Apart from
the efficiency of the labour employed in the industry which can improve
only with time, there is the cost of the raw material and the facility
for economies afforded by industries which can utilise its by-products.
The cost of the raw material, too, is not wholly a function of the effi-
ciency of its producers. It reflects also the relative bargaining strength
of the buyer and the seller. And when the seller has behind him the
sympathy and support of the State, the price paid for the raw material
may tend to distort the picture of changes in costs of production of the
finished product. In the case of the sugar industry, the fixation of
minimum prices for sugar disables the manufacturer to a great extent
for achieving a progressive reduction of costs. A higher price for cane,
like the higher price for sugar, does not necessarily betoken a fall in

productive efficiency. On the other hand, some economy has been
already achieved by the Indian cane-grower through the utilisation of
improved cane. The higher price paid for cane is the result of govern-
mental action aimed at improving the position of the cultivator without
regard to the other aim of cheapening the sugar for the consumer. The
ethics and economics of minimum prices of sugarcane will be discussed
at a later stage. Here it should suffice to note that the test of progress
is to be found not so much in prices at different times as in the technical
criteria of yield per acre or extraction percentage. The unreliability or
obsoleteness of the old methods of testing productive efficiency is again
brought out in this instance.

It is, however, worth while comparing the results of the two Tariff
Board Enquiries that have so far been carried out. Here one fact stands
out in somewhat disquieting relief, that the second Tariff Board Enquiry
recommended the same amount of protection as the first, viz. Rs. 7-4
per cwt., though the 1931 Board seemed fairly confident that after the
first seven years the extent of protection could be reduced to Rs. 6-4
per cwt. At first sight, it would seem that no progress of any kind has
been achieved by the Indian industry during the first half of the period
of protection. But one must not overlook the fact that while the Tariff
Board of 1931 estimated " the fair selling price of white sugar manu-
factured in a typical factory in India " at Rs. 9-5-9 per maund and also
observed that at the end of the protective period (15 years) " this fair
selling price should have fallen to Rs. 7-12-5 per maund, the Tariff
Board of 1937 found that " the cost of manufacture in a representative
la^ry "tfTclucRng overheads and profit is Rs. 6-13-10 per maund." Like-
wise, in regard to cane, the previous Tariff Board estimated a fair price
for cane of Annas 8 delivered at factory. The corresponding figure in
the second enquiry is 5 as. 6 ps. per maund. This compares with the
price of As. 6 which the first Tariff Board envisaged at the end of the
period of protection. These figures give a fair idea of the improve-
ment in efficiency in the production of the raw material and its manu-
facture into white sugar.

This picture, which, one must concede, is by no means too dis-
heartening, is distorted when it is seen from the angle of the price paid
by the consumer. For this price is shaped by the duties paid by sugar,
whether the duty is an excise duty and its consequent countervailing
duty pr whether it is a mere protective import duty. The extent of pro-
tection required which we have noted is the same in 1931 and 1937, is
determined not alone by the cost of production at home nor even by the
cost of production of the competing sources of supply abroad, but the
rate at which the latter could land sugar in India. The protective duty,
therefore, remains unchanged not because the Indian industry has failed
to secure any economy of costs but because the 1937 Board thought it
" possible that Java sugar could be landed at ports at a price of Rs. 2-7
per maund" against Rs. 4 assumed by the Board of 1931. It should
hardly be necessary to repeat here the danger of exaggerating the value
of this fall in the import price to any sapient judgment of the cost or
efficacy of the protective policy.

We may now examine the value of protection to the country as a
whole. OnClThe is rid of the straight jacket of consumer's price or cost

of production, the protectionist may breathe more freely. He can point
with pride to the fact that as against the former imports of sugar to the
value of Rs, 15 crores per annum, we have now indigenous production
of sugar (including Gur) of Rs. 75 crores per annum. The fixed capital
invested in the industry may be valued at about Rs. 32 crores. The
sugar industry ranks as the second jfciggest national industry in the
country. It has provided employment for 1,00,000 skilled labourers and
for no less than 3,000 technical men, and 20 million agriculturists are
associated with its development. 1 It has thus given a great fillip to
agriculture. Not only has it increased the total area under sugarcane
from 2,905,000 acres in 1930 to 4,200,000 acres in 1940, but the yield per
acre has also increased as a result of the increasing area under improved
varieties of cane, which has gone up from 8,17,000 acres in 1930, to
34,80,000 acres in 1940. It has taught the cultivator the value of utilis-
ing improved seeds, of expedition in taking his product to the manu-
facturer, of taking care about the value of his produce, of an increasing
yield derived from improved methods of cultivation, etc.- And there
is still much more to be done. A large bunch of technical problems
both in regard to cane cultivation and sugar manufacture still remain
to be solved. One of the greatest handicaps of the Indian sugar industry
is the short duration of the crushing season, the low quality of the raw
material at the beginning and at the end of the season, and the low
yield per acre, which compares very unfavourably with Java and other
countries, where an acre yields about 50 tons per acre, as compared
with the low average yield of only about 16 tons in India. The evolu-
tion of late ripening and early ripening varieties of cane has been taken
on hand and when better results are produced, their value to the sugar
industry can be easily imagined. Considering that the recovery per-
centage has gone up steadily during recent years and that further pro-
gress depends almost solely on the improvement of the quality of the
cane, the possibilities on the cultivation side must be considered the
most fruitful venue of research for which ample funds should be set
apart. 3

At the other end lies such problems as the utilisation of by-products
and the establishment of industries which can achieve that end. The
manufacture of power alcohol, the use of bagasse for better purposes than
as fuel, these are some means of economy which lie beyond the power
of the sugar industry. It may well be that the manufacturing process
still leaves some scope for economy. Complaints have been voiced about
sugar mills failing to choose the best men available. But whatever that
may be, costs of manufacture are not everything in the costs of produc-
ing a manufactured article. The efficiency of the producers of the raw

l Vide Mr. M. P. Gandhi's speech at the Rotary Club of Bombay, on 13th
October, 1942. (Annual for 1942). Vide 1943 Annual, for his speech at the Rotary
Club of Ahmedabad on 3rd December 1943.

2 The Imperial Council of Agricultural Research assessed the total value of
the increase due to improvement in the sugarcane crop at Rs. 2J crores per annum
(vide Gandhi's Sugar Annual, 1941, page 194).

7") 8 In their Report, the Tariff Board recommended (page 143) that the Govern-
[Ment should allot three annas per cwt. from the excise duty, for research work.
We agree with this recommendation entirely and also endorse the Tariff Board's
recommendation that "the only hope of the industry ever being able to compete
on equal terms with other countries, is a reduction in the price of the raw
material."

material and the alacrity with which industries for utilisation of by-
products are established are often more important factors. They are
all, even like the acquisition of technical skill in the industry, necessary
conditions for the success of an industry. But necessary conditions are
not exactly conditions precedent for such success. In industry, as much
as in any facet of social life, progress in all the various department goes
hand in hand. It is tempting to suggest that the technical progress
painfully achieved by a protected industry can as well be aimed at by
ad hoc research at much less cost than what the nation has to incur
through the protective duties. The difference in costs must have a
strong appeal. 1 But the logical sequence is not the sequence of historical
events. And those who suggest that industries should be established
only after the solution of technical problems in a laboratory or in experi-
mental factory or farm not only overlook the difference between experi-
ment and actual working but fail to realise that to ask for such
encouragement of research in India as she is situate today, is to ask for
the moon. When funds for research are not obtainable even with such
large stakes in protected industries, it is idle to think that the Govern-
ment would undertake research as a preparation for new industries.

It will be seen that the costs of protection to the sugar industry
relatively to the returns are not as unconscionable, as they are made out
to be by writers like H. L. Dey and B. N. Adarkar in their books on
" The Indian Tariff Problem ", and " The Indian Tariff Policy " respec-
tively. At the same time, it is futile to swell the credit side of protection.
Prof. B. P. Adarkar in his excellent volume on " Indian Fiscal Policy ",
somewhat naively suggests, though he hardly says it explicitly, that the
fall in the price of Gur which followed the grant of protection to the
sugar industry may be deemed to be one of the benefits of protection.
Less scholarly writers, not to speak of avowed partisans, are apt to
exaggerate the value of protection. If one is not too much of a doc-
trinaire or a partisan, one should find little difficulty in recognising that
protection to the sugar industry is amply justified, though the results
assuredly are not all that one would desire. 2 At any rate, there should
be little difficulty in recognising that protection must be judged as a
national policy aiming at far more than the replacement of foreign by
Indian sugar and that a broad question of policy cannot be solved by
transforming it into a piece of complicated arithmetical computation.
For no calculation, however carefully made, can suffice to eliminate the
element of speculation involved in determining the price at which the
Indian consumer would obtain his requirements of sugar in certain
purely hypothetical conditions.

1 Vide Dr. H. L. Dey in " The Indian Tariff Problem ", p. 279, where he says :
"When this yastness and complexity of the task of cane improvement in Northern
India is realised, it would become clear that the principal problems facing the
sugar industry, are to be solved mainly by means of organised research on an
elaborate scale and for a fairly long period of time."

2 Even Prof. H. L. Dey admits in "The Indian Tariff Problem", page 255,
"We should admit at the outset that the real importance of the cultivation of
sugarcane is that it gives a greater monetary return per acre than almost any
other staple crop in India. This is certainly of great advantage to a densely
populated country like India."

Both the Tariff Boards in their Reports have laid considerable stress on the
agricultural grounds for justifying protection to the industry.

CHAPTER VII
BENEFITS OF SUGAR PROTECTION TO CANE CULTIVATION

IN the last chapter, an attempt was made to examine how far the actual
results of protection to the sugar industry during the first seven years
justify the protectionist policy. It was emphasised that this question
ought to be approached from the standpoint of the consumer and the
nation at large, as also from the near and the long view. Nevertheless,
the enquiry was restricted to the viewpoint of the consumer and to
what may be called the near view. At the same time, it was found
that appreciable as were the actual results, the potentialities were more
significant, if only because they open up wide vistas of possible develop-
ment in the improvement of cane cultivation on the one hand and the
development of industries for the utilisation of by-products, on the
other. Public opinion in a predominantly agricultural country like
India is naturally more solicitous of the welfare of the agriculturist
and wistfully looks forward to the benefits which a policy of protection
to industry may have to offer to the cultivator. The sugar industry,
too, feels impelled by motives of enlightened self-interest to aid the
improvement of cane cultivation ; for, as has been pointed out in an
earlier chapter, the further progress of the technical efficiency of the
sugar mills depends predominantly on the improvement of the quality
of the cane and a reduction in its cost of production. The Tariff Board,
too, in its first enquiry emphasised the importance to agriculture of
protection to the sugar industry. 1 In this it reacted to the prevailing
climate of economic opinion in the country which had learned to think
in terms more of economic planning than of protection to industries
which satisfy the criteria laid down by the Fiscal Commission. The
Tariff Board report raised high expectations of appreciable progress in
agriculture, at any rate in the cultivation of sugarcane as a result of
protection to the sugar industry.

It is necessary therefore to examine the effect which an expanding
sugar industry has had on cane cultivation and how far improvements
in the latter can be expected to help the former to grow in strength
and stability. The nature of this impact has been to some extent indi-
cated in the previous chapter while examining the costs and yields of
protection to sugar. And it will be clear that with the efficiency of
cane cultivation is bound up the economy of sugar production in India.
It should also have been seen that progress has so far been in the
direction of expansion of acreage and wider use of improved cane.
But the essence of the problem in regard to cane cultivation lies in the

i Vide Tariff Board's Report, 1931, page 27, et seq. It said : " The future of the
sugar industry depends mainly on the cost of producing the primary material, viz.
cane, and the problem is, therefore, one of protecting a particular branch of agri-
culture until such time as improvements in methods of cultivation and development
in research enable the agriculturist to increase his yields per acre and thereby
effect a substantial decrease in the cost of cane, while maintaining or increasing
his own profits." -

fact that cane is the raw material for a protected industry which is
called upon to outgrow, as fast as it can, the need for protection. Since
competitive capacity is determined by conditions in a cane producing
country like Java, the task which we are faced with is to approximate,
as near as we possibly can, the conditions in India to conditions in
Java,

It is in this respect, that India's agricultural problem in regard
to cane is different from the problem in respect of other agricultural
staples. India's agricultural products are, as a rule, staples of our
export trade. Though our productive efficiency in these lines has not
been wholly reliable and India has often been & danger of being
elbowed out of her export markets, there is no hiatus between the
Indian exporter and his foreign competitors such as there is between
the Indian grower of sugarcane and his compeers abroad. The Indian
exporter is helped either by the monopolistic or quasi-monopolistic
nature of his position or by his advantage over his rivals in what are
termed " price markets ". The threat to Indian jute has not yet emerged,
though certain people have cried " wolf " quite often. Our monopoly
of shellac still remains unshaken. Indian groundnuts would continue
to flow into foreign markets after the war, despite their low quality.
And the lower yield of cotton per acre as compared with Egypt or
America will not seriously affect our export trade in short staples. But
Indian sugar is differently placed in that it has to provide the raw
material for an industry which subsists on a high level of protective
duties and will be called upon to compete with countries which have
both natural and organisational advantages.

In another respect, too, sugar is different from our other agricul-
tural products. Inasmuch as sugarcane has to be taken to the factory
without loss of time for fear of dryage and consequent loss of sucrose,
cane cultivation is more of an integral factor in the rationalisation of
the sugar industry than, say, jute in the jute industry or cotton in
the cotton industry. Cane, then, comes under the category of what
may be called " plantation " industries rather than agriculture ordinarily
understood. This, in fact, is what gives Java and Cuba an enormous
advantage over Indian sugar and makes the competition between them
so forbiddingly unequal. On the one hand, there are large plantations
under the control of the manufacturers with every advantage that can
be expected of modern large-scale enterprises, on the other, there are
just small holdings of land that have suffered for centuries an un-
interrupted process of fragmentation 1 and cultivators who are too con-
servative and poor to respond actively to new methods of scientific
cultivation. There are besides quite a large collection of technical
problems which can be solved only by patient research. And in the
conditions of this country to get the cultivators to adopt newly invented
methods is a problem by itself, sometimes more serious and more
knotty than the invention of these methods.

1 In order to remedy this position the factories need assistance in acquisition
of land in the vicinity of factories, although there are bound to be insuperable
difficulties in the Legislatures agreeing to any such proposal which would dispossess
the small holder of land in India, where liability of cultivation is traditional.
Vide Tariff Board's Report, 1937, page 148.

66 .

Happily, in the case of sugarcane, a great deal of research in can&
cultivation had been carried out principally by the Coimbatore Station
before the Government of India decided to grant substantive protection
to sugar manufacture. The evolution of special varieties of cane through
careful crossing of indigenous with foreign types of cane enabled the
spread of improved cane over wide areas of cane cultivation. Not
that it has been easy for the Agricultural Departments to secure the
use of improved cane. But six years have sufficed to produce pre-
sentable results. The following table will be informative in this
connection.

TABLE No. 1

Acreage under Sugarcane, under improved varieties, production

of Cane *per Acre, gross production of Gur, and calculated

production of Cane-crop.

Year

Total acre-
age under
sugarcane

Acreage under
improved
varieties in

Average cane
production

Gross produc-
i tion expressed
> as gur (in

Calculated pro-
duction of sugar-
cane (10-11 fac-

in thousand
acres

thousand
acres

per acre
(in tons)

thousand
tons)

tors) (in
thousand tons)

1930 31 2,905

817 ! 123

3,359

35,789

1931-32 ' 3,077

1,170

14-1

i 4,116

43,316

1932-33 i 3,425

1,845

14-9

4,859

51,129

1933-34

3,422 ^ 2,295 153

5,055

52,455

1934-35 i 3,602 w 2,433 151

5,292

54,346

1935-36 I 4,154 3,056

15-3

6,102

61,202

1936-37 4,582 3,452

15-6

6,932

67,322

1937-38

3,869 I 2,968 15'5

5,579

55,637

1938-39 3,130 2,673

15'0

3,572

35.851

1939-40 i 3,640 2,893 i 15'0

4,748

47,672

1940-41

4,598

3,480

15-0

5,794

59,090

1 (Our est.)

1941-42

3,515

4,371

46,030

1942-43

3,600

5,076

...

1943-44

4,113

5,696

...

And the Second Tariff Board of 1937 writes with obvious exulta-
tion :

" The figures speak for themselves ; we add, however, a few ex-
planatory comments. In 1917-18 the area under sugarcane in India was
approximately 3 million acres and during the next fifteen years fluc-
tuated round this figure without material alteration. It was not till
1933-34 that as a result of the policy of protection any considerable
expansion in acreage occurred. During 1935-36 and 1936-37 the figures
exceeded 4 million tons but fell to 3,855,000 acres in 1937-38.

" Concurrently with the expansion of cultivation, there has occur-
red an equally marked improvement in the quality of cane. The
acreage under improved varieties of cane has increased from 817,000
acres, in 1930-31 to 3,341,000 in 1936-37 and the average yield per acre
from 12.3 tons to 15.6 tons. The supply of improved varieties of cane
is now generally adequate for the requirements of factories but this
should not be taken to imply that the limit of improvement in quality
has been reached or is even in sight."

Since the Second Tariff Board enquiry, there was a further increase
in the proportion of the area under improved cane varieties to the total
area under sugarcane (which, however, has been fluctuating from
year to year 1 ) and the process would have gone on uninterrupted, but
for the difficulties experienced by the industry in recent years. (Vide
table above.)

While the progress regarding acreage and the yield of cane has
been substantial, much more has to be done with a view to reducing
costs. Here, too, some improvement in costs of cultivation is noticeable.
The 1931 Tariff Board estimated that the cost of cultivation of cane
in Northern India was between 4 and 5 annas a maund. After allowing
for interest on working capital, insurance against damage to crop, cost
of transport at one anna a maund, they fixed eight annas per maund
as the fair selling price for a factory. They expected that, at the end
of the period of protection, there would be a reduction in the price
to six annas a maund. That the Board was liberal in its estimate of
the cost of production of cane per maund will be evident from the fact
that the second Tariff Board have estimated the all India average cost
at 3 annas 9 pies per maund when the average cost per maund for
cultivation in U.P. was 3 annas and 7 pies. Including 6 pies for
transport, the " fair selling price " is 4 annas and 3 pies. The original
expectations have therefore been more than fulfilled. The tendency
towards reduction in costs would have perhaps gone further but for
the policy of fixation of minimum prices in U.P. and Bihar in recent
years. It will be noticed from the table given ( above that there has
been no increase in the average yield of the crop since 1936-37 which
has been more or less stationary at 15.6 tons per acre.

The area under the crop alsp has tended to fluctuate violently.
Till 1936 the increase in the area under the crop was quite in accordance
with the growth of the industry. But since 1936, as remarked above,
there has been a considerable fluctuation in the area. While the
fluctuations in the acreage have been due partly to the condition of
rainfall during the period of plantation, the prevailing prices of sugar-
cane, the price of gur as also the returns from alternative crops and
the prospects and the price likely to be received from the cane crop
in the next season, the fixation of inordinately high prices in U.P. and
Bihar had a stimulating influence. The continuance of the policy of
fixing high minimum prices could not discourage cane production though
there was a glut in that season pulling the other way. As a result, in
1940-41 the production of sugarcane was again on a large scale and
the surplus cane had to be burnt in many cases as with the policy of
restriction in production, which was enforced in view of the huge carry-
over of sugar, and absence of outlet in any export markets, all the cane
grown could not be utilised. The reduction in area in 1940-41 and
1941-42 was mainly due to the notifications to the growers in advance,
of the proposed reduction in the manufacture of sugar and the fixation

1 The fluctuations in the area under cane are due to conditions of rainfall, the
prevailing prices of sugarcane, the price of Gur, as also the returns from alternate
crops, and prospects and prices likely to be derived from cane in the following
season, depending considerably on the policy adopted by Government for restricting
the total production of sugar, from time to time.

of uniform minimum prices for the season (not varying with the price
of sugar, as was the practice in the past) .

Apart from the problem of regulation of production of sugar and
sugarcane, attention has to be paid to a further reduction in th$ cost
of production of cane. No appreciable progress in this regard has been
made during the past few years. If Indian sugar should be in a position
to compete effectively, this is absolutely necessary, especially as the
cost of the raw material in the manufacture of sugar is as much as
53 per cent 1 of the total production costs and the principal competitor,
Java, has during this period been able to secure a further reduction
of costs.

It was thought in 1931 by the First Tariff Board that the limit
of technical efficiency had been reached by Java. Much as they were
justified in their assumption owing to what seemed at that time to be
ridiculously low level of costs, their finding has to a considerable
extent been falsified. There has been an increase in the average rate
of recovery to 13.21 per cent in 1935-36 from 10.46 per cent in 1931-32
and during the three seasons ending 1937-38, for which figures are
now available, it has averaged 12 per cent. The yield of cane per acre
in Java has also increased from 50 to 55 tons. With an average recovery
at 12 per cent and the production costs at Rs. 2 per maund including
profit, interest on capital, etc. the price paid for cane is 2 annas per
maund or even less. In Java most of the cane is cultivated in the
company's own farms. Though Java possesses special advantages, and
the same results may not be secured, the scope for progress in India
can hardly be denied.

The question of bringing down the cost of production, however,
bristles with many difficulties. With a varying climate, different methods
of cultivation and different kinds of taxation for irrigation purposes,
it is not possible to adopt any common policy for the cultivation of
higher yielding varieties. It is significant that though the South has
larger yields per acre, higher costs of production are incurred by the cane
growers in Bombay and Madras. As the Tariff* Board Report, 1937,
points out, the standard of cultivation in the Bombay Presidency is
exceptionally high and both the cost and yield per acre are above the
figures of almost every other part of India. The high cost is due
partly to the practice of heavy manuring but mainly due to the high
rates charged for irrigation from canals. In Madras the cost of cultiva-
tion varies with different parts of the Presidency but for the whole
province the average cost of production is estimated at 5 annas per
maund. 2

1 The 1931 Tariff Board estimated it at two-thirds of the cost of producing sugar
(vide page 27), while the 1937 Tariff Board estimated it at 53 per cent. Also see
Gandhi's Sugar Annual for 1939, 1940, 1941, 1942 and 1943.

2 It is very interesting to note the observation made by Mr. N. L. Dutt, Gov-
ernment Sugarcane Expert, in charge of the Imperial Sugarcane Station, Coimbatore,
in an erudite contribution on " The present position of thick Coimbatore sugarcanes "
in the September, 1942, issue of Indian Farming. He says : " As regards cost of
production per ton of cane, it was found at one of the experimental stations in
Madras that the cost of Co 419 was Rs. 6 per ton (equal to about 3.1/2 annas per
maund of 82 Ibs.) against Rs. 8 and Rs. 9 per ton of J 247 and POJ 2878 respectively.
The use of Co 419 in the estimation of the grower and the factory has been rapid.
That is why it is already one of the outstanding canes in the Bombay-Deccan. In
Madras, it is fast becoming prime favourite in several areas.

Thus, reduction of the costs of production of cane with a view to
improve the competitive capacity of the Indian sugar industry bristles
with innumerable difficulties. The discovery of improved varieties of
cane can by itself provide no solution. If Madras and Bombay have
to incur high costs on account of the irrigational facilities, the U.P. and
Bihar also experience in some measure the need for such facilities.
There are besides the insect pests to be combated ; and this is a more
important task in the sense that it is more immediate. The danger to
cane crops as a result of diseases in cane cannot be over-emphasised.

Diseases in Cane and Pests must be Eradicated

Great harm is done to the crop not infrequently by insect damage
in various provinces computed at millions of rupees to the agricultural
community in the country. In 1939-40 for instance, there was a wide-
spread outbreak of redrot and wilt in the cane-growing belt of Bihar,
and it appeared that the infection was worst where the largest areas
were kept under Ratoons. The Bihar Government issued a press com-
munique in July 1940 pointing out the great danger of infection to the
cane crop from Ratoons and they also observed that it was their intention
to fix considerably lower prices for Ratoon cane than for plant cane. The
Imperial Council of Agricultural Research also issued a note regarding
the pyrilla pest and observed that the best time to prevent pyrilla
damage was early in the year when sugarcane plants were generally
young and not high or leafy to prevent labourers from going into the
fields. They also stated that the records showed that the pyrilla was
a particularly bad pest which occurred in 4 or 5 years and as the last
outbreak was in 1937, the years 1940 and 1941 were considered dange-
rous for the recurrence of the pest. They, therefore, recommended
that widespread publicity should be given amongst sugarcane growers
and they should be asked to keep a close watch on the sugarcane fields
for any appearance of pyrilla in numbers, to collect and destroy imme-
diately all leafs so affected and to avoid Ratooning as far as possible
in 1940.

Valuable Educational Effect of Cane Crop in India

Sir John Russel, F.R.S., a distinguished British Scientist, in his
Report on the work of the Imperial Council of Agricultural Research
in applying Science to Crop Production in India, published in October
1937, observed that the Imperial Council can justly claim credit for
the great success in its activities in connection with the production
and utilisation of the cane crop. Though the total area under sugarcane
is only about 3| million acres out of 277 million acres cultivated in
India, the importance of the sugarcane crop is out of all proportion to
its acreage. So far as the cultivatfofe is concerned) sugarcane has a
valuable educational effect. In the words of Sir John Russel, " He (the
cultivator) learns the advantages of modern varieties of crops, of ferti-
lizers, of proper cultivation ; the need to watch for plant diseases and
to seek advice when he is in difficulties. The Agricultural Officer has
more chance to come in touch with a sugarcane grower than will an
ordinary small cultivator. From the national point of view, India is
a heavy consumer of sugar including gur, of course, standing second

amongst the nations of the world and being surpassed only by the
U. S. A. 1

Improvement in Yield Possible in India

It is true the yield of cane in the main sugarcane producing pro-
vinces is still far from satisfactory as compared with the yields obtained,
say, in Java. But it is definitely proved from the work of the Indian
Research Stations, as also from the experience of factories growing
canes, that high yields are possible. Experiments conducted with
Co.-360 and POJ-2878 at three sugar factories, one Government Farm
and three cultivators' fields in different parts of Deccan Canal area
in 1935-36 showed encouraging results. On the Ravalgaon Sugar
Factory, 50.5 tons of the former and 41.4 tons of the latter was the
yield per acre. In a competition organised by the Maharashtra Chamber
of Commerce in 1935-36, yields of 80 to 100 tons of cane per acre were
obtained without any reduction of the sugar value. In Mysore, in
1935-36, H.M.320 yielded as much as 36.86 tons per acre while H.M.606
yielded 51.88 tons per acre and H.M.607 yielded 50.40 tons per acre.
These results are no ground for despair. 2

Education of Cultivators by Demonstration of Improved Methods

Apart, however, from the immediate and important task of research
work in connection with the problem of pests, referred to above, there
is a great need for undertaking other measures which would bring home
to the cultivator the necessity and the desirability of effecting improve-
ments in the conditions of cultivation. The average cultivator in India
is hardly aware of the latest improved methods of farming or manuring
or crop rotation or selection of varieties suitable to the soil, and he
simply carries on the old and traditional methods of cultivation from
year to year without worrying about the importance of effecting any
improvement in the quality or the quantity of the cane grown on his
fields. Sugarcane is one of the most important crops of the country,
the annual value of which has been estimated at over 60 crores of rupees
and the prosperity of the second largest industry of the country is
closely linked with it. The growth of the sugar industry adds sub-
stantially to the resources of the ryot and even in the midst of a period
of depression it has enabled him to pay his rent or land revenue,
his irrigation dues, and other taxes. It is, therefore, the duty of the
Government to devise suitable means of imparting to the ryot instruc-
tion in modern methods of cultivation and to make available to him the
fruits of organised research. It is satisfactory to note the work done
in this connection by the Sugarcane Research Stations at Coimbatore,
Shahjahanpur and Muzaffarnagar, Karnal, Padegaon in the Deccan Canal
area,, Mushari (B & C), Pusa, Dacca, Mysore, the Jorhat Experimental
Station in Assam, at Risalewala and Jullundur in the Punjab, at

1 The consumption of sugar in the U. S. A. in the year 1934-35 was estimated
at 5,870,000 metric tons, in the United Kingdom at 2,283,000 metric tons and in
British India at 3,350,000 metric tons.

2 Vide in this connection the observation of Mr. N. L. Dutt in an article on
Indian Farming, in its issue of September, 1942, already referred to, where he
says : " The yield of Co. 419 in Bombay and Madras was of the order of 55 to 60
tons of cane per acre." ,

Bangalore, Anakapalli, Madras, Hyderabad and other places, for grow-
ing thick canes which have an importance of their own in India, and
for improving the quality of cane generally and evolving suitable canes
for particular areas by cross-breeds, etc. 1 Although improvements are
slowly being effected in the quality of cane grown in the various pro-
vinces, the time has definitely arrived when we should redouble our
efforts to establish more intimate contact with the cane cultivator and
to acquaint him by actual demonstration with modern methods of farm-
ing. For this purpose, it is essential to establish a series of demonstra-
tion farms and nurseries in all cane-growing provinces in order that
they may devote their energies to the propagation of cane of higher
sucrose content, of higher tonnage, of early and late-ripening varieties
for the extension of the crushing season, of increasing the yield by
suitable crop rotation, by provision of a suitable supply of water through
irrigation or tube-wells, etc. These demonstration farms and nurseries
should also serve as centres from where trained agriculturists would
tour round the surrounding districts in order to show or demonstrate
efficient methods of cultivation and manuring suitable to the soil in the
various places and would distribute disease-free seed amongst the culti-
vators. An important function of these farms would be to conduct
researches into the best method of combating cane diseases and pests.
In addition to the establishment of such farms, it is also necessary for
the provincial governments to undertake other allied tasks, of effecting
improvement in the cane cultivation by educating the ryot in the use
of irrigation water, by providing better facilities of irrigation, by
extension of canal system, and by affording suitable assistance in tapping
the subterranean sources of water supply.

Future Trend of Canes in India

Among the new canes, Co.419 is fairly on the road to becoming
somewhat of a universal cane in several parts of tropical India, while
Co.421 is likely to prove of great utility in certain tracts of Northern
India. The spread of Co.419 and Co.421 has been quick and pales
into insignificance when it is known that in Java POJ.2878, " Wonder
Cane " which was evolved in 1924, and which revolutionised the Java
industry, occupied by 1929 (within a period of five years) 95 per cent
of the area under cane in that country. Among other canes showing
promise of development in particular areas are Co.290, a medium-thick
cane, Co.360, Co.413, Co.426. Co.421 has yielded in Northern India,
where it is found suitable, a yield of about 950 maunds (35 tons per
acre) at the Experimental Stations Muzaffarnagar, Shahjahanpur and
Gorakhpur in the United Provinces. Vide Indian Farming., issue of
September 1942, pp. 473-477.

1 Excellent work done in this direction of providing thick canes suited for
tropical regions is narrated in an excellent article! in the July, 1942, issue of Indian
Farming by Mr. N. L. Dutt, Government Sugarcane Expert who recently succeeded
Sir T. S. Venkataraman who has immortalised himself by his epoch-making crosses
between sugarcane and sorghum, and more recently between sugarcane and bamboo,
which will confer everlasting benefits on Indian cane cultivation. The name of
Sir T. S. Venkataraman should be written in letters of gold for his successful efforts
in the improvement of cane- crop in India.

72
Tube-well Project in U.P.

The first extensive tube- well project in this connection was sanc-
tioned in the U.P. in 1939. It seeks to provide irrigation facilities in
the dry tracts of the seven western districts of U.P. where for various
seasons canal irrigation is not possible. They represent an investment
of 52 lakhs of rupees. This project will cover nearly 1J million acres
which will now be fully protected. About 1,300 tube-wells are now
working and each one has been so located that it can command an area
of two square miles with an approximate average of 1,000 acres of
cultivable area.

A fresh drive to organise the cane development work in the U.P.
was launched by the Provincial Cane Development Department in 1941.
The new plan of development, which has been formulated by Mr. R. L.
Sethi, the newly appointed Cane Commissioner, seeks to give a fillip
to the development work so that it receives due consideration.

The plan among others, includes provision for the following :

1. Development of compact zones round factories ;

2. Selection and propagation of tested varieties ;

3. Provision of suitable manures and tried cultural methods ;

4. Zone trials, and

5. Systematic regulation of seeds.

The Cane Development Scheme was started towards the end of 1935
with the help of contribution from the Government of India. The
U.P. Sugar Factories Control Act provided for the reservation and
assignment of areas and since 1938 that system has been in vogue.

There was no increase in the number of zones in 1939-40 which
was the same as in 1938-39 at 136 but the number of villages covered
was considerably higher at 13,826, against 9,594 in the previous year.

The scheme now extends to the areas of almost all the sugar
factories in the province.

For the successful working of the scheme the province has been
divided into three ranges western, central and eastern. The total
expenditure incurred by the Government on the scheme was
Rs. 10,19,823.

Over 32,00,000 maunds of improved seed were distributed to the
cane growers.

Manuring

Progress was made in improving manurial practices. A con-
sciousness was created amongst the cultivators of the necessity of
proper manuring not only for getting immediate better yields but even
more for preserving and increasing the fertility of the soil.

Improvement of Communications

Special attention was paid by many societies towards improvement
of the communications in their areas. The societies spent about
Rs. 67,359 for the improvement of communications in the western range.
Over and above this 349 pucca and 99 temporary culverts were con-
structed. This expenditure was made from contributions from the
societies, the growers and the factories. Other rural development
activities of the department included the improvement of irrigation
facilities, improvement of the quality of live-stock and propaganda for
the improvement of sanitary conditions of the villages.

Marketing

There were 66 central cane supply unions and 839 primary cane
societies for the development of cane and its supply to the factories.
The total quantity of cane supplied by these societies during the year
was 18,77,00,000 maunds, that is, 79 per cent of the total cane crushed
by the factories in the province. In the western range the societies
supplied as much as 88 per cent of the cane crushed by the factories.

We have digressed somewhat from the main argument of this
chapter, but only to show on how many different fronts the battle for
lower costs of production has to be fought. The efforts of the U.P.
Government in this regard cannot however reflect in full the complica-
tions of this problem as, in the nature of things, administrative action
can be attempted only on points on which experts are fairly agreed as
to the correct solution. Even in the programme outlined above, two
important issues, viz. ratooning and zoning are matters of controversy.

Ratooning

Ratooning is a subject on which there has been a good deal of con-
troversy, particularly since there is some evidence that ratooning causes
an increase in insect pests. The period of profitable ratooning varies
greatly in different localities and depends on the soil, variety and the
treatment which the crop receives. Ratooning, as at present practised,
has acquired a bad name, perhaps because the crop is often neglected.
Canes differ to some extent in their performance as plant canes and as
ratoons. On the whole thin canes are better suited for ratooning than
thick canes although thick varieties have also been found to ratoon well
in certain places. This subject was discussed at the Sugar Committee
Meeting in July 1936, where it was noticed that opinions of Directors
of Agriculture of factory owners and of cultivators were divided as to
the increase of insect pests in cane as a result of ratooning. The
question is at present receiving the attention of the Imperial Council
of Agricultural Research. It seems to be generally held that first
ratooning is permissible, Itftit that ratooning of cane crop beyond one
season does not find much favour amongst the factory owners. It is
now being realised that ratoons are easily susceptible to disease and
should be discouraged as much as possible.

Zoning of Areas of Cane

Of like importance to the efficiency of cane farming is the question
of zoning. The main feature of this system is the allotment of a definite

area of supply to each factory from which it can draw at least the
major portion of its cane supply and on which no other factory can
encroach. At first sight zoning seems to be of the very essence of
rational co-relation of cultivation and manufacture. But the first Tariff
Board took exception to it on the ground that it eliminated competition
and that the grower was at the mercy of the manufacturer in the absence
of any rules regarding the payment of minimum prices. The Second
Tariff Board 1 had no difficulty in recommending the system of zoning
in U.P. and Bihar as according to the Sugarcane Act, 1934, minimum
prices were in force and the idea was particularly suitable to these
two provinces owing to the large areas under sugarcane and th^ close
proximity of mills.

The advantages claimed for the zoning system are that it makes
the regulation of production of cane possible and avoids the possibility
of overproduction in any one particular area if the factories notify in
advance their requirements of cane for the season. Again, factories
will develop an interest in the area allotted and try to improve the
crop. This incidentally helps the problem of bringing down costs.
The tendency to improve the cane crop develops in the knowledge that
there will be no competition from the adjoining factories and that the
factory concerned will be free to enjoy the fruits of its labour. Regula-
tion of cane supplies is possible by the sowing of early and late ripening
varieties. The factories will also be able to work a longer crushing
season.

Economy in Transport Essential

While all this remains to be done, Java, too, is forging ahead with
further economies. The leeway between her and India is still consi-
derable ; and in the absence of protection, it might be found impossible
to compete with Java sugar. The cost of production for Java sugar is
estimated at Rs. 2-1-7 per maund before providing for interest on
working capital. Including freight, the cost of Java sugar was estimat-
ed at Rs. 2-10-0 per maund. Allowing for the difference in quality of
Indian sugar, 5 annas per maund and freight 9 annas, the difference
between the two costs of production was therefore Rs. 5-4-0 or Rs. 5-5-0
per maund, equivalent to Rs. 7-4-0 per cwt. Even according to the
Government who pointed out that production costs were assumed on
a liberal basis, the difference between Java sugar and Indian sugar was
as much as Rs. 3-4-10 per maund. During the remaining period of
the years of protection it was highly improbable that the industry could
go without a high level of import duty. The Tariff Board, however,
never believed that it would be impossible to compete at any time on
equal terms with Java and Philippines .a^ While the manufacturing
side is not without scope for economy, it is cultivation that has to bear
the brunt of the problem, by reducing the cost of cane through the
cultivation of cane with a higher sucrose content and heavier yield per

i Vide Tariff Board's Report, 1937, pages 44-46. It observed, however, that " if
a zoning system is introduced, it will be necessary to control the erection of new
factories and extension of existing factories by some licensing system," This was
done ini U, P t and Bifctar by the Sugar Control Act, in 1937,

acre. To the extent that minimum prices blunt the spur to improve-
ment, they must be held to delay progress. In these circumstances
it may be said that the assumption of state cultivation of cane and the
taking over by factories of farm cultivation may not only minimise
costs of transport of cane but enable the crop to be improved and har-
vested at the proper time to prevent wastage of sugar content. It has
been found that some mills have an efficiency equal to Jlava as judged
by their recovery figures, but their loss percentage of sucrose is higher
as compared with that of Java which is 1 to 1.5 (vide Tariff Board
Report, 1937, p. 72) . The difficulties in the way of such a development
are many and it is futile to dilate on the question here. As far as
possible, efforts should be made to reduce the cost of transport of
cane by intensive development of areas round factories and proper
zoning with due safeguards. State research should be intensified and
greater attention paid to the manufacturer's point of view. The con-
centration of the industry in two provinces has created special difficul-
ties 1 and these will have to be satisfactorily got over.

Another important factor to be considered in the discussion regard-
ing the possibility of reduction in costs is the duration of the crushing
season and the size of the factory. If the size of a factory is fairly
big, it may be possible to effect a considerable reduction in overheads
and it has to be remembered that this item is equal to the expenditure
incurred in the manufacturing process. Unfortunately, the difficulty
of getting adequate and proper supplies of cane makes it impossible to
work mills for a period longer than five months. The early and late
ripening varieties have not proved successful. In the early part of
the season, mills get cane which is under-ripe ; and towards the end
of the season, cane which is over-ripe. It is difficult to have a longer
season with different crops as it will not be possible for the ryot
to grow other crops. Some reform in this direction is therefore
necessary.

Regarding the economic size of the factory, the larger the size of
the mill, the lesser the incidence of overhead charges. But the main
points to be taken into consideration are the availability of cane in
required quantities without any increase in transport costs, the ability
to work mills for a longer season and greater access to markets. The
first Tariff Board took the size of the economic unit at 400 tons crushing
capacity per day as they were afraid that supplies of cane would not be
available within a given radius. 2 The difficulties in this regard have
been to a considerable extent overcome in U.P. and Bihar but the
advantages in respect of markets have been offset by the growth of
factories very close to one another.

1 One such defect came to notice prominently in June, 1942, when owing to
wagon shortage and transport difficulties, sugar could not be transported to long
distances, and this led to scarcity of sugar, long queues of men for getting small
quantities of sugar, black markets, etc. If this industry was developed more
uniformly over the various areas, it would have been possible to arrange for a
better distribution of sugar.

2 The Tariff Board of 1937 adopted a factory with 500 tons capacity as a reason-
able economic unit for the whole of India. Vide pages 60-61.

76
Average Cane-Crushing Capacity

In recent years there has been an increase in the average crushing
capacity of mills. The following table will show that there has been
a gradual increase in the crushing capacity during the years 1934-35 to
1940-41 and that in 1939-40 it was as much as 710 tons. In 1936 out
of 140 factories 26 had a capacity below 250 tons and 50 below 500 tons.
The majority%of the factories had, therefore, capacity below 500 tons.
Comparison should not, however, be made with the average actual
crushing capacity, as the potential crushing capacity is something very
different and is affected by the length of the crushing season. Con-
siderable extensions to plant have been affected in recent years to
effect an increase in the production of sugar and a decrease in the cost
of manufacture. Till 1934, this country had the smallest economic unit.
The following table will be of interest :

TABLE NO. 2
Cane-crushing Capacity oj Factories in India. 1

t
Year

Average cane crushing capacity of
Factory (calculated on the basis
of tons of cane crushed per day of
actual working) in India

Year

Maximum cane crushing
capacity of Factories
per day in India

1934-35

517

1934-35

2,012

1935-36

568

1935-36

1,807

1936-37

630

1936-37

1,960

1937-38

660

1937-38

2,000

1938-39

630

1938-39

1,850

1939-40

710

1939-40

1,960

1940-41

690

1940-41

1,980

1941-42

640

1941-42

1,800

From the foregoing it is very clear that, in spite of the considerable
progress made in recent years, there is still a lot of ground to be
covered. The difficulties in the way have been discussed in detail in
this and other chapters. One of the important aspects of the question,
the utilisation of molasses and by-products has not been given proper
consideration till very recently, and the need for a power alcohol
industry is grudgingly realised. With the continuance of the war, this
question may be given greater consideration and Indian sugar might
perhaps be in a position to take advantage of the present circumstances.
The period given to the industry to prepare itself to face competition
may be only five years, as protection will expire in March 1946, but
the actual time available may be much more. Her only three serious
competitors are the Philippines, Cuba and Java, but of these three,
two countries, Philippines and Java, are under enemy occupation and
the state of the sugar industry at the time of the cessation of hostilities
cannot be precisely forecast. But on the assumption that the factories
might have been damaged or razed out of existence, it may take some
time after the conclusion of peace for the industries in these two countries
to prove serious rivals to India. Cuba, of course, is far removed to be

1 Vide Indian Trade Journal, Calcutta, dated 17th September, 1942, and previous
issues.

a serious competitor to India. Besides, Philippines and Cuban sugar
are mostly taken up by the U.S.A. With the additional time available
and the possibility of great progress being made in the by-products
industries, the entrepreneur would be in a position to economise in
costs and if the Governments, Central and Provincial, are also sympa-
thetic in their attitude, post-war competition need scarcely unnerve the
Indian sugar industry.

The immensity of what remains to be done in the sphere of culti-
vation should not be allowed to blind us to the solid achievements of
the past or to their significance to progress in the future.

CHAPTER VIII
FIXATION OF CANE PRICES

THE effects on agriculture of the policy of protection to the sugar
industry were examined in the previous chapter from the point of
view of cheapening the cost of production of this all-important raw.
material. And it was found that the picture was on the whole one. of
presentable results and more or less impressive potentialities. To invent
by patient research the best kinds of cane and the best methods of
cultivation, to persuade the cultivators to adopt such methods and
secure a heavy yield of good quality cane, all this is one thing ; it is
quite another to provide the mills with cane which will enable them
to compete on equal terms with Java. For Java is delectably free from
that problem of securing a fair distribution of benefits between the
grower and the manufacturer which in India has proved the source of
controversy and of complication. In Java, the cultivation of cane is, for
the mills, only one stage in the manufacture of sugar, while in India
the price paid to the cane grower is the focal point of a large social,
besides being an economic problem. When the Tariff Board emphasised
the importance of the sugar industry to agriculture, it was understood
to hold out a means of improving the economic well-being of the cane
growers in the provinces concerned. This hope came in the wake of
a decade of sullen discontent among popular politicians with the ways
of the captains of India's protected industries. And the Central Legis-
lature persuaded itself to pass measures enabling regulations to be
framed for securing a fair price for the cultivator. 1 The fixing of
minimum prices for sugarcane came in thus as essentially a piece of
social relief, but so wedged in between the two processes of agriculture
and manufacture that at times it may be said to have acted to the
detriment of both. In the progress of the Indian sugar industry in
relation to world developments, it is unquestionably a forbidding hurdle
to be cleared ; and an understanding of this is necessary before we
can pass on from the agricultural to the manufacturing side.

Needless to say, the fixation of minimum prices did not come on
the industry all of a sudden. At the outset, the Central Legislature
did not contemplate any more than a few safeguards against the illite-
rate cultivators being duped by the agents of the millowners. And
the mills were at first required by the Provincial Governments to do no
more than affix notices in conspicuous places near the entrances of
the sugar factories showing the prices at which sugarcane was being
bought at the factories. This was done by the U.P. Government in

The enabling measure introduced in the Legislative Assembly on 13th
March 1934, and subsequently enacted as the Sugarcane Act, 1934, which permitted
the Local Governments to fix a minimum price or prices for the purchase of
sugarcane intended for use in any factory. The Statement of Objects and Reasons
appended to the above Bill and the Text of Bill will be found on page XXXV in
Appendix II (c) of the Indian Sugar Industry, Its Past, Present and Future, by
Mr. M. P. Gandhi, published in 1934.

November 1933, by publishing rules 1 under powers conferred on them
by Section 6 of the Sugar Industry (Protection) Act, 1932. (For the
text of this Act, vide Gandhi's Sugar Industry Annual, 1940) .

Such publicity, it was thought, was sufficient to offset the dis-
advantages of the poor cultivators of cane. From the obligation to
put up such notices every fortnight, to being obliged to pay prices
dictated by the provincial governments, was, indeed, a far cry, and
it must be observed that minimum prices were not brought into force
by the Governments of both the U.P. and Bihar without some searchings
of the heart on their part and strenuous opposition on the part of
the sugar millowners. It is useful and instructive to follow the contro-
versy as it brought out the principal objections from the practical
point of view to the adoption of this policy of fixation of minimum
prices of cane.

1 These rules were brought into operation from 1st December, 1933. In a
Press communique, the U. P. Government stated that these rules did not enforce
the payment of any prescribed prices or fix the rates which the factories should
pay for the cane purchased by them. It was also added that they were intended
primarily to educate public opinion and to provide cane -growers with data which
may enable them to ascertain what a fair price for cane should ordinarily be. It
was also made compulsory for factories in the U. P. to publish along with the
price paid for the purchase of cane, a figure of price of cane worked out according
to the following formula :
S XP

C = where

200

C = the price in annas per maund of cane delivered at the factory gate, including
charges or allowances for transport, dryage, commission and supervision ;
S = a figure fixed by the Government for each season for anticipated percentage
of extraction of sugar which does not vary by more than 0.25 from the average
percentage of extraction of sugar from cane for all sugar factories in the province
during the three previous working seasons. (For 1933-34. This figure was fixed
at 8.7.)

P = the average fortnightly price in annas per maund as announced by the Director
of Industries, United Provinces, Cawnpore, in the local Government Gazette based
on the highest wholesale price quotation for white factory sugar made in the
United Provinces on a f.o.r. Cawnpore basis minus four annas a maund.

Although these rules did not fix the price of cane, it will be clear that they
were definitely unfair to manufacturers. For instance, it is preposterous to take
the highest wholesale price quotation for white factory sugar (leaving second and
third quality sugar alone), and again not the ex-factory but the Cawnpore price
with the addition of Railway freight, as a basis for calculating the minimum price of
cane to all the factories in the U. P.

What is more, when the rules were first published by the U. P. Government,
they suggested, for the value of " P " the average price of Java white sugar in the
Cawnpore market (not even the Calcutta market as was recommended by the
Tariff Board), as the basis. The Cawnpore price for Java sugar was notably higher
than the price of sugar made in U. P. for various reasons including the keen inter-
national competition as a result of the growth of factories, the competition of
Khandsaris, the low price of Gur, the addition of freight and Customs charges
in the transport of Java sugar from Calcutta to Cawnpore which amounted to
Re. 1-9 per maund, and the superior quality of Java sugar. As a result of protests
from the mills, these rules were revised as stated in the above paragraph.

SxP
While we are in general agreement with the adoption of formula C = -

200

we feel that it would be fair if the fixation of the price of sugar would be based
on average wholesale ex-factory price of sugar of all qualities.

For details of the various objections to the formula, vide pages 166/170 of the
Indian Sugar Industry, Its Past, Present and Future, 1934, by Mr, M. P. Gandhi,

In July 1933, a Sugar Conference was convened by the Govern-
ment of India at Simla comprising the representatives of various inter-
ests, namely, the Central as well as Provincial Governments, millowners,
cane growers, etc. At this Conference, various important questions
like cane price fixing, zoning, licensing, control of cane cultivation were
brought up for consideration.

The Chairman of the Conference pointed out that any intervention
by the Government in any of the above matters must involve legisla-
tion. The present position, tlhe Chairman described, was that a man
could establish any factory when he liked, where he liked and could
buy cane wherefrom he liked and pay what price he liked. Similarly,
the sugarcane producer could bring under sugarcane such areas as
he liked, give up producing sugarcane if he liked, and sell it at what-
ever price he could get. That is, the policy of laissez faire prevailed
on both sides, and things were left to adjust themselves.

The champions of the cultivators who felt that the cultivators had
been robbed of their legitimate profits and were being paid too low a
price for their cane, and had the feeling that the manufacturers were
reaping a rich harvest of profits, suggested that in order to increase the
price of cane, minimum cane prices should be fixed, by legislation, as
then alone the interests of the cultivators could be safeguarded. Others
suggested that it would be unwise for the Government to intervene
in the interplay of economic forces and that, if things were left to
themselves, they would adjust themselves in the course of time.

Speaking on the subject of fixation of minimum prices, the Hon'ble
Dr. Gokul Chand Narang, Minister for Local Self-Government (in
charge of the Industries Department), Punjab, observed that Khand-
saris were known to be paying only 0-3-0 or even less per maund of
cane to the cultivator and it was wrong to penalise the factory industry,
which consumed only 5 per cent of the total quantity of cane produced
in the country. He also stated that 0-6-0 per rhaund of cane was an
economic price and that it represented cent per cent profit on invest-
ment. Mr. H. C. Prior, Revenue Secretary of the Bihar Government,
also suggested that in the opinion of the Bihar Government, distribu-
tion of profits was not unfair. In fact, he stated that the factories
had paid for cane about three times the price paid by the indigenous
gur manufacturer. He pited an instance that the average price of gur
made from cane in South Bihar was Rs. 2 a maund, and that it repre-
sented a price of about 1| annas per maund of cane, as against about
5 annas per maund paid by factories. A representative of the Indian
Sugar Mills Association enquired what the position of the sugarcane
grower would have been, if it had not been for the capitalists who
had sunk their money and taken all the trouble they had in setting up
the sugar factories. He further argued that even in areas where sugar-
cane had been planted, and grown for the factories, and factories had
not been able to buy those supplies, the sugarcane grower had not been
able to get in the very same locality, more than 1| anna per maund
for the cane which had been converted into gur, or had been used in
khandsari factories. He observed that the fact remained that, as a
result of the development of the industry, the sugarcane grower had
benefited, to the extent that he has been getting over 5 annas per

maund instead of li anna or so, for his cane. Besides, the . cultivator
had improved his quality of cane, thus getting a better return per
acre, and he would not have gone in for the improvement of the
quality but for the establishment of the factories.

The Government of the United Provinces were strongly inclined to
favour legislation for zoning factories and fixing a minimum price of
cane. Sir Jwala Prasad Srivastava, Minister for Education, United
Provinces, observed that in spite of the well-known defects of zoning,
he felt that zoning would be an advantage to the cultivator and the
factory, and along with zoning he suggested that there should be a
minimum price of cane which should be arrived at with the help of a
suitable formula, and further that there should also be a system of
licensed contractors from whom alone the factories should purchase
their cane, in order to guard against evasion of prices by factories. He
observed and with considerable truth that there were numerous factor-
ies which paid a fair price, which, however, did not reach the
cultivators.

In a memorandum circulated at the Simla Conference by Sir Jwala
Prasad Srivastava, it was suggested that there was no difficulty in
the United Provinces about laying down what the minimum price to
be paid for sugarcane should be. The generally accepted formula
laying down that the price of cane in annas per maund should be $$&
where p is the price of sugar in annas per maund, and s the average
extraction of sugar from sugarcane of all vacuum pan factories in the
province during the previous year, would be, he observed, suitable for
the province, and there was perhaps no objection to laying down a uni-
form price for the whole province and that, if necessary, the figures
could be varied with the time of the year at which the cane is delivered,
though a uniform rate throughout the season would be better. The
real point, however, he observed, was not in laying down the rate
but enforcing it. The danger was that even in such conditions the
price might not reach the growers, and therefore he suggested a system
of zoning, as also a system of licensed contarctors who should, by
legislation, be compelled to pay at least 90 per cent of the price they
received, to the actual growers. He further stated that the fixation
of a minimun\ price was a complicated matter, and lent itself to numer-
ous abuses.

It may be useful to note here how the proposal was viewed by the
representatives from various provinces, and by the different interests
represented at the Simla Conference. Mr. H. C. Prior, speaking on
behalf of the Government of Bihar and Orissa said : " The view of my
Government is that any legislation for zoning, licensing of factories, or
fixation of cane prices is impracticable and will go against the interests
both of the cane growers and of the development of the industry."
He observed, " The sugarcane was then the most profitable crop for the
raiyat to grow." He also added that a fair price was generally paid
for cane and it seemed likely that in North Bihar the ordinary rules
of supply and demand would result in a fair price being paid in the
future. He concluded by saying that the Bihar Government considered
that it would be absolutely impracticable to endorse by legislation the

payment of any minimum price. Dr. G. P. Hector, Director of Agricul-
ture, Bengal, gave expression to the Bengal Government's view that
legislation was not necessary. All that they were anxious about was
that nothing should be said or done at this stage of the industry to
frighten away capital. The Hon'ble Diwan Bahadur Kumaraswami
Reddiar, Minister of Education and Excise (in charge of Industries),
Madras, remarked that so far as the Madras Government were con-
cerned, they had at that time no intention of introducing legislation
in the local legislature. Speaking on behalf of the Bombay Government,
Mr. V. V. Gadgil said that they had not so far considered, nor had
they under contemplation, any Bill for fixing of prices, or zoning or
licensing. The representatives of manufacturing interests, it need
hardly be said, were also opposed to the proposal of legislation. Let
us see what views were expressed on the question of fixation of mini-
mum prices of cane by the Sugar Committee, and the Tariff Board
of 1931.

Practical Difficulties in Legislation

The Indian Sugar Committee, too, discussed the system of the scales
of payment for cane, and came to the conclusion that in Indian con-
ditions, a sliding scale based on a price of cane equal to half the price
of sugar manufactured from it, subject to a minimum of 6 annas per
maund would be suitable.

But the Tariff Board was sceptic about this proposal and came to
the conclusion : " It is clear that no direct measures can be taken to
ensure that a definite rate for cane is paid to producers/' They further
observed, " Conditions differ so widely in India, as regards the output
of cane per acre, the cost of cultivation and the sucrose content of
the cane that no one scale of payment would be suitable to all condi-
tions."

The Tariff Board also remarked that even if a scale could be de-
vised which would be suitable for the very varied conditions of cane
cultivation in different parts of India, the methods of evasion are so
numerous that it is improbable that this would be successfully en-
forced. The Tariff Board concluded : " But we must leave it to the
good sense of factory owners and to their realisation that eventually
the interests of the factory and of the cultivators are inseparably con-
nected, to ensure adequate payment to the agriculturist for his cane."

We may now discuss the practical difficulties then envisaged and
pointed out in enforcing legislation for fixing minimum price of cane.
In the first place, it is not easy to determine a standard quality in terms
of which the price could be fixed. For instance, should a factory buy
cane giving a smaller yield of sugar at the same rate as cane giving a
larger yield ? How are disputes regarding quality to be settled ?
What will the grower of the inferior cane do with it if he cannot sell
it to the factory at a lower rate ? Would not a fixed price take away
the incentive to improve the quality of cane ? Is the law to apply to
people who buy cane to make gur or manufacture sugar as khandsaris ?
How can it be discovered whether a middleman bought cane to sell
it to a factory or a gur maker or of khandsari ?

It was also argued that such a law would prevent direct contact
between the factory and the cultivator, which was so desirable, and
increase the number of middlemen.

The Factor of Railway Freight

There were also to be considered the disadvantages suffered by
some factories in comparison with others, in the matter of railway
freights. In some cases, the difference in railway freight between two
factories amounts to 6 annas per maund of sugar, which is equivalent
to a difference of half an anna in the price of sugarcane. Is it not
unjust that a factory which is subjected to the handicap of a higher
railway freight should have to pay compulsorily the same rate for
cane as a factory more advantageously situated in this respect ?

The difficulties as to what variations should be permitted in
regard to quality or variety of cane or season of supply, and as to what
might be done when the minimum price fixed was found to be in excess
of the price of disposal of cane in any other manner, were serious, and
it was difficult to devise an acceptable and equitable solution. There
is, above all, the fact that the authority which fixes a minimum price
for cane should also be able to assure the manufacturer of a minimum
price for his sugar.

Methods of Payment of Cane in Various Countries

Methods of payment of cane vary from country to country in
accordance with its peculiar conditions. A system found suitable in
one country may be utterly unsuitable in other countries, due to dif-
ferences in conditions of production, etc. Cane is raised in one of
the three ways :

(1) Entirely by independent cultivators (as in India).

(2) Entirely by mills themselves.

(3) Partly by the mill and partly by cultivators.

It is hardly necessary to add that the most economic method is
found where cultivation of cane and manufacture of sugar are con-
trolled by the same hands as in Java, because the smooth and efficient
working of ia mill depends on a well-regulated supply of cane of
adequate quality. But that system is not practicable in India today
for the obvious reason that agricultural holdings have suffered undue
fragmentation owing to our laws of inheritance.

Methods of payment must necessarily depend on the peculiar cir-
cumstances of each country, and it would be foolish to attempt to adopt
any system prevalent in another country, without considering the
differences in conditions. 1 For example, we cannot adopt the practice
in Java where 50 per cent of the sugar recovered is paid to the
planter for his cane, because sugar factories in Java do not buy cane
from planters, and plant, cultivate, and harvest their own cane on land
temporarily hired for the purpose ; nor can we adopt the method of

*Vtde page 16 of Maxwells' "Economic Aspect of Cane-sugar Production."

Queensland, where the price of cane is fixed by the Cane Price Board,
and the price of sugar is controlled by the Government and fixed at
a very high level; nor of the Hawaiian Islands, where also the great
bulk of the cane is raised by plantation companies. In Mauritius, where
there are a great number of small planters, the cane is bought at a
fixed rate per ton. The rate thus fixed varies according to the quality
of the canes, the locality, and other circumstances. There is also a
system in vogue in whicn the planter is paid on the extraction of first
grade white sugar or alternatively, on all sugars, per ton of cane
delivered. The actual quantity of sugar paid to the planter under this
system varies from 60 to 72 kilos according to the factory, its location,
and its efficiency.

Some Methods of Fixing Price of Cane in India

In this country, cane has to be purchased by the factories as a
rule from growers (except in Bombay where factories own their cane) ,
either direct or through contractors, in accordance with the rules and
regulations fixed by the Government of the Provinces concerned. Till
1934, the price of cane was fixed on the basis of Demand and Supply,
and there was no Provincial Legislation fixing minimum prices of cane
till 1934.

Sliding Scale of Cane Prices Suggested in 1933

To overcome the various objections pointed out before, a formula
of sliding scale of cane prices was first suggested by the Sugar Techno-
logist of the Imperial Council of Agricultural Research, in 1933. The
principle of the sliding scale of cane prices suggested was that the
price paid for a maund of cane should be equal to half the price of
sugar made therefrom.

The formula suggested by him is C = f where
C Price of cane (in annas per maund) .
S Extraction of sugar per cent, and
P Price of sugar (in annas per maund) .

The extraction percentage, it was stated, could be fixed for each
province every year or for five years in advance, and was to represent
the anticipated average extraction during each year. Thus the figure
of 8.7 was fixed for percentage of extraction of sugar for 1933-34 by
the United Provinces Government in accordance with the Rules pub-
lished by them in November 1933. Similarly, other provinces, could
fix a percentage to suit their own conditions. The percentage might
vary, from province to province, and from year to year, according to
the average extraction.

For the sake of illustration, a table is given below showing the
to different prices of sugar and different extraction percentages, cal-
culated according to the formula C =

TABLE NO. 1
Price of Cane corresponding to different extraction percentages

Price of Sugar

Price of cane (Annas per maund)

Extraction

Rs. a. p.

8-5

875

9-0

9'25

9-50

800

5-44

5'60

5-75

592

6t)8

880

5-78

595

6-12

6-29

6*46

900

612

6-30

6'48

6-66

6-84

980

6 '46

6-65

6-84

7-03

7'22

6-80

7'00

7'20

7'40

7'60

10 8

7*14

7*35

7'56

Til

7'98

7-48

7'70

7'92

8-14

8'36

The advantages claimed for this formula was that it has only one
variable, viz. " p ", i.e. the price of sugar, and could therefore be
understood even by the grower. It was also claimed that it would
give some advantage to an efficient factory with a higher extraction
percentage.

The price of sugar, it is suggested, should be fixed periodically by
some suitable authority, who would issue a statement showing the
average wholesale price for factory delivery of first grade white sugar
manufactured in India, during the preceding fortnight.

The price paid by the factory for cane would then be calculated
on the basis of the average price of sugar ruling in the nearest or most
representative market for which official figures are published.

The price of cane (value of " C ") for purposes of sliding scale
should, it is suggested, be for cane delivered at the factory gate,
including transport charges, dryage, commission, supervision charges,
all being taken at their actual figures, subject to a maximum, in the
aggregate, of one anna per maund.

It was observed by the Sugar Technologist that the difficulties, on
the score of methods of evasion which are easy and numerous in regard
to the enforcement of any scale of prices fixed by law, were not serious.
He also stated that the real sanction would be the knowledge by the
grower that he is entitled to a certain price for his cane. Hence, he
suggested that the factories should post notices at all places where
cane was being purchased, by or for them, giving full particulars of
price calculated according to the prescribed sliding scale, as well as
of the charges on account of cartage, railway freight, etc. Any dis-
putes might be referred to Cane Marketing Boards set up for groups
of 5 or 6 factories.

Let us now review the attempts made and methods adopted from
year to year, for fixation of minimum prices of cane in the various
provinces since 1933.

United Provinces Sugar Industry (Protection) Rules, 1933

The United Provinces Government was the first to frame rules
under the Sugar Industry (Protection) Act, 1932. These rules were
brought into operation from 1st December 1933.

The United Provinces Government stated in a press communique
that they did not seek to enforce the payment of any prescribed prices
or fix the rates which factories should pay for the cane purchased by
them. They were intended primarily to educate public opinion and
provide cane growers the data to enable them to ascertain what a fair
price for cane should ordinarily be.

These Rules 1 regulated the affixation of notices at conspicuous
places near the entrances to the sugar factories, on the 1st and 16th
of every month in Nagri and Urdu scripts, containing information as
to (i) the rates at which cane is being purchased (either by new con-
tracts or under previous contracts) at the factory (including its several
purchasing centres) together with transportation and other charges, and
(ii) price of cane worked out according to the formula C = -f^
where C = the price in annas per maund of cane delivered at the
factory gate, including charges or allowances for transport, dryage,
commission and supervision ;

S = a figure fixed by the Government for each season for antici-
pated percentage of extraction of sugar which does not vary by more
than 0.25 from the average percentage of extraction of sugar from
cane for all sugar factories in the province during the three previous
working seasons ;

P = the average fortnightly price in annas per maund as announced
by the Director of Industries, United Provinces, Cawnpore, in the local
Government Gazette based on the highest wholesale price quotation
for white factory, sugar made in the United Provinces on a f.o.r.
Cawnpore basis minus four annas a maund.

From this hesitant exhortation to active enforcement of minimum
prices was not a far cry. The minimum price for the purchase of
cane was fixed by Legislation in the UP. and Bihar for the first time
during 1934-35, with a view to secure a fair price to the growers, under
Sugarcane Rules framed under the Sugarcane Act, 1934. 2 The follow-
ing schedules which were adopted by the respective Provinces for fixing
the minimum price of sugarcane for each fortnight according to varia-
tions in the price of sugar, during the season 1934-35, continued to
operate in 1935-36 and in 1936-37, provision was also made for minimum
price of cane corresponding to an average price of sugar between Rs. 6
and Rs. 6-8-0 in view of the fall in price of sugar during 1936-37.

1 Any contravention of the rules shall be punishable with a fine which may
extend to Rs. 50.

2 This act was repealed in the U,P. and Bihar in 1938, when the U. P. and
Bihar Sugar Factories Control Act was passed and Rules were introduced in
1938. These have been subsequently amended, as found necessary.

TABLE NO. 2

Fortnightly varying Sliding Scale of Cane-prices, in
operation from 1934-35 upto 1936-37

Bihar

The United Provinces

Corresponding minimum

price of sugarcane

Average price

intended for use in

Average price

intended for use in

of sugar

Open Pan

Vacuum Pan

Open Pan 1 Vacuum Pan

Factories

Rs. a.

As. p.

Rs. a.

As. p.

Above

6 8

2 3

6 8

2 3

68170

2 6

4 3

6 8

2 10 i 43

78 28

4 6

78 30 46

7 8

2 10

4 9

7 8

3 2

4 9

8 12

3 4

8 12

9 4

3 2

, 5 3

9 8

3 6

5 3

9 4

9 12

3 4

5 6

98 10 3 8

5 6

9 12

10 4

3 6

5 9

Irreducible Minimum Price Fixed for the First Time in 1937-38, for

the entire Season

During the 1937-38 season, the minimum price for cane was not
fixed every fortnight varying with the price of sugar both in the U.P. and
Bihar. The minimum cane price schedule which was in force till 1936-
37 was established in the beginning of 1937-38. In Bihar and U.P. the
irreducible minimum price of sugarcane was fixed for the entire season
of 1937-38 at annas 0-5-3 per maund for gate cane, and annas 5 per maund
for rail borne cane.

In November 1938 the Governments of U. P. and Bihar issued
Notifications (8683-A/RIIA dated 17th November 1938, and No. 2017-D
dated 16th November 1938) respectively, announcing the minimum
cane price for Vacuum Pan Factories during the whole crushing season
1938-39. The following were the cane prices thus fixed :

No.

Per standard maund
of 82-2/7 Ibs.

Rs. a. p.

Cane purchased at the factory (or within a radius of 5 miles
therefrom in Bihar only).

069

Cane purchased at outstations and transported by railway
or other means at the cost of the factory exceeding 5 miles
but not exceeding 28 miles

066

Cane purchased at outstations and transported by railway or
other means at the cost of the factory for distance exceed-
ing 28 miles

063

On the 13th January 1939, Government of U. P. increased the
minimum price of sugarcane, with effect from January 15, 1939, upto

0-7-9, and with effect from 3rd March, upto 0-8-9 due to rise in the
price of sugar. The Bihar Government increased cane prices from
February 1939, upto 0-7-0 per maund.

During 1938-39, in the Province of Madras in the Hospet area, the
Government fixed a minimum price of cane at about Rs. 9-8-0 per ton,
roughly equivalent to 0-5-7 per maund. During 1939-40 the minimum
price in the Hospet area was fixed at Rs. 12 per ton for all varieties
of cane. In Mysore, the minimum price was fixed, varying
with the price of sugar, in 1939-40, as in the previous years.

The Mysore Government fixed a minimum price of Rs. 12 per ton on
all cane supplied from February 1940 to the end of May 1940. From
August 1940 the minimum price was reduced to Rs. 11 per ton and
further reduced to Rs. 10 per ton from October 1940.

Levy of Cess on Cane at 0-0-6 per maund in the
U. P. and Bihar and revenue therefrom

The Government of U. P. and Bihar levied a cess on all sugarcane
purchased by factories, with effect from the 1938-39 season, commen-
cing from 16th November 1938. The revenue derived from the cane-
cess in 1938-39 in the U. P. was Rs. 27,81,280 and in Bihar Rs. 14,34,000.
In 1939-40, the revenue from the cane-cess in U. P. amounted to
Rs. 40,04,350 and in Bihar to Rs. 17,86,000. The revenue from the
source has not been funded or assigned either in U. P. or Bihar. It
is understood, however, that large sums are spent annually on sugar-
cane and its development and also on roads particularly in the vicinity
of factories.

Sliding Scale of Minimum Price of Cane recommended
by Sub-Committee in U. P. and Bihar in 1939-40

At a meeting of the U. P. and Bihar Sugar Control Board held at
Patna on the 29th April, 1939, a Sub-Committee was appointed to
report, inter alia, on the scheme of minimum price of sugarcane, and
to consider the feasibility of a sliding scale of cane and sugar prices.
This Sub-Committee consisting of two representatives of the Govern-
ment, two representatives of the manufacturing interests, and two
representatives of cane cultivating interests met at Nainital on 18th
June 1939 and recommended to the Sugar Control Board for adoption,
the following sliding scale of minimum price of sugarcane linked with
the price of sugar:

The basis of calculation of sugar prices will be the same as when
the previous sliding scale was in use (i.e. in 1936-37).

The scale was unanimously accepted on the assumption of the
existing rates of sugar excise, viz. Rs. per cwt., Cess viz. 0-0-6 per
maund of cane, and co-operative commission (for supply of cane to
factories varying from 0-0-1 to 0-0-3 per maund) being maintained.

As a result of the unanimous recommendations of such a sliding
scale, the Governments of U. P. and Bihar decided to abandon their
previous practice of fixation of a non-varying minimum price of cane
for the entire season, and to re-introduce a system of fixing the

TABLE NO. 3
Sliding Scale of Minimum Prices recommended by Sub -Committee

Price of sugar per maund

Price of cane per maund

Rs. a. p.

and under

to 8

;

minimum price of cane, every fortnight, varying with the price of sugar
according to the above sliding scale or such modifications thereof as
they wished to make, with effect from the commencement of the cane
crushing season in November, 1939.

As has been -stated above, during the season 1934-35, 1935-36 and
1936-37, cane prices were fixed fortnightly in U. P. and Bihar according
to the then accepted schedule, which was more favourable to the
manufacturers than the schedule in force in 1939-40.

Minimum Cane Price Sliding Scale adopted
by Bihar and U. P. in 1939-40

On 27th October 1939, the U. P. Government issued the following
Press Note in connection with the fixation of minimum price of cane.

The Sugar Control Board appointed a Sub-Committee to examine
the question of suitable minimum sugarcane prices payable by vacuum
pan factories, and this sub-committee, which included representatives
both of sugar manufacturers and cane-growers, unanimously recom-
mended that the minimum price for sugarcane should be fixed every
fortnight in accordance with a sliding scale linking the cane price to
the average price of sugar calculated as formerly on the basis of the
ten highest price quotations at Cawnpore, 1 for first grade sugar
manufactured in the United Provinces for delivery by factories on an
F.O.R. basis. The Government have accepted this recommendation,
but have on consideration of all the relevant circumstances slightly
modified the scale of sugarcane prices recommended by the Sub-Com-
mittee. The scale decided upon by the Governments of the UP. and
Bihar was as follows:

i This was amended on 7th December 1939, and instead of ten highest prices,
"the average of all available market quotations of first grade sugar" was taken.

TABLE NO. 4
Scale of Cane Prices adopted by Governments in 1939

Per maund of sugar

Rs. a. p.

Under 7

to under 7

On the 7th December, 1939, the U. P. and Bihar Governments
decided to make an allowance of 0-4-6 per maund of sugar on account
of the rise in the price of raw materials as a result of the war and to
deduct this amount from the average sugar quotations before correlating
it to the price of the cane.

After the increase in the excise duty on sugar from Rs. 2 to Rs. 3
per cwt. with effect from the 1st March, 1940, the U. P. and Bihar
Governments decided to reduce the minimum price of cane by 9 pies
per maund (working out the cane prices in accordance with the
schedule which remained unaltered) .

From llth April 1940, the practice of fixing minimum price of cane
with reference to the sliding scale schedule given above was abandoned
and the price of cane was fixed at a flat rate with a provision for pay-
ment of a higher price to the cultivators if the factories were able to
sell sugar at a higher rate thus introducing virtually the system of
deferred payment for cane.

Opening Minimum Cane Prices in 1939-40

The minimum price for sugarcane for the period from November
1 to 15, 1939, was fixed as follows in the U. P.:

No.

Per standard maund

For purchase at the factory

Rs. a. p.
089

For purchase at Railway stations within 28 miles

086

For purchase at Railway stations beyond 28 miles

083

The minimum cane prices in Bihar from 1st November to 15th
November, 1939, were as follows :

No,

1.
2.

Cane purchased at the factory or within a radius of 5
miles therefrom

Cane purchased at outstations and transported by railway
or other means at the cost of the factory for distances
exceeding 5 miles but not exceeding 28 miles

Cane purchased at outstations and transported by railway
or other means at the cost of the factory for distances
exceeding 28 miles

Price per standard maund
of 82-2/7 IDS. avoirdupois

Rs. a. p.
089

086
083

The above prices were exclusive of the cane-cess of 0-0-6 per
maund both in U. P. and Bihar.

Minimum Sugarcane Prices in the Season 1939-40

For ready reference we are giving a table showing the cane prices
per maund in U. P. and Bihar for the entire 1939-40 season :

TABLE NO. 5
Cane Prices in 1939-40

Date

Cane prices

Deduction
Granted

Rs. a. p.

November 1 to December 15, 1939

089

December 16 to December 31, 1939

099

6 1

January 1 to January 15, 1940

10 9

9 1

January 16 to January 31, 1941 ...

10 3

JO 9 l
10 6 2

ro o 9

February 1 to February 15, 1941

< 6 2

[O 1 O 8

February 16 to February 29, 1941

090

f As in the first

March I to March 2, 1941

099

j fortnight of

March 3 to March 15, 1941

090

L February.

March 16 to March 31, 1941

090

fO 6 1
<0 6 2
to 9*

April 1 to April 10, 1941

089

| As in the prc-
l vious fortnight.

April 11 to April 30, 1941

063

May 1 onwards

056

*For the districts of Bahraich, Gonda, Fyzabad, Gorakhpur, Basti, Azamgarh
and Ballia. Belief is for all cane.

2 Relief for " Desi " cane in Basti and Gonda districts between 26-1-40 to 31-5-40
and in Gorakhpur districts between 3-2-40 to 31-5-40.

3 Relief in Gonda district only.

Date

Cane prices

Deduction
granted 1

Rs.

P-

Rs. a. p.

November 1 to December 15, 1939

...

December 16 to December 31, 1939

January 1 to January 15, 1940

6 1

January 16 to January 31, 1940

/ 6 (a) and
10 1 6 (b)

February 1 to February 15, 1940

JO 6 (a) and
10 1 6(b)

February 16 to Februry 29, 1940

1 6 (ft)

March 1 to March 2, 1940

March 3 to March 15. 1940

March 16 to March 31, 1940

April 1 to April 10, 1940

April 11 to April 30, 1940

May 1 onwards

The above prices were exclusive of the cess on cane of 0-0-6 per
maund levied from the commencement "of the season in 1939-40 upto
10th April, 1940, after which the Government decided to forego the cess.

Non-varying Cane Prices in the 1940-41 season, in U. P. and Bihar

The Governments of U. P. and Bihar decided to fix a non-varying
minimum price for the purchase of cane for the entire season, thus
abandoning the previous practice of varying the minimum prices of
cane according to the sliding scale in use during the season 1939-40.
The Government of Bihar issued a notification on the 4th December
fixing the minimum price of cane during the crushing season 1940-41
at 0-4-6 per maund. The Government of U.P. issued a notification
on 6th December fixing the minimum price of cane at 0-4-6 per maund
with effect from 15th December, 1940. On the 23rd December the
Government of Bihar issued a notification fixing the minimum price
of cane at 0-4-3 per maund with effect from the 23rd December, 1940,
for the crushing season 1940-41, while the Government of U. P. issued
a notification on the same date reducing the minimum price of cane
to 0-4-3 per maund for factories situated in Gorakhpore, Gonda,
Bahraich, Basti and Fyzabad Districts to 0-4-3 per maund. The mini-
mum price of cane in the other Districts was kept at 0-4-6 per maund.

Difference in price between gate-cane and rail-cane abolished

It must be noted that the difference prevailing between gate-cane
and rail-cane hitherto has been abolished and the same price is fixed
both for gate-cane and rail cane.

1 For the districts of Champaran, Saran, Darbhanga and Muzaffarpur. From
17-12-39 to 11-1-40.

(a) For the Sadar Sub-Division of the district of Saran and the districts of
Darbhanga and Muzaffarpur from 12-1-40 to 31-1-40.

(b) For the Bettiah Sub-Division of the districts of Champaran and Gopalgunj
Sub-Divisions of the district of Champaran and Gopalgunj Sub -Division of
the district of Saran from 12-1-40 to 29-2-40.

#,B. Relief is for Co-210 and Co-213 cane.

Cane cess and additional cess on cane

For the 1940-41 season, the Government of Bihar issued a notifi-
cation on the 25th November fixing the cess of 9 pies per maund on
all cane purchased by factories in Bihar (out of this 9 pies 0-0-3
represented the usual cane cess and 0-0-6 represented the repayment
of the excise loan given to factories in previous year.) The Govern-
ment of Bihar issued a further notification on the 23rd December
increasing the cess from 9 pies per maund to 12 pies per maund (0-0-6
per maund being the cess on cane and 0-0-6 per maund being the
repayment of the excise loan) and reduced the cane prices as stated
above by 3 pies per maund. The Government of U. P. issued a notifi-
cation on the 6th December announcing the levy of a cess on cane at
the rate of 3 pies per maund together with an additional cess of 6 pies
per maund being the repayment of the excise loan given last season
to the factories and they issued a further notification on the 23rd
December announcing the cane cess at 12 pies per maund, 6 pies being
the cess on cane and 6 pies being the additional cess for cane purchased
by all factories in the Province. The Government of U. P. reduced
the cane prices in the few districts stated above to 0-4-3 per maund
with effect from 24th December, 1940. The minimum price of cane
in other districts in U. P. was fixed at 0-4-6 per maund.

The total cess on cane in 1940-41 was 0-1-0 per maund.

The reason of the U. P. Government for reducing the price of cane
in the districts mentioned above was that there was likely to be a
considerable amount of cane left standing in those areas when the
quotas of canes allotted to factories had been crushed. The price of
cane in those areas was therefore reduced and the cane cess raised
by 3 pies so that the proceeds of this extra cess of 3 pies might form
the nucleus of a fund to which the Governments would respectively
contribute and from which compensation would be paid to tenants
whose cane was left standing at the end of the season.

A reduction of 0-0-6 per maund of cane was given in March, 1941,
to some factories in Bihar which drew their cane from areas where
there was surplus cane.

Non-varying minimum price for cane in U, P.

and Bihar in 1941-42 1 *

After the successful practice adopted in 1940-41, it was found
advisable by the Governments of U. P. and Bihar to fix again a non-

1 In the 1942-43 season, in view of the poor cane crop and the high prices
prevailing for gur, the U. P. and Bihar Governments fixed the minimum price of
sugar at As. 8 per maund but it was increased with effect from 1st January 1943
to As. 10 per maund, a relative increase in the price of sugar having also been
announced with effect from that date.

In the 1943-44 season, the minimum cane price in U. P. and Bihar was further
increased from As. 10 per maund to As. 12 per maund, but it was stipulated that
the additional two annas was to be paid in Defence Savings Bonds or Certificates
which were to be cashed one year after the war was over. ,

A recent announcement by the U. P. and Bihar Governments for the 1944-45
season fixes the minimum price of cane at As. 14 a maund out of which As. 2
per maund are to be invested in Defence Savings Bonds. The price of sugar was
also increased by Rs. 1-7-0 per maund in order to enable the factories to pay
an additional sum of As. 2 per maund of cane.

varying minimum price for cane, though at a slightly higher level,
for the 1941-42 season. It was thought desirable to offer a greater
return to the ryot in view of the smallness of the crop for the season.
Thus, the minimum price was fixed at five annas per maund against
4 annas per maund. The relative selling price for standard sugar
was fixed at Rs. 9-10 per maund. Deferred payments were to be made
to the growers if the selling price exceeded Rs. 9-12-0 per maund. 1

Price fixation militates against efficiency

It will be seen from the above history of price-fixing in the pro-
vinces which adopted it and particularly those of U. P. and Bihar that
the motive behind these measures was that the State should lend its
strength to the cultivator to get his share of the prosperity of the
industry. Obviously the Governments were not activated by a desire
to handicap the industry in its progress towards greater efficiency.
The idea that State intervention in the interest of the cultivator can
only create complications for the industry and ultimately defeat its
own purpose is beloved of orthodox economists and is quite in accord
with the theory of laissez jaire. The issues arising from this view
will be considered from the theoretical standpoint at a later stage.
Here it should be noted that the working of price-fixing during these
years is not calculated to inspire the enthusiasm of honest well-wishers
of the cultivators. It could hardly be considered unfair to the authors
of price-fixing if it is suggested that there was more enthusiasm than
practical knowledge behind these measures.

What is a " fair price "

Whatever definition one may give to the phrase "fair price of
cane" it is certain that no price that involves loss to the industrialist
can be considered to be fair. Any price paid under the dictates of
political authority, and not according to the indications of value offered
by prices in a free market, can be proved to be fair or unfair only by
the ultimate fate of the finished product. The price of sugar being
subject to many unforeseeable factors, there is always the possibility
that what seems at the start to be fair to the cultivators may prove to
be a case of serious injustice to the industrialist. This possibility is
inescapable, except when the amount paid to the cultivator at the
time of purchase of cane is only a part of the price and the accounts
are left to be adjusted after the sugar is marketed and the sale pro-
ceeds are realised by the millowner concerned. So long as such a
system is not adopted and it is not easier to adopt than any other
available alternative any stipulated price has the danger of proving
unfair to the cultivator or the industrialist.

In the case of price-fixing in the U.P. and Bihar, it was more than
a theoretical possibility and was often the nearest approach to certainty.
Measures to secure minimum prices for the agriculturist have always
to reckon with reluctant psychological effects on the cultivators. All

*On the basis of sugar prices fixed, after the Sugar Control Order of the
Central Government came into force on 14th April, 1942, the cane-grower was to
get the balance of the deferred payment for his cane supplies, the total price being
0-7-0 per maund, exclusive of cesses in U. P. and Bihar.

schemes of agricultural regulation in the post-depression period have
as a rule tackled the problem from the two ends of volume of produc-
tion and supply on the one side and prices on the other. In the case
of sugarcane, the effects of the price paid in one year on the production
in the next have been overlooked. And even if the authorities had
been aware of it, it is more than doubtful whether they would have
undertaken the restriction of production.

A chain of consequences

But, as things were, price-fixing measures have led to a chain of
mishaps for the industry which are not easy to avoid, once the
Government accepts the responsibility for fixing the price of cane.
Criticism of the prices awarded by the Governments has generally
been based on a comparison of such prices with prices paid by
Khandsaris or by the manufacturers of gur. Such criticism cannot be
expected to appeal to the authorities who hold that an industry which
has obtained protection on the ground of its importance to agricul-
turists ought to pay a fair price for the agricultural raw material which
it consumes. All other standards would appear to the Governments
as extraneous. Criticism to be valid must fasten on the fact that cane
prices tend to increased cane production, larger carry-overs, frequent
crisis in the sugar market and that such elements of instability cannot
be to the advantage either of the cultivator or of the industry.

An inversion

If the mills are asked to pay a higher price for their cane than
other consumers of it, then the agriculturist may be said to have his
dividend in his pocket before production has begun. It is an inversion
of the logical and chronological order in which events must occur and
the effect of such inversion would be to prevent such events from
occurring at all. Once the industry gets stuck in a depression, it will
be long before it is able to pay the same " fair " price to the cultivator,
so that every year of " fair " price is bound to be followed by two or
three years of " unfair " prices. Indeed, this has been proved by recent
experience. And official regulations regarding price-fixing must in-
evitably be in the direction of decreeing a tentative price, leaving final
adjustments to be made at a later stage after the results of the prices
of the entire production of the season are available.

Price-fixing not entirely to blame

One word of caution has, however, to be uttered while appraising
the experiences of price-fixing during the last few years. For, its
opponents will naturally be eager to attribute all the difficulties of
the sugar industry, not merely to the rates decreed by the authorities
for cane, but to price-fixing as such. Theoretically, there ought to be
a certain price which is fair even according to laissez faire theories,
though the fairness must be proved by the event of ultimate sale of
the finished product. And that price cannot become unfair merely
because it happened to have the support of a provincial Government.
Even if such a price had been fixed from year to year, it can hardly
be concluded that the sugar industry would have been wholly free

from the problems with which it was faced. The problem of carrying
over large stocks produced at high costs into a period of low prices
is by no means peculiar to the sugar industry ; and it is perhaps, too
late in the day to argue, even if it were practicable, that the sugar mills
should get cane by the same methods by which jute mills get their
raw jute ; when the experiences of fixation of cane prices are
examined, it must be borne in mind that the price-fixing has a com-
paratively small share of the blame for the over-production of the
sugar industry. But one thing is certain, that price-fixing has queered
its own pitch, so to say, and that it will be a long time before it gets
a fair chance to prove its worth. Also the methods by which the
principle of a tentative price can be brought into application have to be
worked out in a manner which would be equitable to both the interests.

Pros and Cons of Price-fixing

It remains now to consider whether price-fixing is necessarily
deemed to be a costly and dangerous futility. The position of the
laissez faire economist hardly needs to be stated at length. For, it is
no more than the contention that the laws of supply and demand being
natural laws, any interference with them will bring on that terrible
vengeance which nature wreaks on man whenever he stupidly seeks
to secure a triumph over her. Besides, to impart rigidity to one part
of the structure of costs because the market is otherwise free is to
condemn the structure to ruin. All this is as valid as it is intelligible.
But those who advocate fixed prices for cane have certain presupposi-
tions of their own ; and as has been observed earlier, criticism by
extraneous standards can claim little validity for itself. In this case,
the presuppositions are that the market for sugar is a closed market ;
that prices of sugar cannot fluctuate beyond certain limits, that the
price of cane can be altered from year to year, while the responsibility
for regulating production according to the state of the market must
rest with the industry. It is argued, therefore, that price-fixing need
not stand in the way of the industry increasing its efficiency, that the
cane prices need not raise costs or endanger fair prices for sugar.

A Problem of Costs or of Distribution ?

It is not difficult to appreciate this point of view. The difference
between the two parties arises mainly from the fact that, while the
laissez faire economist views the price of cane as a question of costs
and of production, the. advocate of price-fixing regards it as a problem
in distribution. The latter only insists that, when the millowner pays
the price for cane, the problem of distributing the profits or other
advantages of a protected industry should be solved at least so far as
the cane-grower is concerned. Empirically, when a price is paid for
cane, it is not only the cost of the raw material but also the cultivator's
share in the advantages created by the grant of protection to the
industry. So far as the millowner is concerned, there are other items
in his costs and the computation of his profits or his share in the
advantages of a protected industry can be done much later. But, for
the cultivator, the price he gets for his cane closes his accounts in this
regard. The question, therefore, is whether this price can be so fixed
that this closing of accounts can be indubitably equitable to him. To

award a tentative price with room left for a final adjustment at a later
stage is to postpone the solution of the problem of distribution envi-
saged here. But that is precisely the line on which the Sugar Control
Act attempts to solve the problem.

The Structure of Costs

But the gravamen of the charge against price-fixing, from the side
of economic theory, is that it imparts rigidity to costs and incapacitates
the industry for its main task of reducing costs of production. The
emphasis on lower costs arises from the anxiety that the stage of
removal of protective duties and resumption of free trade should be
reached as soon as possible. The means by which costs are lowered
rarely worries the economist ; for he never concerns himself directly
with the problem of distribution. The same laws which ensure
economy in production and costs are expected to bring about fair
distribution as it is understood by laissez jaire theory. But the post-
depression period is remarkable for a growing scepticism towards such
theories and a refusal to wait for their slow working for the economic
security of men and women. Theories of underconsumption are in
the main a reaction from the over-emphasis, which orthodox economics
has laid on the production side and particularly on the reduction of
costs of production. While there can be no question that increased
efficiency both of labour and of plant and machinery, of men and
material, ought to be ceaselessly striven for, the tendency to include
wages as only an item in the costs schedule to be cut as relentlessly
as any other is strongly to be deprecated. It is no accident that, while
protection in India is awarded with a view to bring new industries
into being, protection in the advanced industrial countries of the west
is given with a view to maintain standards of Kving. The conflict
between lower costs and standards of living, laissez faire ignores.
While theoretically it may be resolved in the long long run and in
ideal conditions of free trade, the conflict is real in real life. To ask
the sugar industry to reduce costs regardless of what the cane grower
gets for his pains is to believe that the only way of distributing the
benefits of protection is to cheapen the goods for the consumer. Much
indeed can be said against this view: firstly, the "consumer" is an
unreal abstraction, and what the cane-grower may get by way of
cheaper sugar will be poor compensation for what he loses by the
drive for lower costs. And the cane-grower is not a consumer of white
sugar ! Secondly, there is no guarantee that cheaper raw material
would lead to proportionately lower costs of sugar production or that
the benefits of lower costs will be passed on to the public. The demand
for fixed cane prices is a demand that the mills should not monopolise
the benefits of protection and that when the " consumer " cannot be
helped to get a share of them, at least the cane-grower can and ought
to be.

Anticipatory Solution

Price-fixing ought to be viewed as a severely limited objective
It is in essence a half-hearted, piece meal, slipshod way of solving the
problem of distribution so far as it concerns the cane-grower and is
to be condemned- or supported as such. But when such attempts are

seen to flow from any ambitious scheme of regulation which oversteps
-the limits set by free trade theories, it is necessary to see the bearings
of such anticipatory solution of the problem of distribuion.

The Human Factor in Cutting Costs

It has been observed already that the insistence on wage standards
and on fair prices for agricultural raw materials is only a case of such
anticipatory solution. In so far as distribution is attempted before the
productive processes are completed and the results of productive
activity can be known, it is a reversal of the correct order of events
and must be attended by some risk of eventual unfairness. But oppon-
ents of price-fixing or wage-fixing condemn them not so much on
grounds of possible unfairness, as on the ground that those regulations
will interfere with the industry's attempt to cut down costs and cheapen
the product for the large mass of consumers in the country. It is in
relation to this laudable aim of progressive decrease of costs that these
measures have to be considered. The question to be considered in
this connection is whether the cheapening of a product through relent-
less cutting of costs, regardless of what the human factor gets in return
for the pains, is the only or the best means of securing economic pro-
gress. Experience of the last two decades has shown that such decrease
in costs is more often than not a pyrrhic victory for the capitalist, for
the industry and for the community. When the reduction in costs is
accomplished in a number of industries at the expense of labour or
the growers of the agricultural raw material, a crisis in consumption
occurs inevitably. One is therefore driven to the position that economy
from a communal standpoint, as different from that of the investors in
an industry, consists in the most effective use of material in the pro-
duction of goods and services and that somewhat different standards
have to be applied to the labour involved.

The Crisis in Consumption and Maladjustments thereof

If it is true that the adoption of the same attitude to men as to
material leads to a crisis in consumption, then it is necessary that; the
industry should be told that savings at the expense of labour will not
be regarded as genuine economy in production. Logically, the distinc-
tion between men and material, so far as production costs are con-
cerned, wears thin indeed. For, it would mean that labour-saving
devices are the very reverse of economy in production. Nevertheless,
it. should not be difficult to recognise that when such devices throw
men out of employment, the resulting maladjustments are highly un-
economic, at least temporarily from the standpoint of the community
as a whole. In other words, what may be economy from the point of
view of the production side is " diseconomy " from that of the distri-
bution side,

Lower Costs not an Unmixed Blessing

Orthodox economics refuse to regard this even as a possibility ;
and the whole structure of the science is such that it cannot compromise
with the logical proposition that when economic life is free, there is no
problem of distribution as such to be faced. But in real life, problems

of distribution call for at least as much attention as problems of pro-
duction. The assumption that the race for lower costs has only to
be run for the best results to be achieved is seen to be unwarranted.
Lower costs are no longer regarded as the unquestionable or unmixed
blessing they were formerly said to be ; and problems of distribution
are, therefore, frankly faced.

Price fixing an " ad hoc " solution in distribution

However, the solution of these problems is not easy. Problems of
distribution are inextricably inter-woven with questions of ethics :
and solutions are limited by what is politically practicable. The
decrees of political authority in regard to distribution are usually
dictated by political considerations. Except in the impossible condi-
tions of absolute economic equality such decrees can only be an un-
helpful tinkering with the problem. But they are important because
they signify the growing element of regulation in economic policy, /They
are tokens of social determination that problems of distribution ought
not to be allowed to accumulate in one uncontrollable crisis of under-
consumption. They indicate, too, that there is a large mass of opinion
which would much rather face the consequences of interference than
lay up a huge problem for future generations by letting everything
alone. Above all, it is a bland assertion that a cut in wages or in the
price paid for agricultural raw material is no economy at all. It is a
sharp rebuke to the capitalist that if he is so intent on cheapening
sugar for the consumers, he had better show his mettle in other
directions.

It should not be thought, however, that price-fixing for cane
necessarily implies indifference to the cost of production of cane or
that the industry is called upon to pay a price for cane which leaves
a fair margin of profit for the cultivator regardless of his efficiency
as a producer. When the Tariff Board observed that the provision of
cheap cane is vital to the growth of the sugar industry they did not
mean that the cultivators should provide cane to the millowners at a
loss, but that the cost of cultivation should be reduced by the adoption
of improved methods of cultivation and securing higher yields of cane
per acre and of better quality. Both the cultivator and the millowner
have thus a score of technical problems to face and solve, and price-
fixing must be viewed as an interim award by an " ad hoc " tribunal
for distribution.

CHAPTER IX

ECONOMIES IN PRODUCTION BY UTILISATION
OF BY-PRODUCTS

WE have seen in Chapter VII what the protection to the sugar industry
has done for cane cultivation and, what is more important, what
agriculture so aided and revivified can do for the sugar industry. We
have also noted, somewhat parenthetically, how agriculture has, to
some extent, through official fixing of price for cane, retarded the
progress of the sugar industry towards lower costs of production. All
this is important in as much as the further cheapening of Indian sugar
rests more with agriculture than with industry. We must now turn
to the other end of sugar manufacture, and consider the utilisation of
by-products. It is a common-place of text-books of economics that
the utilisation of by-products is a main source of economy in large-
scale industry. It is, in fact, a scientific rendering of the common
adage "waste nothing, want nothing." This adage is, however, one
which the country, rather than any particular industry should take
to heart, particularly when it sets about establishing new industries
at great cost to the consumer. We have said before that in India the
problem is to make the most of every new industry established by
means of high protective duties, rather than one of ticking off the
results of actual working as each year passes in the stipulated period
of protection. While this is true, at the same time the sugar industry
has been handicapped not a little by the fact that it has been obliged
to waste its valuable by-products and thus forego one of the means of
cheapening its costs.

Utilisation of By-products, (Molasses and Bagasse) :
Molasses, most important by-product

Molasses is the most important by-product of the Sugar Industry,
from the point of view of the factories as also of indigenous small-scale
manufactures. Molasses is that liquid substance or syrup which
remains after the massecuite has been cured. It is often boiled again
for making lower qualities of sugar, and the molasses finally obtained
is exhausted and contains very little sucrose. The other by-product
is bagasse or as it is sometimes called megasse. This bagasse is the
residue of fibrous matter which remains after the cane is crushed.
Out of 100 maunds of cane about 10 per cent of sugar and 3.6 per cent of
molasses are recovered by the factories and about 5.2 per cent of sugar
and 4.5 per cent of molasses are recovered by the Khandsaris.

Precipitous Fall in Price of Molasses

Formerly, the molasses produced by the factories and khandsaris
was consumed largely in the tobacco industry and in the manufacture
of plain country spirits. The consumption of molasses in both these
ways has fallen by more than 75 per cent at the present time. While

101

there has been such a heavy fall in the consumption of molasses, its
production has naturally increased considerably since 1931, as a result
of the establishment of a very large number of factories. The pro-
duction of molasses in India was estimated at 269,000 tons in 1930-31
and 366,000 tons in 1931-32. And in 1939-40 it amounted to as much
as 625,000 tons. 1 The molasses obtained in the khandsari sugar factories
is richer in sucrose than factory molasses and is either sold direct to
the consumers or made into second class eating gur. The sudden
increase in the production of molasses with a concomitant decrease in
its consumption has created a problem of first rate importance and
should engage the anxious attention of all sugar manufacturers. At
present, it is not possible to realise even one anna per maund for the
molasses while a price of Rs. 2-12-0 was obtained in the year 1930-31.
When the Tariff Board reported they assumed in their calculations that
the factories would be able to realise about Rs. 1-8-0 per maund for
their molasses. The Indian Sugar Committee stated unequivocally
that " the time is remote when the sugar manufacturer in India need
anticipate any difficulty in disposing of his molasses." This has how-
ever proved to be incorrect, since 1934.

Impossibility of throwing away Molasses

It is really unfortunate that a situation has developed whereby
not only can this most important product of the sugar industry not be
profitably utilised, but it involves expenditure for its disposal.- If the
molasses are thrown in the adjacent river or watercourse, there is no
doubt that the water will be polluted. If it is allowed to run into pits,
it would prove a serious nuisance to the neighbourhood. The situation
is one in which a certain source of wealth is turned into a loss to the
manufacturer and a possible menace to public health in the neighbour-
hood of the factories.

Outlets for Molasses

The problem therefore should be examined very closely in order to
remove a great handicap of the industry almost since the very first
year of the regime of protection. The quantity used in curing tobacco
will decline further, owing to the increasing use of biris and cigarettes,
and decrease of hookah and chilam. We must therefore think of other
outlets for disposal of molasses. These are :

(i) Methylated spirit,

(ii) Cattle food.

(iii) Production of the yeast as a source of food,

(iv) Fertiliser,

(v) Road-surfacer.

(vi) Cheap confectionery,

(vii) FueL

(vizi) Alcohol for power in partial substitution of petrol.

These channels, we shall now consider.
* In 1942-43, it was 469,000 tons and 1943-44, it was 538,000 tons.

102

Methylated (Denatured) Spirit, and Potable Spirit

A glance at the Import trade statistics will show that about a
million gallons of methylated or denatured spirit are imported annually
from Java. During the year 1932-33 the import was 8,56,800 gallons,
valued at Rs. 8 lakhs, as compared with 10,52,400 gallons valued at
Rs. 10 lakhs in 1931-32. During 1937-38 the import was 379,010
gallons, valued at Rs. 3,14,042. An increase in the duty from 7i per
cent ad valorem to about 25 per cent would make it possible to shut
out its import completely and to substitute the same by the indigenous
product. An outlet for a part of our production of molasses can thus
be found in the development of the Indian Spirit Industry. Spirit can
be manufactured from molasses. A large quantity of it is used by
the various industries, e.g. Lac Industry, Varnish Industry, Paint and
Furniture-polishing Industries. As a result of the great fall in the
price of molasses it would be possible to encourage the distilling
industry in the country without affecting in any way the industries
consuming spirit, and to supply the country's requirements from
internal production cheaply owing to the tremendous fall in price of
molasses. The loss to Government's revenue will be only about
Rs. 75,000 per year.

The production of country spirits in India has decreased consi-
derably, during the last 12 years. About 1920, the quantity of
molasses consumed for making potable spirit was 4 times the quantity
used in 1938. But the excise duty has resulted in the consumption
being scarcely large enough to justify the operation of distilleries.
At present (1939) the distilleries suffer due to lack of an outlet and
have hardly enough work for 6-7 months in a year. This is partly
due to the Government's policy of reducing the consumption of potable
spirituous liquor, and of deriving maximum revenue from minimum
consumption. One result of the excessive taxation has also been the
increase in the practice of illicit distillation of liquors by the poorer
classes. Distillation could be increased, if the increase were socially
desirable. But inasmuch as the popular parties are wedded to a policy
of prohibition, the solution of the problem of molasses has to be sought
along other lines than that of liquor production.

Cattle Food

The scope for the use of molasses as cattle food does not appear
to be great due to the difficulty in marketing combined with a tradi-
tional conservatism of owners of most of the cattle in India, as they
are used to free grazing with hardly any expenditure on other food-
stuffs. But now the molasses can be given away without cost by
factories, a certain amount can thus be consumed. This may solve
the problem of disposal, but it is not a means of finding a market for
this by-product of the sugar industry.

Yeast

The use of molasses as a source of yeast is new to Indian ideas, and
is not likely to develop very much.

103
Fertiliser

It is possible to use molasses as a fertiliser in its raw state, but our
cultivators will have to be educated to its use and ample supplies of
water would have to be provided in order to dilute the molasses before
it could be put on the land.

Used in a small quantity, it tends to improve the land ;
Sir T. Vijayaraghavachariar recently observed that he had seen molasses
being used as manure. This avenue of use for molasses should
therefore be explored and the Agricultural Department should carry
on research in regard to the same. It is also possible, we are informed,
by using a particular Plant to recover the potash from molasses and
to produce ash with a high content of potash therefrom.

Potash is necessary to plant-life in order to enable starch, sugar
cellulose arid carbo-hydrates to be produced. Potash plays a large
part -in the development of leaves and woody parts of the stems of
plants and gives the plant more resistance to attacks of fungous diseases
or the like.

Sugarcane on an average extracts from the soil about 100 to 150
pounds of potash per acre and it is desirable that this should be
replaced either by potash recovered from molasses or from fresh resour-
ces, if the land is not to be impoverished and the yield of crop maintained.
It is possible to return the available potassic content of molasses in an
easily assimilable form to the land and to use it for the fertilisation of
sugarcane or other crops,

One essential for this invention is a furnace to burn molasses
at the lowest temperature and recover the highest possible yield of
potash. There has also to be provision for burning waste molasses
from cane sugar factories or gur refineries comprising a furnace into
which the said waste product suitably pre-heated is introduced into
or a revolving drum from which it falls as drops or threads to be
burned as it falls. It has been estimated that the working cost for
dealing with 12,000 maunds of molasses in 24 hours works out to li
annas per maund of molasses. Taking the average ash contents of
molasses to be about 9 per cent, 100 maunds of molasses will yield
9 maunds of ash which may have an approximate potash content of 34
per cent or 3 per cent of valuable fertiliser value. Such a product
based upon other potash products will have a value of Rs. 2-12-0
per maund at the factory. Reduced to one maund of molasses the
estimated value of the product will come to about 4 annas from which
the cost of treatment will take away 1 annas. The estimated profit
will therefore be at least 2 annas per maund of molasses thus treated.
For the whole season this will give a substantial profit.

Utilisation of Molasses for Reclaiming Usar Lands

During the year 1938, the Government of U. P. appointed a
Committee to report on the suitability of the methods advocated for
the reclamation of Usar lands with special reference to the use of
molasses etc. The Committee submitted its final report to the
Government in December 1939. The Committee considered very
carefully the feasibility of utilising molasses for reclamation of Usar

104

land. It also critically examined all the data available in U.P., Bihar,
Punjab, Madras, Bombay and Mysore, and came to the conclusion that
molasses could be utilised with advantage for reclamation of Usar
areas, but for the fact that the cultivators might find the cost of the
treatment to be distinctly prohibitive. The majority of the members
of Usar Lands Reclamation Committee found it a little difficult to
recommend this method for places which are not within 10-12 miles
of a sugar factory. The Committee also felt that there was need for
further work both in the field and laboratory so that the question of
molasses as a reclaiming and fertilising agent might be critically
tested. In short, wherever the cost of treatment permits it, mixtures
of molasses and pressmud in different proportions can be utilised in
reclaiming alkali lands.

Road Surfacer

Another use, though comparatively insignificant, to which molasses
can be turned, is for road surfacing, by mixing it with a certain
amount of Pitch. Experiments in this direction are far from complete ;
and it still remains to see how far this can be a commercial success,
in competition with other products.

Confectionery

Molasses were used for cheap confectionery in the villages, but
since the decline in the price of gur and sugar, its consumption has
considerably decreased.

Fuel

Molasses can also be used as fuel. Some experiments were carried
out in Java, and a few factories burnt a mixture of bagasse and
molasses. In Australia several mills burnt molasses as fuel in their
furnaces. Molasses mixed in small proportion with bagasse burns
well and produces profitable calories. This practice is followed in
many centres in the Philippine Islands when there is a shortage of
bagasse or when this has only a small calorific power, which happens
as the requisite quantity of molasses is too small for this purpose to
solve the problem of its disposal.

A countless number of furnaces have been proposed for the
burning of molasses alone in the Philippine Islands, but none of them
to our knowledge has given satisfactory results. Besides, the construc-
tion of special furnaces, its repair and maintenance entail heavy
expenses for which there is no compensating benefit. The possibilities
of this, however, should be investigated in India.

In some factories the press-cakes are mixed with slack coal and
brickets are manufactured. These bricks are used for burning.

Power Alcohol

It is certain, however, that the best and most promising outlet in
India for the molasses would be in its manufacture as power alcohol.
The entire scientific world is unanimous in its recognition of the fact

105

that the fuel of the future for engines of internal combustion is alcohol.
This can be produced from vegetable materials with which nature
provides us generously and there as no danger that they will be
exhausted in the course of time. The development of this industry
is of considerable importance in the industrial development of this
country ; it is vital because of the possibility of providing the country
with a motor fuel which is both cheap and easily obtainable. Alcohol
has many advantages over gasoline. One of these is the fact that its
source is not a wasting asset^ The raw material for it is produced
annually, and alcohol is the only fuel which can be produced without
danger that its existing natural source of supply will be exhausted.

The manufacturer of sugar finds in molasses first class material
for the production of alcohol. 1 The future development of the alcbhol
industry can easily go beyond the limits of the imagination of the great
enthusiasts, not because its growth can be achieved easily but because
of the constant and increasing demand for motor fuel at low prices.

The value of alcohol as a fuel for internal combustion engines has
been recognised in various countries, e.g. France, Germany and
America. In Germany alcohol was used during the last World War in
very great quantities by the army for motor transport, for which
purpose it was mixed with benzol. The importance of alcohol as a
fuel depends on its possibilities in the future as a substitute for
kerosene or petroleum.

Alcohol has a lower caloric power than kerosene or benzol or
benzine ; but since it requires less air to effect combustion, less caloric
power is lost, and since its resistance to compression is greater, it is
of more value as a fuel than the other two substances. Kerosene or
petroleum is not a chemically pure substance but a mixture of great
number of substances. Its properties cannot be determined definitely,
since they vary as the grade of petroleum varies. While alcohol is
low in caloric power, it possesses an ignition temperature around
270 degrees and can be used only with a pressure of from 70 to 90
pounds per square inch. Due to this the thermic efficiency can be
increased from 22 per cent to 30 per cent.

The start of engines burning alcohol offers no difficulty, and
engines burning alcohol develop 20 per cent more power than the same
engines when they burn gasoline. The combustion of alcohol is perfect
and the escaping gases do not exude an offensive smell. Pure alcohol
offers great advantages. Since alcohol contains oxygen in molecules,
it requires less air for combustion than gasoline does. Another out-
standing feature in favour of alcohol which should not be lost sight of,
is its clean combustion. The carbon formation is practically nothing.
The cleanliness of alcohol as fuel, compared with gasoline, can be
demonstrated by burning a small quantity of gasoline and a small
quantity of alcohol and holding a cold piece of metal or a glass object
over the flames of each product. Alcohol which is of uniform com-
pression and contains one-third of its weight in oxygen, burns com-
pletely and does not leave any deposit or residue.

1 " Molasses is the cheapest raw material in common use for the production of
alcohol for industrial purposes, the price being governed by supply and demand."
Vide, report of the Imperial Sugarcane Research Conference, London, 1931.

106

Alcohol also does not produce violent explosions such as gasoline
and other motor spirits proluce. As a result, the motor runs smoothly,
thus reducing the wear and tear. The engine is not overheated as in
the case of gasoline or other fuels. It keeps the spark plugs clean, thus
assuring more efficient ignition. Alcohol, it is also recognised, is a
good " anti-knock " fuel.

As alcohol generates less heat in the combustion process, it needs
less water for cooling. It is less disagreeable to work with and the
danger of poisoning due to inadequate supply of air does not exist
when alcohol is used in an engine in a closed place. Medical experts
have expressed the opinion that the rapid increase in cases of neurosis
or hysteria in big cities is due to the fact that the air is poisoned by
carbon monoxide. This could be prevented with the use of alcohol
as fuel instead of gasoline.

Even if the cost of production of alcohol is high due to the neces-
sity of using denaturants which are very costly and of little use but
whose use is imposed by legislation coupled with taxes which must
be paid to the Government, the manufacturer of alcohol can still put
his product on the market at low prices. If the manufacturers of
alcohol can succeed in getting the Government of India to abolish
the use of costly denaturants and substitute less costly ones for them
such as petroleum and gasoline for motor alcohol and exempt alcohol
from any excise duty as on petrol, the immediate success of the
industry would be assured. It must be observed that 95-96 alcohol
mixed with gasoline or ether will prove unsuitable for use as the
continuous evaporation produced in the carburetter will lower the
temperature to a limit which will give way to the separation of alcohol,
then the gasoline or ether, more volatile, evaporates, leaving alone the
alcohol which will hinder normal evaporation of the motor. Pure
alcohol, however, mixed with gasoline in fixed proportions improves
the quality of the former. It is mixable at all temperatures, never
reaching a point of separation. The best way therefore of having an
outlet for the production of alcohol is to make the distilleries manufac-
ture pure alcohol.

Assistance to Power Alcohol Manufacturing Industry
Compulsory use of Alcohol with Petrol

Power alcohol can be produced in India and mixed with petrol in
the proportion of one part of alcohol and three parts of petrol or 20
per cent alcohol and 80 per cent petrol. Several countries have in
fact passed legislation making it imperative for petrol companies to
use a certain percentage of alcohol with petrol. Below is a statement
showing the form in which assistance might be given to the industry
and what is done in other countries.

. AUSTRALIA.: A mixture of 17 per cent alcohol and 83 per cent
petrol is used on a small scale legislation contemplated.

AUSTRIA. (1) The law provides that mixing shall be compulsory
if the (duty paid) price of petrol exceeds the price of alcohol not
operative.

107

(2) The petrol Cartel takes over the alcohol from the State
Alcohol and arranges disposal. During 1933 it is expected that they
will take over about 250,000 gallons.

BRAZIL. Petrol companies are required by law to purchase power
alcohol equivalent to 5 per cent of their petrol imports. The law is
suspended as most of the alcohol produced is only of 94 per cent
strength and the concentrating plant is of insufficient capacity.

CZECHOSLOVAKIA. The addition of 20-25 per cent of alcohol to
motor fuel is compulsory and 98 per cent of the petrol sold is this
mixture. The amount of alcohol so used is about 11 million gallons.

FRANCE. (1) Importers of Petrol are under a legal obligation to
take from Government a quantity of alcohol equivalent to 8-10 per cent
of their petrol imports.

(2) The State buys alcohol from the refineries up to a certain
limit of quantity at 41 per ton (Rs. 1-15-3 per gallon) and sells it
to the petrol distributors at a much lower price corresponding roughly
to the (internal) price of commercial motor spirit, viz. 17 per ton

(13 annas per gallon) the loss being partly made by a special addi-
tional import duty of Is. 3d. per gallon on all imported petrol and
kerosene. The amount of alcohol to be allocated for motor fuel for
1933 is estimated at 45 million gallons.

(3) All " heavy " petrol must be mixed with 20-25 per cent of
alcohol, this is sold at 24 d. per gallon cheaper than "light" petrol.
A mixture of 20 per cent alcohol is permitted without a declaration
in fuel grade petrol.

(4) The cost of these subsidies to the State is estimated at 206
million francs or say 3 crores of rupees.

GERMANY. The oil importers and indigenous producers are required
to purchase from the alcohol monopoly a quantity of power alcohol
corresponding to 10 per cent by weight of their imports of petrol and
benzol plus 6 per cent of their imports and | or production of kerosene
at a control price of 45 per ton. The amount of alcohol taken over
is estimated at 42 million gallons. The mixtures permitted range from
10 per cent to 30 per cent alcohol.

GREECE. (1) It is proposed to standardise a mixture of 78 per
cent petrol with 22 per cent alcohol but also to permit the use of
unmixed petrol.

(2) To fix annually the quantity of mixture to be made. It is
estimated that 1| million gallons of alcohol would be so used.

HUNGARY. (1) Petrol over .735 S.G. must be mixed with 20 per
cent alcohol (unless used for agricultural purposes) about 90 per cent
of the motor fuel used is this ' Motalco '.

(2) The duty on light petrol (below .735 S.G.) is 4d. per gallon
higher than that on ' Motalco '.

ITA&Y. A definite allocation of the total production of industrial
alcohol is made to the motor industry at present 2 million gallons
which is less than 3 per cent of the total consumption of motor spirit.

108

This is taken over at a control price (Rs. 1-6-10 per gallon) but does
not pay the petrol duty.

LATVIA. The mixture of 25 per cent alcohol with 75 per cent
petrol is compulsory. The alcohol is a State monopoly.

SWEDEN. There is no legal regulation but power alcohol is free
of all duty. The mixture used is 25 : 75. The quantity of alcohol
used for motor fuel is about 2 million gallons.

YUGOSLAVIA. The mixture of 80 per cent petrol with 20 per cent
alcohol is compulsory except for aeroplanes.

It can be seen from these statements that whereas in several
countries the use of a specified mikture has been made compulsory, in
others, the principle has been adopted of requiring the oil companies,
by legislation, to purchase annually a quantity of power alcohol cor-
responding to a certain percentage of their imports and production of
petrol and benzol ; and in some countries even of their kerosene. The
adoption of this method leaves a certain amount of latitude to the
petrol distributing companies in distribution, and in practice the mix-
ture is sold at a price somewhat lower than pure " light " petrol in
spite of the fact that it actually costs more. A more positive method
of promoting the use of alcohol as a motor fuel is its exemption from
duty as in Sweden, but the Government of India is hardly in a position
to forego any revenue.

Modification in Denaturing Rules in India Essential

Several countries have been experimenting for years with power
alcohol in order to make it a commercial success for use fn internal
combustion engines. The United States of America, South Africa and
Philippine Islands have succeeded considerably with mixtures of
alcohol and ether, e.g. Natalite but these countries are fortunate
enough to have received the full support of their governments. The
greatest drawback in this country, however, to any experiments in this
direction materialising lies in the present Excise Rules relative to
denaturation. The Government insists upon the use of Caoutchoucine
as an ingredient for denaturation. This substance which is obtained
from the destructive distillation of rubber is not suitable for denaturing
alcohol intended for use in internal combustion engines as it leaves
a gummy residue which clogs valves and fuel jets. True, Government
have of late relaxed to some extent the use of Caoutchoucine for de-
naturation in special cases, e.g. manufacture of high grade soap and
have permitted in its place the addition of 5 per cent Wood Naphtha,
but the price of this ingredient is prohibitive. It is held by some that
the use of Caoutchoucine or Wood Naphtha is not imperative as a de-
naturant so long as Pyridine, the other ingredient insisted upon, is
used. Pyridine in itself renders alcohol unfit for human consumption
and if denaturation be permitted with Pyridine along in increased
proportion of 1 per cent instead of i per cent as at present the diffi-
culties regarding the denaturation of commercial spirit will be imme-
diately overcome and power alcohol could then be produced to sell
considerably below the current price of petrol in the mofussil.

109
UJP. and Bihar Joint Power Alcohol and Molasses Committee

In January 1938, the Governments of U.P. and Bihar appointed
an expert committee to devise ways and means for starting the manu-
facture of Power Alcohol from molasses and to report on the best
method of mixing Power Alcohol with petrol and also to explore the
possible use of molasses and their practical application.

The Committee submitted its report to the Governments of U.P.
and Bihar in June 1938. The report was published in July 1939. The
findings of the Joint Committee on various important questions per-
taining to the enquiry regarding power alcohol and their recommenda-
tions are given below.

U.P. and Bihar Joint Committee's Findings 1

The Committee has dealt with the subject of power alcohol tracing
its growth in the various countries of the world, and also with reference
to the importance it Has now assumed so far as India is concerned.
It has endeavoured to deal with the properties of power alcohol and
has, with the materials available, forecasted what the cost of manu-
facture would be. The Committee has also suggested that it would
be possible for power alcohol being produced at a price, which would
enable it to bear, if necessary, an excise duty equal in amount to that
of petrol without imposing any additional burden either on the tax-
payer or the motor-owner.

It would be seen that if the entire surplus quantity of molasses,
estimated at 265,000 tons, be converted into power alcohol, about 15
million gallons of it can be produced, calculating one ton of molasses
as equivalent to 57 gallons of power alcohol. The total consumption
of petrol being as high as 100,000,000 gallons, the abovementioned
quantity of power alcohol can be easily utilised, particularly as there
would be little difficulty in the disposal of power alcohol in the interior,
where it can be sold at the same price as petrol. Thus the replacement
of 15 million gallons of imported petrol by indigenous power alcohol
would mean a saving of about Rs, 40 lakhs per year to the country.

The Committee emphasised that the case for the development of
the power alcohol industry within the country has assumed particular
importance with the separation of Burma from India. It appears to
be in the national interest to encourage the manufacture of power
alcohol, and thus get rid, to such extent as is possible, of the dependence
of the country on imported petrol, the regular supply of which cannot
be assured during an outbreak of hostilities, when it would be iti
greatest demand.

Power alcohol is an ideal fuel having great flexibility, which makes
is possible to be used in higher proportions for heavy types of vehicles.
If, therefore, for some reasons there is a serious shortage of petrol in
the country, or imports are obstructed, or if the price of petroleum
which is dependent to some extent on political considerations is en-
hanced to an uneconomic level, the country would have an alterna-
tive supply of fuel, namely power alcohol, to fall back upon.

iThe writer (Mr. M. P. Gandhi) had the honour of being a member of this
Committee.

110

The Committee estimated that the quantity of petrol consumed
in the United Provinces and Bihar will soon reach a figure of 10 million
gallons 1 so that the requirements of power alcohol for the two provinces
would be in the neighbourhood of 25 million gallons, for the manufac-
ture of which about 44,000 tons of molasses would be required. But
there is no doubt that if a start is made, it will be possible to supply
power alcohol to the neighbouring areas as well, and the quantity of
molasses so utilised will increase gradually. Although, therefore, the
relief given to the molasses situation in the initial stages would not
be very substantial there is the certainty that, once the industry is
established, it will be possible to extend considerably the use of
" industrial alcohol " and methylated spirit. The Committee was thus
convinced that the power alcohol industry satisfied all the necessary
conditions required for the establishment of a new industry, namely a
cheap and abundant supply of raw material in the form of molasses,
an adequate supply of labour, and an extensive home market present
as well as potential.

Findings of the Joint Power Alcohol and Molasses Inquiry Committee

The findings- of the Committee on various important questions
pertaining to the inquiry regarding power alcohol are given below :

(a) The quantity of surplus molasses per annum is estimated at
about 265,000 tons for the whole of India.

(b) The scheme for the export of molasses from India has virtually
been a failure,

(c) (i) The use of power alcohol-petrol fuels mixed in proper
proportions in place of straight petrol is not likely to give rise to any
trouble and would not ordinarily require any change to be made in
the adjustment of the engine or carburetter, (ii) The use of a 50 : 50
power alcohol-heavy petrol mixture in motor lorries and buses may be
found to give more satisfaction in tropical countries like India than
in Europe, (iii) Straight alcohol, even of the usual rectified spirit
strength, can be used without much trouble in specially designed
stationary engines or for running tractors and other agricultural
machinery.

(d) There are two recognised processes for the manufacture of
power alcohol, namely, the Azeotropic and the Saltdehydration process.
Judging from the number of installations all over the world, both the
processes seem to be quite satisfactory.

(e) The conditions in the United Provinces and Bihar are very
favourable for the manufacture and use of power alcohol made from
molasses.

(f) The power alcohol industry can be established without a
subsidy from the Government. But, even if it were slightly more
costly, the industry should be encouraged, as it would lead to the
development of other industries.

1 In 1937, the off- take of petrol was estimated at 5.1/2 million gallons in the
United Provinces and 2.1/4 million in Bihar.

2 Vide also the views expressed in this connection emphasising the urgent neces-
sity of establishing this industry, in order to prevent difficulties which would be
caused in the event of a blockade of India by see, etc., in a separate Note attached
to this Report, by Mr. M. P. Gandhi, vide Report, page 141, Appendix XVIII-E,

Ill

(g) Power alcohol can be marketed in the United Provinces and
Bihar, as also in the other adjoining inland areas at substantially the
same, if not lower, price at which petrol is now being sold.

(h) The average price of petrol, ex-pump calculated for most of
the large towns in the United Provinces during the greater part of
1937 was Rs. 1-9-0 per gallon.

(i) Power alcohol can be manufactured at such a cost that an
excise duty almost equal to that on indigenous petrol can be levied
on it.

(j) The manufacture of power alcohol seems to be a subject under
the control of the Provincial Governments.

(fc) (i) The cost of manufacture, by the Azeotropic or the Salt-
dehydration process, of power alcohol, starting from rectified spirit
and excluding the cost of denaturation, would be about As. 6i per
gallon, when the cost of molasses is As. 6| per maund delivered at
distillery. By adopting a modified process, it may be possible to bring
down the cost to about As. 6 per gallon. Again in case molasses are
available at As. 4 per maund, these prices would further go down by
about As. 1 per gallon respectively, (ii) The price at which power
alcohol may be delivered at the petrol mixing depots in these two pro-
vinces may not be higher than Rs. 1-4-0 per gallon, after paying As. 6
per maund for molasses, As. 1 for denaturants, and As. 10 as excise
duty.

(I) The average cost of imported petrol at the railside petrol
depot in the United Provinces works out to about Re. 1-5-0 per gallon.

Recommendation of the Joint Committee
The Committee, therefore, made the following recommendations :

(a) The power alcohol industry should be established under the
control of the Provincial Government.

(b) A Power Alcohol Advisory Board should be established.

(c) The duties and functions of the Board would be to advise the
Government generally on all matters connected with the industry.

(d) Necessary legislation should be enacted at an early date for
the compulsory mixture of power alcohol with petrol.

(e) Petrol should not be allowed to be retailed until it has been
mixed with power alcohol.

(/) The present petrol distributing organisations in these two
provinces should be required to take up the distribution of the fuel.
Failing satisfactory arrangements being made with them, the Govern-
ment should make alternative arrangement for the same.

(g) Power alcohol should be made available at all petrol depots
at a uniform price contracted with the Governments, inclusive of any
excise duty.

(h) Petrol used for admixture with power alcohol should conform
to specifications laid down by the Government.

(i) The denaturants for power alcohol may be one of the following :
(1) " Coal tar Benzole "3 parts by volume, or (2) Wood Spirit 2.5
parts by volume per 100 volumes of power alcohol.

112

(j) The Government should explore the possibilities of promoting
the use of alcohol-mixed fuels for power purposes in agricultural
operations, especially in sugarcane areas.

Industrial Alcohol

The findings of the Committee on various important questions with
regard to the uses of industrial alcohol and also of molasses for other
industrial and agricultural purposes are given below :

(1) There is a large field in India for expansion in the use
of alcohol for industrial purposes.

(2) The use of "methylated spirit" for purposes of heating and
lighting may be considerably increased by suitable propaganda
especially when there is the possibility of marketing it at a price com-
petitive with kerosene.

(3) The "Vend-fee" of As. 8 per gallon levied on methylated
spirit is very high as compared with the excise duty on kerosene.

(4) The high rate of " Vend-fee " on methylated spirit is a great
handicap against its more general use.

(5) The present market in India for vinegar, acetic acid, com-
mercial organic solvents, and such other products wherein alcohol is
used as a raw material, is small, but is capable of being developed.

(6) The use of molasses as a fuel is unremunerative.

(7) The use of molasses for making road compositions is still in
the early stage of experimentation.

(8) Investigations regarding the utilisation of molasses for making
composite cattle-feed have so far not given any discouraging result.

(9) Yeast for cattle-food can be manufactured from molasses at
the same time as alcohol, and the economic possibilities in this direction
seem to be attractive.

(10) The use of molasses as manure in normal soils has not received
much support from the majority of agricultural experts in India.

(11) The use of molasses for reclaiming usar soils has aroused
considerable interest and is being tried in different parts of India.
At many places encouraging results have been obtained and extended
trials are being given to this process of reclamation.

Recommendations

(1) " Industrial Alcohol " for use in internal combustion engines
should be (i) more heavily denatured than power alcohol ; (ii) free
from any kind of excise duty, and (iii) sold at almost the cost price.

(2) Research work should be undertaken by the Government on
all technical matters connected with the use of industrial alcohol for
power generation in stationery engines, tractors and lorries.

(3) Intensive propaganda work should be done to popularise the
use of methylated spirit for household purposes, such as for heating
and lighting.

113

(4) Facilities should be given by the Excise Department to en-
courage experimental investigations for the commercial use of industrial
alcohol for solvent and other purposes.

(5) Investigation should be made into the commercial and practi-
cal possibilities of combining the manufacture of alcohol with that of
yeast for cattle feeding.

(6) The results of the experiments now being carried out under
the Imperial Council of Agricultural Research on (i) the feeding of
cattle with bagasse oilcake, molasses cakes, and (ii) road making and
surfacing compositions, should be closely watched by the Government,
as these uses may form in future substantial outlets for molasses.

(7) The Agricultural Departments of the two provinces should
give an exhaustive trial to the method of reclaiming usar soils by the
application of molasses, and study carefully the economic aspects.

Concluding Remarks
The terms of reference to the Committee were :

(1) To advise on the manufacture of power alcohol out of
molasses ;

(2) To report on the best method of manufacture ;

(3) To report on the best method of manufacturing petrol-alcohol
mixture ; and

(4) To explore the possibilities *>* m.nTmfjirtma^ of the use of
molasses in -tibe other practical applications.

Under the first heading, the Committee has stated that the manu-
facture of power alcohol out of the molasses is a feasible proposition,
being an economic one, and that power alcohol could be manufactured
and sold in the United Provinces and Bihar, and in the other interior
places, at a price which could be less than the present selling price of
petrol, and which could bear, if necessary, the same excise duty as
the Government of India may levy on petrol.

The Committee feels that the best method of developing this
industry, which is an important one, would be by introducing legisla-
tion in the United Provinces and Bihar, and in such other provinces
as would like to do so, making it compulsory for all petrol sold in
these provinces, to be mixed with power alcohol in a definite proportion,
say, 20 per cent by volume of power alcohol.

The petrol alcohol mixture should be prepared under Government
supervision, which could be effectively done by the entire production
and distribution being regulated by an Advisory Body referred to
elsewhere.

As regards the best method of manufacture, there are two well-
known processes Aseotropic and Salt-dehydration both of which can
be tried in India.

The mixture of petrol and alcohol does not appear to present any
serious difficulties. The best and the practical method of effecting this
appears to be, for alcohol to be transported in bond from the various
places of production, to places where there are bulk installations by

114

the distributing agencies for effecting alcohol-petrol mixture, the actual
mixing being done in a suitable manner, as may be decided upon to
safeguard the interests of the Excise Department.

The Committee was of opinion that the other uses which molasses
could be put to, e.g. for the surfacing of roads, for feeding cattle, and
for reclaiming usar soils, are still in the experimental stage, and the
various problems connected with them have not been sufficiently worked
out.

The Committee, therefore, felt that from the economic point of
view, the most profitable outlet for molasses an important by-product
of sugar industry now running almost to waste is in the manufacture
of alcohol required for power generation and for other industrial pur-
poses. It is also convinced that several other industries such as the
manufacture of commercial organic solvents, acetic acid, chemicals
requiring alcohol as one of the raw materials or ingredients in their
manufacture will develop in the country with the establishment of the
power alcohol industry.

There can be no doubt that in modern times the production of
motor fuel is a matter of vital importance to every country, and it
would b* desirable if India developed her resources for the production
of a motor fuel which can be pressed into service, if and when neces-
sary for purposes of speeding up the mechanisation of the army, and
the development of air-craft. The early establishment of the power
alcohol industry on a sound basis will enable India to become an object
of strength not only to herself but also to the Empire.

Bihar and U.P. Governments 1 Resolutions on Utilisation of Molasses

The Government of U.P. published a resolution in the U.P. Gazette,
dated the 8th July 1939. The Bihar Government also published an
identical Resolution in the Bihar Gazette. For ready reference, we
are giving the full text of this Resolution :

"The problem of utilisation of molasses, especially for the manu-
facture of power alcohol, has been engaging the attention of both the
Governments and public for some years. The Governments of Bihar
and United Provinces accordingly appointed a Committee in January
1939, to go into the whole question and report as to the best way of
dealing with the problem. The Committee consisted of :

(1) Dr. N. R. Dhar, D.SC., F.I.C., I.E.S., Professor, Allahabad
University.

(2) Mr. G. H. Dickson, Messrs. Begg Sutherland & Co., Cawnpore.

(3) Mr. Ananthasubramanyan, Mysore Sugar Co., Ltd., Bangalore.

(4) Mr. P. S. Maker, Chief Chemist, Majhaulia Sugar Factory,
District Champaran,

(5) Lala Padampat Singhania, Cawnpore.

(6) Mr. M. P. Gandhi, Chief Commercial Manager, The Rohtas
Industries, Ltd.

1 Vide U. P. Government Gazette dated, July 8th, 1939.

115

(7) Dr. S. S. Bhatnagar, O.B.E., D.SC., F.instp., Professor of
Punjab University.

(8) Dr. N. C. Chatterji, D.SC., Harcourt Butler Technology Insti-
tute, Cawnpore.

" The report of the Committee was received in the midde of June,
1938, and has been further examined by both Governments. The most
important points that have to be considered in this connection are
whether the manufacture of power alcohol is a sound economic pro-
position and what arrangements are to be made for the disposal of
the power alcohol when manufactured.

Molasses Worth Rs. 13.5 Lakhs Lost Annually

"The total quantity of molasses produced in vacuum pan sugar
factories in the United Provinces and Bihar has been estimated at
300,000 tons a year of which, it appears, nearly 200,000 tons are mixed
with factory effluent and discharged into neighbouring fields and water
courses as waste, thereby polluting the local sources of water supply,
giving rise to offensive odours and causing numerous complaints from
the local inhabitants. Some 3 years ago an exporting company under-
took to purchase molasses at As. 4 per maund, but it appears that
in 1936-37 they purchased some 80,000 tons at an average price of
just over As. 1 a maund, while the quantity purchased since is much
less. The value of the molasses lost at As. 4 a maund comes to 13i
lakhs of rupees annually.

" If power alcohol were to be manufactured from molasses, it is
estimated that the output would be 2.2 gallons of alcohol from one
maund of molasses or 60 gallons from one ton. Hence Bihar and the
United Provinces could, between them, produce 120 lakhs of gallons
of power alcohol a year. The Committee have, however, recommended
that for the present only as much power alcohol should be manufactured
as can be absorbed in Bihar and the United Provinces and the Gov-
ernments of both Provinces are disposed to accept this view. They
also agree that the minimum economic unit for manufacture should be
taken to be a plant of a capacity of 2,200 gallons a day, which, it is
estimated, will cost about 2 lakhs of rupees. A number of such plants
may be put up at convenient places, the plant being duplicated where
a central distillery is found to be more convenient for the purpose of
distribution of power alcohol in the case of Bihar.

Cost of Manufacture

"The cost of manufacture, if a plant of this size is installed, has
been estimated by the Committee at from 3 to 3i annas per gallon
of alcohol produced, excluding the cost of molasses. Since the report
of the Committee was written, it has come to light that no recurring
royalty will have to be paid for the use of the patent process to be
adopted. Hence the cost of manufacture may be taken to be As. 3.
It has been suggested that this cost can be reduced by having one
large-scale plant instead of a number of smaller ones, but this need
not be considered for the present* Even allowing for the price of
molasses at As. 4 per maund, and another As. li the cost of transport

116

thereof, the cost of the molasses in one gallon of power alcohol comes
to As. 2 and the cost of production of one gallon of alcohol to As. 5J.

" In order to arrive at the actual selling price, it is necessary to
add to this figure the amount of the excise duty, if any, and the actual
distribution and selling costs. The latter should not exceed 3 annas
a gallon and even if the excise duty is calculated at the same rate as
the customs duty on petrol, the total cost comes to Re. 1-3-0 per gallon,
which is appreciably lower than the price of petrol in Bihar and United
Provinces. It thus appears that it is an economic proposition to manu-
facture power alcohol, provided it can be used in these Provinces.

Contemplated Legislation

"Practically the only use for power alcohol is as a motor fuel,
mixed with petrol. The Governments of Bihar and the United Pro-
vinces are satisfied that the admixture of 20 per cent of power alcohol
with petrol is unobjectionable from the point of view of the motor
industry and are prepared to undertake legislation to make such
admixture compulsory in the United Provinces and Bihar unless other
suitable arrangements can be made for the same. As the total quantity
of petrol consumed in those Provinces is in the neighbourhood of 90
lakhs of gallons a year, it is possible to replace some 18 lakhs of gallons
of petrol by pow;er alcohol. In other words, some 30,000 tons of molasses
can be utilised in this way.

"The Provincial Governments realise that this will not altogether
solve the problem of surplus molasses. But a useful beginning can
be made and it may be possible later to arrange to supply power
alcohol to other provinces also at a price which is not appreciably higher
than that of petrol, excluding the surcharge. For the present, how-
ever, the two Governments intend to proceed with the making of
suitable arrangements for the manufacture and sale of power alcohol
in these Provinces.

" In conclusion, the Governments of Bihar and the United Pro-
vinces desire to thank the members of the Committee for their arduous
work and their valuable report which will serve as a useful guide for
the development of the power alcohol industry."

The representatives of the Bihar and the U.P. Governments met
the representatives of the Sugar Syndicate, Ltd. for a discussion and
the methods of starting the manufacture of power alcohol, e.g. whether
the power alcohol distilleries should be located in definite regions,
what should be the price fixed for molasses to be delivered to the
power alcohol distilleries, whether sugar factories would like to fix up
any quota system regarding supply of molasses, etc. In view of the
terms offered by the U.P. Government, the Board of the Indian Sugar
Syndicate, Ltd. decided at its meeting held in July 1939, that it would
not like to take the responsibility of running the power alcohol industry.
The Board of the Indian Sugar Syndicate passed the following resolu-
tion in this behalf,

"In view of the discussions that the Syndicate's deputation had
with the Government on the subject, the Board agreed that the terms
that the Government proposed to impose on the manufacture of power
alcohol from molasses did not warrant the Syndicate to take the finan-

117

cial responsibility involved in the venture and that the matter be
left to the individual discretion of member factories."

Madras Power Alcohol Committee

It is worthy of note here that a Committee was appointed by the
Government of Madras also for considering the possibility of utilisation
of molasses. It submitted its report in 1939 and found that an admix-
ture of alcohol with petrol for use in motor vehicles is a practical
proposition and that it is desirable that the Government should take
steps to make use of such mixture compulsory, that in time the Madras
Presidency may be able to supply all the requirements of absolute
alcohol, that a beginning may be made in suitable areas, and further
steps may be taken in the light of the experiences gained there and by
the Mysore Government at Mandya.

In regard to the cause of the manufacture of power alcohol, the
Committee observed that at present the Mandya Sugar Factory is the
only concern which is manufacturing absolute alcohol in India. It has
a production of 1,500 gallons per day. The cost of production of 90
per cent absolute alcohol has been found to be 5J annas per gallon at
Mandya, With Interest at 6 per cent per annum on the capital, at
10 pies per gallon, which was not included in the calculation and also
the cost of dehydration at 1 anna per gallon, the total cost would come
to about As. 0-7-4 per gallon of absolute alcohol.

The Committee also reported that alcohol of 95-96 per cent strength
unmixed with petrol has been used by the Mandya sugar factory with
satisfactory result in the running of tractors, lorries, buses and even
cars which are provided with special readjusted engines. Mixtures of
60 parts of such alcohol and 40 parts of petrol have also been used
for running buses at Bangalore without any adverse effects on the car
engines being observed. The Committee also reported that it feels
that even if it is eventually found that power alcohol cannot be marketed
at the same price as petrol, the Government of India should, in the
national interest, be urged to face loss of revenue and to levy a lower
duty on power alcohol than on petrol. The Committee had, therefore,
no hesitation in recommending legislation to enforce such mixing.
The Chairman of the Committee was Dr. D. N. Strathie, i.c.s., Member
of the Board of Revenue and Commissioner of Excise, Madras, and
there were nine other members.

During 1940, the report of the Director of Industries, Madras, was
published, and it states that some doubt was expressed as to
whether power alcohol, even taking the low rate of I^s. 7 per ton of
molasses, could compete with petrol at any point in this Province after
paying the Central Excise duty. Eventually, the Government decided
that the proposed legislation for the compulsory admixture of power
alcohol with petrol for use as motor fuel should be dropped, and if the
question is to be re-opened at a later date, a committee representative
of all the Provinces and the Government of India should be set up to
consider the matter further, in the light of all the information and
experience that will then be available*

118
Power Alcohol in Mysore

While the Provincial Governments were thus hesitantly debating
on the possibility of the manufacture and use of power alcohol, the
Mysore Government was steadily taking one step after another to
achieve the purpose.

Ever since the establishment of a distillery at Mandya by the
Mysore Sugar Co., Ltd., experiments were conducted with regard to
the suitability of 96 per cent alcohol, both by itself and as an admixture
with petrol, as motor fuel. Early in 1939, the distillery began the
manufacture of absolute alcohol and on the strength of the experience
gained with the use of alcohol as motor fuel, the Mysore Power Alcohol
Act was passed making it compulsory for the admixture of 15 per cent
of alcohol with all petrol sold in the State. This Act came into force
on the 1st October 1939, to begin with in the districts of Bangalore
and Tumkur, and since that date all petrol sold in Bangalore and
Tumkur Districts contains 15 per cent alcohol produced at Mandya.

The annual consumption of petrol in the Mysore State is about
30 lakhs of gallons, and on the basis of a 15 per cent mixture, there
is scope for absorbing about 4,50,000 gallons of alcohol. This would
mean that the import of petrol into the State can be reduced by this
quantity. It is the desire of the Mysore Sugar Company to be able to
supply the entire quantity of alcohol required for admixture with
petrol for sale throughout the State and it hopes to do so as soon as
possible.

To the progressive Mysore State, then, goes the credit of being
the pioneer in this field in the whole of India. The example of the
Mysore Government coming on top of the exigencies of the war situa-
tion was difficult to ignore ; and in August 1940 the Power Alcohol
Bill which was passed by the Provincial Legislature in October 1939
received the assent of His Excellency the Governor of the United Pro-
vinces. This Act made provision for controlling the production, supply
and distribution of power alcohol in U.P. and to make its admixture
with petrol in certain specific proportions for use as a motor fuel
compulsory.

On the 10th August 1940, the Government also published a draft
of the rules they proposed to make. The Government proposed to
invite tenders for the exclusive privilege of supplying power alcohol
to the Government for three years, the tenderer being allowed to manu-
facture power alcohol on the terms of the required licence which he
will have to secure if his tender is accepted. It appears the require-
ments of the power alcohol have been calculated on the assumption
that the prescribed mixture will contain 20 per cent of power alcohol
and 80 per cent petrol, the total consumption of which latter is estimated
at present at over 6 million gallons in the United Provinces. It also
appears that the operation of the Act will in the first instance be
confined to the Districts of Agra and Meerut Divisions and some Dis-
tricts of Rohilkhand Division as it is expected that about 6 lakhs gallons
of power alcohol equal to a little less than half of the total require-
ments would be available in the area.

On the 4th September 1940, a conference of the oil interests was
held at Lucknow to discuss the details of the Power Alcohol Act.

119

Several difficulties were apprehended in the scheme in connection with
the securing of the necessary equipment such as tankage, etc. Follow-
ing a conference held at Nainital on the 4th October under the presi-
dency of Mr. Pannalal, i.c.s., Adviser of the U.P. Governor, for con-
sidering the U.P. Power Alcohol Rules, it was understood that at that
time there was the possibility of the Meerut Distillery only manufac-
turing power alcohol. Thus only a few districts were selected in the
beginning for the opening of mixing depots.

Power Alcohol Act Amended

On the 10th November 1940, the U.P. Power Alcohol (Amendment)
Act. 1940, (Act X of 1940) was promulgated for general information.
In the Statement of Objects and Reasons it was stated that UP. Power
Alcohol Act (Act VIII of 1940) required amendment in three respects.
Firstly, it was considered desirable to exempt all military requirements
from its operation. Secondly, the supply of power alcohol for the whole
province was at present not possible and the power to enforce it piece-
meal was needed. Thirdly, in the public interest it was felt necessary
to make provision in the Act for a contingent breakdown in the supply
of the prescribed mixture of power alcohol and petrol. The amending
Act makes provision for the above requirement. The following 1
amendments have been made in the Act.

" (4) Nothing in Section 3 or Section 4 shall apply to the sale or
use of petrol without admixture with power alcohol for the require-
ments of His Majesty's naval, military and air forces."

The following section empowering the Collector of a district to
take the required steps in case supply fails has also been incorporated
in the new Act :

" 10-A. Notwithstanding the provisions of sub-section (1) of
Section 3 and sub-section (1) of Section 4 when for any cause there
is a failure in the supply of petrol with the prescribed admixture of
power alcohol in any district, the Collector may, subject to any rules
that may be made in this behalf, authorise the sale and use within
his jurisdiction of petrol without such admixture for such period
as he may deem fit, and may at any time withdraw or modify such
authority or from time to time extend the period of such authority."

U.P. Power Alcohol Act comes into Force

Since the introduction of petrol rationing in August 1941 and parti-
cularly with the outbreak of hostilities in the Far East, the problem
of providing fuel for industrial and transport purposes has assumed
great importance. The war in the Far East has meant a considerable
increase in the requirements of the Imperial forces in that war theatre.
Also, the oil producing centres in Burma and South Pacific are seriously
threatened. It is not surprising, therefore, that there has been a
reduction in the supply of petrol. This has resulted in a complete

*In Section 1 of the original Act for sub-section (3) the following has been
substituted:

" (3) The Act or such portion or portions thereof shall come into force in such
area or areas on such date or dates as the Governor may by notification in the official
Gazette, specify."

120

dislocation of bus traffic. The alternative methods of transport are
not quite convenient and quick while the railways are already finding
it difficult to meet the needs of the public. It has been proved neces-
sary to suspend booking of goods indefinitely on certain sections of
the railways.

It was in anticipation of these needs that the campaign for the pro-
duction of industrial alcohol on a large scale in this country was
started early.

The recommendations of the Power Alcohol Committee of the U.P.
and Bihar were given effect to only after a long time and the Power
Alcohol Act of the U.P. came into force with effect from April 28, 1941.
With the outbreak of war, it is impossible to get the requisite machinery
and the operation of the Act was at first confined to the district
of Agra. The distillery at Meerut is producing alcohol and selling
the whole quantity to the Government of U.P.

Orders for the enforcement of the Power Alcohol Act in the dis-
tricts of Bareilly, Bijnor, Budaon, Pilibhit and the Chandausi and
Amroha tehsils of the Moradabad district have also been issued. The
proportion of alcohol to petrol will be 20 parts of the former to 80
parts of the latter. It is understood that the Act will also be extended
to Kathgodam and the neighbouring areas. Licences have been issued
to the Kesar Sugar Mills and to the Oudh and Hindustan Sugar Mills
jointly for manufacturing power alcohol from molasses. The prices
at which they should sell alcohol to the Government has been fixed
at 6 annas per gallon. The Bihar Government enacted in August 1942,
a Power Alcohol Act, similar to the one in the U.P. The Bombay
Government published draft rules for enacting a Power Alcohol Act in
August 1942. Among the Indian States, Mysore and Travancore are
already producing power alcohol. Bhopal also will shortly be com-
mencing production.

But all these efforts are nothing compared to what might have
been done if the start had been made much earlier. Today there is
little doubt about the desirability or the feasibility of manufacturing
power alcohol. But the essential preliminaries have been completed
too late. The difficulty of getting the necessary equipment stands in
the way of increasing the production. It is urged that such equipment
can be made in India. It is of a piece with all our national efforts
that no serious attempt has been made so far in this direction.

Use of Bagasse as Fuel Costly

We must now turn to the utilisation of bagasse (or megasse) which
is the residue of fibrous matter remaining after the cane is crushed
and which is the other main important by-product of the sugar industry.
The bulk of bagasse obtained by crushing cane in the factory is burnt
as fuel for generating steam, and for boiling the juice in rab or gur
making. As a rule, almost all the power required in factories is
obtained from bagasse and occasionally it is supplemented by coal or
firewood. Various sugar factories require only a small amount of
outside fuel to supplement the use of bagasse. Mr. E. L. Squires 1

* The International Sugar Journal of August 1929.

121

observes : " Apparently bagasse is a very high-priced fuel and it might
be better to burn the sugar." The high railway rates of freight on
coal, and the absence of a demand for bagasse for other purposes are
probably responsible for the general practice of its use as fuel for
sugar factories.

But the invention of more economic ways of using bagasse has
engaged the attention of both the sugar industry and the associated
technical and commercial institutions. At its meeting in November
1933, the Sugar Committee considered the question of the utilisation
of bagasse for paper and board industry. The Forest Research Insti-
tute was also asked to undertake more extended experiments in the
manufacture of paper, etc. from sugarcane bagasse. In 1936, the Presi-
dent of the Forest Research Institute put up a note stating that if the
factories were equipped with suitable machinery, it should be possible
to turn out packing and cheap Badami papers from bagasse pulp mixed
with about 25 per cent bamboo pulp. Experiments were also made in
the laboratory to produce boards from bagasse. Small samples of
boards for insulation and structural purposes, etc. were made by hand
and the material, he states, appears to be quite suitable for the pro-
duction of such boards. He states, however, that the Forest Research
Institute is not equipped for making boards on a semi-commercial scale.

The unbleached pulp of the bagasse was also bleached in the
laboratory of the Forest Research Institute and it was found that it
required 9 per cent standard bleaching power and the yield of bleached
pulp was about 41 per cent. The bleach consumption was about 50
per cent higher than that required by such grasses as sabai. ulla, etc.,
but it compared favourably with that required on the average by
bamboos. The average length of the fibre of the material experimented
upon was found to be 2 mm M there being a large number of shorter
fibres. In this respect the material compared unfavourably with
bamboos or sarai grass, etc. Considering the above data, the material
does not appear to be unsuitable for the manufacture of products like
boards, packing and wrapping papers and even certain classes of writing
and printing papers in admixture with longer fibred pulps, e.g. bamboo,
rags, etc. The possibility, however, of utilising the material 'for such
products depends, firstly, on the quantities available and, secondly,
on the price at which it can be made at the manufacturing site.
If the quantities available are only such as are surplus in the most
efficient sugar factories, then the supply of the raw materials is likely
to be unreliable and also the total quantity available will probably not
be large enough to justify putting up a paper or a board factory.
According to the Sugar Technologist of the Imperial Council the cost
of one ton of bagasse at the sugar factory is likely to be between
Rs. 12 and Rs. 14 on the assumption that wood for fuel will cost
between Rs. 6 and Rs. 7 per ton. To the above cost of bagasse, the
cost of transporting it from the sugar factory to the paper or board
factory has to be added. As this cost may be anything from Rs. 14 to
Rs. 18, or even more, per ton it appears doubtful whether the utilisa-
tion of bagasse for paper or board will be more economic than using
grasses or bamboos for the purpose.

If, however, the price of bagasse is low, and adequate quantities
are available, there appears to be nothing against its utilisation for

122

board or paper manufacture. In February 1935, the North Bengal
Sugar Mills Co., Ltd., Gopalpur, informed the Forest Research Institute
that about 12,000 tons of bagasse could be made available at their
factory at about Rs. 7 per ton and that bamboos were also available
in the vicinity. In such cases the utilisation of bagasse for paper or
board manufacture would appear to be feasible, provided the bagasse
is not of poor fibre-content and other manufacturing facilities are
available. To sum up, bagasse is a raw material which can be utilised
for paper or board manufacture. Each project should, however, be
investigated on its own merits.

We give on next page a table showing the quantities and values of
packing paper and paste-board, mill-board and card-board of all kinds
imported into India during 1934-35 to 1938-39.

A glance at Table 2, next page, will show that there exists a market
for wrapping paper and board in India a portion of which can be
suitably exploited as bagasse can be utilised for the production of
some of those qualities.

Large quantities of board for insulation and structural purposes
are being manufactured in Louisiana and other countries, notably by
the Celotex Company, in Louisiana. The suitability of bagasse for
the above purposes depends to a considerable extent on the quality
of the fibre present in it. The experiments conducted at the Forest
Research Institute, Dehra Dun, with Indian bagasse have been very
encouraging in regard to the suitability of Indian bagasse for paper
and board manufacture. The only important defect in Indian bagasse
appears to be the shortness of its fibres.

In a Note on the utilisation of bagasse for paper, submitted to the
Sugar Committee in March 1938, Mr. R. C. Srivastava, Director,
Imperial Institute of Sugar Technology, observed that bagasse at present
was being used as fuel in factories. Some bagasse was saved by
factories which may be used for raising power during off-season. If
bagasse is not to be made available for other purposes, it would be
necessary to replace it by other fuel, by wood or coal. It is clear,
therefore, that unless a cheap and suitable fuel is found, it will not
be possible at present to use bagasse for making card-board and packing
papers at prices comparable to prevaling prices of such materials. But
if the fuel efficiency of Indian factories improves, some surplus bagasse
may be available.

Wood as a substitute for bagasse can be burnt in bagasse furnaces
either by itself or in admixture with bagasse. But the price for the
same fuel value is likely to be high. The calorific value of dry bagasse
may be taken as 8100-8350 B.T.U. whereas that of wood is 4500-5000
B.T.U. On the basis of these fuel values therefore the selling price of
bagasse, when wood is a substitute, may be taken at nearly twice the
price of wood ex-factory. If the ex-factory price of wofod is Rs. 6
to Rs. 7 per ton which is a comparatively low figure for most parts
of the U.P. and Bihar, the price of bagasse will come to Rs. 12 to Rs, 14
per ton.

Coal, unless it is much cheaper than wood, is not a very desirable
substitute for bagassfe, as it is difficult ordinarily to burn it in bagasse

123

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1935-36

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124

boilers, even when they are filled with auxiliary coal furnaces. To
get the maximum heat value from coal, separate boilers will have to
be installed. This would be an expensive addition, and factories may
not be willing to put themselves to this expenditure unless they were
assured of their market for bagasse for a long period.

The calorific value of bagasse is about two-thirds of that of coal
and therefore the price of bagasse when coal is used as a substitute
may be estimated to be about equal to the value of the coal at the
factory in consideration of the changes in equipment that may be
necessary. The average price of coal at the collieries in Bengal at
present is about Rs. 3 per ton. The transport charges from the colliery
to the factory will have to be added. Amongst other items affecting
the price of bagasse ex-sugar factory are the costs of baling, storage,
handling charges and the transport of bagasse. The baling of bagasse
for transport is a very important item and for this separate equipment
and staff will be necessary at each purchasing centre. (The Saraya
Sugar Factory of Sardarnagar is baling its bagasse and keeping it
properly packed up.) After allowing for these charges as also for the
transport of bagasse, it has been computed that the cost of dry bagasse
at the Celotex Company at Louisiana is about Rs. 9 per ton. It may
be possible to get bagasse at this rate in the case of a board factory
situated in Bihar and Bengal nearer to the collieries, if coal is available
at low price. It is true that " the improved canes now grown in
Northern India have a relatively high fibre-content/* as is observed
by the Imperial Council of Agricultural Research. In fact, they are
amongst the most fibrous canes in the world. Reports from several
factories in India show, however, that at present all of them are using
varying quantities of extra fuel. Fuel consumption and steam economy
have not reached a sufficiently high standard of efficiency in the Indian
factories to permit of large quantities of bagasse being spread.
Therefore, at present bagasse can be made available for paper and
board manufacture only by replacing it by wood or coal. Wood being
a costly fuel as compared with coal, bagasse can only be had at a
reasonable price from factories in Bihar which are located nearer the
collieries.

The quantity of cane crushed by factories in Bihar and Bengal may
be estimated at say 1,826,300 tons and the dry bagasse production at
about 250,000 tons per year. The minimum economic capacity of a
fibre-board factory is 20 to 25 tons dry bagasse per day or 7,000 to
7,500 tons per year. Therefore, even if the factories in Bihar and
Bengal substitute only 10 per cent of their bagasse by coal, there would
appear to be scope for running a board factory, but due investigation
should be made for determining the consumption of insulation and
pressed boards in India, and the cost of production of such boards.
The number of sugar factories in Bengal being very few, there is
little possibility of establishing a board factory in Bengal. Bihar
appears to be a more suitable place for the location of such a factory,
in tracts where sugar factories are sufficiently near to the collieries.
If a board factory could be established, alongside a sugar factory,
that would be an ideal situation from the point of view of the raw
material. One such factory was established in 1939-40 at Meerut.

125

In a Note on this subject Mr. M. P. Bhargava, Officer-in-Charg0
of the Paper Pulp Section, Forest Research Institute, at Dehra Dun>
observed in 1937 that in view of the fact that there was an adequate
and permanent demand for boards and packing papers which wfcs
likely to grow considerably in the future, there appeared to be no
ground for the fear that the demand for bagasse for manufacturing
these products might not be a permanent one, particularly as no other
raw material for the industry was likely to be obtained at a cheaper
price. The sugar factories, therefore, needed to have no hesitation on
the score of demand to incur the expenditure necessary for effecting
a change in their boiler equipment. If a few sugar factories changed
their entire boiler equipment with a view to supply bagasse to a 'board
factory, it would be more economical as the supply would be more
uniform, and baling, handling and transport charges would be minimum.
The markets for boards and packing papers manufactured in Bihar
would lie not only in Bihar and Bengal but throughout the country
particularly in Bombay and Sind which import about half the total
products.

A technical programme of experimental work in connection with
the utilisation of bagasse was then drawn up by the Sugar Committee
of the Imperial Council of Agricultural Research Institute. Mr. M. P.
Bhargava continued his experiments on the production of insulation
boards, straw boards and wrapping papers from bagasse and submitted
a final report to the Imperial Council of Agricultural Research in 1941.
It is understood that insulation boards, possessing thermal conductivity,
sound absorption and strength characteristics comparable with those
of imported insulation boards, have been successfully prepared in
the laboratories of the Forest Research Institute. Satisfactory qualities
of straw-boards and wrapping papers have also been prepared from
bagasse at the Forest Research Institute and the results of the experi-
ments must be pronounced distinctly heartening. It is true, the demand
for insulation and pressed boards in this country is not very large at
present, but it has been increasing. It appears, therefore, that adequate
supplies of surplus bagasse would be available for the manufacture of
these boards, though we cannot be certain that the rates will be quite
economic.

Another development of great importance to this problem is the
discovery that cane bagasse is a suitable raw material for plastics ;
and plastics, as well known, is a substance suitable for moulding into
any form and is therefore useful for making a wide variety of articles
of daily use and for building automobiles and for electric installations.

It remains to assess the importance of the utilisation of by-products
to the question of costs of production. It has been seen that of the
two main products of the sugar industry, viz. molasses and bagasse,
neither can account for a considerable reduction in the cost of pro-
ducing white sugar. And when it is remembered that the Tariff Board
assumed a price of Rs. 1-8-0 per maund of molasses and that today
the sugar mills are actually out of pocket in disposing of it, any industry
which will pay a price for molasses must be deemed to bring appre-
ciable relief to the industry. But it is well to bear in mind that the
Power Alcohol Committee of the U.P. and Bihar assumed in their
calculation of the cost of producing power alcohol, a price of only

126

As. 4 per maund of molasses. Likewise in the case of bagasse, the
by-product is not wholly wasted. Though the use of bagasse as fuel
is uneconomic, the advantage of its utilisation as raw material for
other industries is, so far as the sugar mill is concerned, no more than
the difference between its actual value as fuel and the price which the
new industries would be prepared to pay for the raw material
Obviously, the pecuniary value of bagasse as fuel varies in direct
proportion to the distance of the sugar mill from the collieries. A mill,
which is far away from the collieries, will have to pay a higher price
for coal ; and to such a mill the value of bagasse as a substitute for
fuel is to that extent higher. It may be said, therefore, that the manu-
facturers of packing paper and the like would seek to obtain the
supplies of bagasse from mills situated near the collieries. It would
therefore, be well not to exaggerate the net advantage of the utilisa-
tion of by-products to the cost of production of sugar. But from the
national point of view, the question is indubitably of great importance.
We have stressed the view at every point that the benefits of protection
to industry have to be carefully gleaned and garnered by the nation.
It is no small advantage to have an alternative source of power or to
provide for packing material which a developing economy would
require in greater quantities in the future.

CHAPTER X

ECONOMIES IN MANUFACTURE OF GUR AND SUGAR BY
VARIOUS PROCESSES

WE have seen in the previous chapters that the ultimate justification of
protection to the sugar industry is in the establishment, not alone of
the industry directly aimed at, but also of a number of ancillary pro-
ductive activities in the agricultural as well as the industrial spheres.
We have seen, too, that if protection must be justified solely by the
industry surviving the need for protection through a progressive
decrease in the costs of production, then it is far more important that
the yield and quality of cane should : be improved and that industries
should be established for the utilisatipn of by-products than that the
productive processes of the industry itself should be censoriously
scrutinised. This view, unwelcome as it is to opponents of protection,
will be seen to be quite reasonable even on a cursory examination of
the principal elements in the costs of production of sugar in India and
abroad. 1 Public opinion, which often finds itself in a dilemma between
abandoning a protected industry to its fate and continuing indefinitely
to foot a heavy bill of costs on this account has every need to be apprised
of the fact that the way out of the dilemma lies in the development
of other productive activities to their utmost degree of efficiency and
usefulness. This feature is by no means peculiar to sugar. Every
industry in India has had to labour under the handicap of inefficiency
in connected trades and industries. But it may be said without fear of
exaggeration that in the case of the sugar industry this feature is
really a salient one.

Nevertheless, the industry cannot be absolved altogether of res-
ponsibility for increasing the efficiency of its working. And it is neces-
sary at this stage to clarify the position in this regard. We have haci
occasion in the earlier chapters to note the progress achieved by the
sugar industry in the last decade, particularly the increase in the
recovery percentage. But the picture of the utilisation of our cane
resources as it is today and as it can be, has to be appraised in its
entirety. From this point of view, the most important fact to note today
is that the factory industry utilises only about 20 per cent of our total
cane crop (as against 1 per cent in 1920 and 6 per cent in 1932) and
that by far the larger part of our cane crop goes to the making of
gur and for other purposes like chewing, etc. which may not strike the
modern mind as strictly economic. The table on the next page shows
the various uses of cane during the past few years.

It is notorious that in the existing indigenous processes of extrac-
tion and conversion into both sugar and gur there is a cruel waste of
sugar. The Industrial Commission (vide page 80) roughly estimated
that of the sugarcane grown in India at least one-third was wasted
owing to inefficient and primitive methods of extraction.

B. P. Adarkar's "Indian Fiscal Policy", p. 224.

128

TABLE NO. 1

Percentage o f cane used under different heads during the years 1932-33 to 1940-41

(November-October) l

1932-
33

1933-
34

1934-
35

1935-
36

1936-
37

1937-
38
Our
est.

1938-
39
Our

est.

1939-
40
Our
est.

1940-
41
Our
est.

Cane used in factories
Cane equivalent to gur
used in refineries
Cane used for gur manu-
facture
Cane used for other pur-
poses, including Khand-
sari, Chewing, Sets for
planting, etc.

6-5
3-0
64*7

25-8

98
2'0
65-5

227

12-3
12
66'0

20'5

16-0
1-4
63-8

18-8

17-6
0-5
64-9

16-9

17-8
0'5
62-0

19*7

16-2
0'9
51-4

193

277
0'9
51'4

20'0

191
1-4
57-7

21-8

Total percentage ...

100-0

lOO'O

1000

lOO'O

100-0

lOO'O

The Indian Sugar Committee, 1920, observed in their Report
(page 260) that

"A thoroughly up-to-date factory can extract at least 96 per
cent of the sugar actually present in the cane, and by an efficient
control in the boiling house, 90 per cent of the sucrose in the juice
can be recovered as manufactured sugar. In other words, about
86.4 per cent of the original sucrose in cane car> be obtained as
sugar."

In paragraph 336 of their Report, the Indian Sugar Committee
remarked, in regard to the low recovery of sugar in India, as follows :

" We have assumed that cane in India contains on an average
12 per cent of sugar. 2 If it were dealt with in a thoroughly effi-
cient factory, it would be possible to obtain 9.5 per cent of market-
able sugar from it. From cane with the same sugar content, factories
in Java recover 9.75 per cent of marketable sugar against an
average of 6.85 per cent in Indian factories, the best of which
obtain less than 8 per cent. There is thus a difference of almost
3 per cent between the results obtained by factories in Java and
India."

Improvement in Recovery Percentage in Factories

A glance at the table below will indicate that the percentage of
recovery of sugar in India has been steadily on the increase. From
7.5 in 1923-24 it reached 8.89 in 1931-32, as compared with 10.46 in
Java in that year. Since the grant of protection the average recovery
has been well maintained and has steadily improved. The maximum
recoveries obtained in some of the factories since 1931-32 are also given
in the table below from which it will be seen that the maximum

* Vide reply in the Council of State to Question No. 39, dated llth November
1941.

2 The Indian Tariff Board (Sugar Industry) Enquiry Report, 1931 assumed
a sucrose content of 11.5 per cent

129

obtained in the year 1941-42 was 12.45. This maximum compares very
well with Java's average recovery. India's average is much lower.

TABLE NO. 2

Average and Maximum Percentage of Recovery of Sugar in Factories in India
and Java from 1931-32 to 1942-43 1

Year

India
Average

u. P.

Average

Bihar
Average

Bombay
Average

Java
Average

India
Maximum

1931-32

889

8*59

9-06

10-92

1932-33

8*66

855

8-60

10-00

1156

1933-34

8-80

9*08

8'32

lo-uo

12-84

1934-35

8-66

8-56

879

10-37

1255

11-10

1935-36

939

960

8-93

10-47

13-23

11-34

1936-37

9-50

9*65

9-20

IU'68

1277

1143

1957-38

9*38

918

958

10-97

11-87

1163

1938-39

929

9-14

9-00

11-29

11*77

1225

1939-40

9'45

9-37

9-29

10-97

12-23

1231

1940-41

9-70

9'87

9-86

9-94

...

1116

1941-42

9-69

9-87

10-35

987

...

12-45

1942-43

10-28

10-16

10-93

10-64

...

1335

The recovery from Khandsari sugar is, however, remarkably low
(being about 5.5 per cent) and if the industry has been able to maintain
its production, it is due to the fact that it is possible for it to purchase
its cane at a rate far lower than the rate paid by the factories, exemption
from any cane cess which has to be paid by the factories, and non-
payment of any commission to co-operative societies and railway freight
on outstation cane, and saving of Us- 2-8-0 per cwt. in excise duty.

Manufacture of Gur

As by far the bigger of our cane production goes to the making
of gur, let us try to examine the position in*this regard. Gur may
perhaps be best defined as cane juice in its natural state concentrated
to its solidifying point without undergoing any material process of
purification save the addition of a small amount of alkali or other
clarifying ingredient, and the removal of the scum. When cleanly made,
it is a perfectly wholesome article of diet, and is very much in demand
in this country, and is preferred to sugar by a large section of the
people particularly in the village areas, and for some purposes, by all.
Besides, gur has an attractive flavour and delicious taste.

Gur of jaggery could be well defined, in technical language, as cane
juice boiled to a temperature of 115 C. containing from 50 to 85 per
cent of sucrose, 10 to 20 per cent of inverted sugar, and a smaller
percentage of mineral salts, ash and moisture. Most nearly, it may be
described as hardboiled massecuite, This is the form in which about
3J to 4 million tons of gur is annually consumed by the people of this
country. In colour, purity, hardness, flavour and shape in which it is
marketed, gur varies greatly from tract to tract but with relatively
unimportant exceptions. Most of the gur production is consumed
directly, only a negligible portion being used for conversion into sugar
in refineries. Thus gur is not a raw material for refining sugar, but
a final product for domestic consumption.

* Vide Trade Journal, Calcutta, 18th September 1941, and 17th September 1942.

130

Gur is manufactured in most sugarcane growing villages by the
simplest process. Modern 2-roller, 3-roller and 5-roller mills driven
by oil engines have replaced the earlier pestle-and-mortar type of mills
made of stone or wood. Appreciable improvements have also been
made in the furnaces and pans, but in essentials, the process is much
the same as it was a hundred years ago, the fresh cane juice being
boiled down to a solidifying point in an open pan. A certain amount
of clarification takes place during this process and multiple pans are
common in some tracts where high class gur is made. Ordinarily one
or two pans are used for boiling but sometimes as many as 12 are
arranged in a boiling series.

Gur Manufacture A Cottage Industry

Although the quantity of gur produced in India is generally 3i
times as big as the quantity of refined sugar at present, the method
of production of this enormous quantity, it must be admitted, is very
primitive. Its manufacture consists of two main processes, viz. crush-
ing of cane and subsequent boiling of the juice. It is essentially a
cottage industry and the manufacture is in small quantities. The
extraction of the juice from cane is about 60 per cent in the case of
bullock-driven mills and up to 70 per cent in the case of power-driven
mills. The best quality of gur is produced in Coimbatore, Kolhapur
and Meerut. Much superior gur remains in good condition for about
a year where the climate is a little dry but it deteriorates in humid
atmosphere in about 3 months.

The waste of sugar involved in the manufacture of gur is attributa-
ble, as indicated above, firstly to the crudeness of the mechanism
employed for crushing cane and the small scale on which production is
carried on by the producers. Where bullocks are used to run the
crushing mills, they are of the poorest kind and lack the strength and
stamina for this laborious process. A large quantity of juice is thus
left in the bagasse, the cane having been crushed once only.. Then
there are the crude methods of boiling the juice in which inversion
takes place from sucrose to glucose. 1 As a result, the recovery of the
sucrose content of the cane works out to about 52 per cent as against
86 per cent obtained in a modern sugar factory. 2 The loss of efficiency
due to the crude process of manufacture of gur, thus works out to
about 34 per cent. If we assume an average of 12 per cent sucrose
content for this cane, as has been done by the Indian Sugar Committee,
the total recovery of sucrose from 34,595,000 tons of cane used for the
manufacture of gur in 1932-33, would be 41,40,000 tons, out of which
only 21,00,000 tons could be extracted by the present crude method, as
against a possible extraction of over 35,30,000 tons of white sugar in
the modern factory run on efficient lines. The total loss of sucrose
thus entailed amounts to 15,00,000 lakhs of tons, which is equivalent
to about as large a quantity of manufactured sugar. 3

1 This inversion is not, strictly speaking a loss of sugar, but it is a loss of
crystallisable sugar which is of importance when the question of refining from
gur is considered. Vide Tariff Board's Report on the Sugar Industry, 1931, p. 19.

2 Vide Report of the Sugar Committee, 1920, p. 262.

s The actual sucrose content of gur varies considerably but may be placed at
between 65 and 75 per cent as compared with between 99 and 100 per cent for
white sugar. (Vide Tariff Board's Report, 1931, p. 19.)

131

But the introduction of power mill in place of the bullock mill,
which happily is increasing, has made it possible to extract more sugar
per maund of cane, and has reduced considerably the cost of produc-
tion which, it must be stated, however, varies from province to pro-
vince. According to the Director of Agriculture, Bengal, the extraction
of juice per 100 maunds of cane is 62 per cent from a bullock mill,
and 68 per cent from a power mill. (Tariff Board Report, 1931, p. 20.)

On this calculation, the loss of sucrose involved, as estimated in
the preceding paragraph, by gur manufactured in power mills, would
be slightly lower, but nevertheless considerable. 1

Cost of Manufacture of Cur

It is difficult to state with precision the cost of manufacture of gur
as it varies from year to year and from district to district, but roughly
it may be taken as Re. 1-1-0 per maund for the UP. and the Punjab
(vide Tariff Board Report, 1938, p. 51). Taking As. 4 as the present
cost of cane, the Tariff Board stated the c***t of production of one
maund of gur would be Re. 1-3-9.

It is also difficult to arrive at a correct figure of the average price
of gur, because, it differs considerably according to the quality and
varies from district to district and from town to town and from month
to month. The average price of gur per maund varied from Rs. 5-5-9
to Rs. 2-9-0 during the years 1930-31 to 1937-38. Since 1934-35, the
price of gur was generally on the decline till 1937-38 due perhaps to
the production of larger quantities and to a certain extent to the
decline in the price of sugar. The price of gur, and sugar rose during
1938-39, but it fell in 1940-41 due to apprehended overproduction.

An idea of the size of the gur industry in India can be had from the
table given below showing the calculated net annual production of gur
for direct consumption in India :

TABLE NO. 3

Calculated Net Production of Gur in India for Direct Consumption from

1930>31 to 1942-432

Year

(November-October)

Calculated net Annual Production of Gur for
direct consumption in tons

1930-31

22,41,000

1931-32

27,58,000

1932-33

32,40,000

1933-34

34.86,000

1934-35

37,01,000

1935 36

41.01.000

1936-37

42.68,000

1937-38

43,64,000

1938-39

21.31,000

1939-40

24,41.000

1940-41

34.14,000

1941-42

28.29.000

1942-43

35,67,000

iThe Indian Sugar Committee, on the basis of manufacture of 99 per cent
of cane-sugar produced in India from gur or rab, as against 1 per cent produced
direct from cane, in 1921, estimated a total loss of sucrose of 10,69,860 tons per
year. This figure represents the theoretical limit of possible improvement. By
1942 there has been a considerable improvement in this position, the manufacture
of sugar direct from cane having greatly increased.

2 Figures for net production are calculated from the figures for total yield of
gur in the "Final General Memorandum" each year, allowing for the gur equiva-
lent to cane used for other purposes (adopting the conversion factor of 10).

132

It will be seen from this that the total production of gur is roughly
3} million tons and that it is constantly fluctuating, depending on
various factors like cane crop, cane prices, sugar prices, etc.

Future oj Gur

It is tempting to speculate on the possibilities of expansion of the
sugar industry, when our cane crop is increasingly diverted from the
manufacture of gur to the manufacture of sugar. Doubtless, the avoid-
ance of the waste involved in the former is a legitimate and laudable
objective. And those who believe that the masses in India have a
secret aspiration to the luxuries of the middle and upper classes would
probably be quick to forecast the quick extinction of gur manufacture
in this country. There are, however, important facts and considerations
which argue against this line of thought and which ought not to be
overlooked. In the first place, there are large numbers, even among
the well-to-do, who prefer gur to sugar for certain purposes. The taste
of gur is distinctly different from that of sugar, and there is bound to
be a large demand for gur at all times. It is fallacious to regard gur
as an inferior product which must necessarily be displaced with the
increased production and cheapening of white sugar. The practical
problem^, therefore, in this regard may be said to be one of increasing
the efficiency of manufacture rather than of eliminating it from the
inventory of our annual national production. If it is reasonable to
hold that gur does not lend itself to manufacture on a large scale or
that, on what are called broadly social grounds, it must remain a
cottage industry, then progress lies in educating the rural gur manu-
facturer in economic methods of production. The task then is of a
piece with our tasks in regard to other cottage industries. A neces-
sarily slow process of educating the rural cultivator, through the
devious ways of co-operative credit, of power-crushing mills, improved
boiling pans and furnaces, has to be resorted to. That is a task of
responsible ministries who will band their energies to the focal pro-
blems of rural reconstruction in India. From the point of view of
the economist, what matters is not the form in which sucrose in cane
is consumed by the people, but the elimination of waste in the utilisa-
tion of cane.

The efforts of the U.P. Government to ensure more economic
manufacture of gur will be dealt with at a later stage. Other sources
of gur production may also be noted at this stage.

Village Industry of Palm~gur

Unlike cane-gur which exhibits a week tendency towards large-
scale production, p^lm-gur is essentially a genuine village industry and
by the very nature of the business it must remain such. No factors are
necessary as in the case of cane cultivation for planting palms, which
are to be planted not every year but only once in 50 years or so. No
big costly power crushers are required for extracting the juice which
is done with the help of small instruments manufactured by the village
smith. Palms are not only useful for gur supply, but also for manu-
facture of tasteful sugar of all grades from the palm juice in the
villages with the help of small hand-driven centrifugals which also

133

can be manufactured within the country by our own mechanics. The
technique of sugar making can also be taught to the villagers easily. 1

Tapping of Palm-juice Palm Jaggery as good as Cane Jaggery

The method of obtaining juice from the palm is known as " tapping ".
Tapping is a delicate and complicated art and men are generally found
conversant with this art in the areas in which the palms grow. These
men are called tappers, and are mostly engaged in toddy-drawing. The
method of tapping the palms is not the same for toddy and gur making.
There are certain important variations which have to be practically
learnt. Besides the knowledge of tapping two more things are essen-
tial : (1) to secure a license for free tapping of the palms from the
Government, (2) to know the technique of nira drawing and gur
making. Neither the sweet unfermented juice of any of the four palms
is intoxicant nor the gur made from palm juice. The following chemical
analysis shows that palm-pur is akin to cane gur:

TABLE NO. 4

Gur

Cane-sugar

Glucose

Ash

Moisture

1. Sago Palm
2. Date Palm
3. Palmyra
4. Cocoanut
5. Sugar Cane

;

76-455
79-45
85-263
74-163
65*209

1-642
2281
1-77
2-939
17-052

5-995
2-2594
1-927
3-815
2-35

1-681
3-05
8-467
6-25
7-38

Lakhs of people are using this without any harmful effects, in
Bengal and Madras Presidencies. Hundreds of people in Orissa, Bihar,
C.P., Bombay and UP. have very recently used this gur to much
advantage.

The utility of this industry as an avenue of employment for the
erstwhile toddy-drawers has been recognised. The Governments of
Madras, Bihar, Orissa, UP. and CP. have provided for the free tapping
of palms for gwr-making in the dried zones. The tappers are being
encouraged to take up the industry.

Wherever palm gur has been newly introduced the people are
relishing it and palm sugar is much in demand everywhere. People
are preferring palm gur to cane gur. Palm gur is of a light cream
colour, is very pleasant to the sight and to the taste. It has an excel-
lent flavour.

1 The report of the All-India Village Industries Association for the year 1938
states that gur was being made under their auspices in Bengal, Andhra, Travan-
core, Cochin, Karnatak, Broach and Assam from the palmyra, and in Maharashtra,
Bihar and Orissa from the date-palm. In Karnatak a beginning was made during
that year in training a few toddy tappers to manufacture sugar in one centre
and to manufacture gur from the sweet juice of cocoanut trees in another centre.
At Wardha, the headquarters of the All-India Village Industries Association, ex-
periments were also carried on for facilities in the manufacture of gur. The
Association also obtained a licence from the C.P. Government in the year 1938 to
use and sell Nira or sweet palm juice as a beverage. It is stated that it makes
a good wholesome drink and should be popularised in villages.

134

Quantity of Palm-jaggery in Bengal and Madras

The total quantity of gur produced other than that from cane is
estimated at about 1,00,000 tons per year in Bengal. The palm juice
gur manufacturing industry is #n industry of great importance in
Madras where the production is estimated at about 40,000 tons during
a season. 1

Cocoanut Palm-jaggery

Dr. J. S. Jatel, Ex-cocoanut Enquiry Officer of the Imperial
Agricultural Research Council recorded that a tapper can earn
Rs. 54-6-0 in six months from 15 cocoanut trees and 40,000 cocoanut
palms are tapped for jaggery-making in the Madras Presidency.

Date-Palm Jaggery

The average annual production of gur per tree is 12.25 Ibs. 500
trees can be grown per acre, so that the yield per acre would be 4 tons.

Prospects oj Date Sugar

Date-palm can be grown at a nominal cost. The yield of sugar
is an absolute certainty and the trees once grown yield sugar for 30
years on an average. The yield of sugar per unit area in date palm
is much higher than in cane.

Nutritive Value of Gur

We cordially welcome the All-India Village Industries Association
which was * established by the Indian National Congress under the
guidance of Mahatma Gandhi in November 1941, particularly on account
of the propaganda which that Association has undertaken for the
popularisation of gur. The Association undertook^ this task not only
on purely economic grounds of promoting a cottage industry but also
because it was satisfied about the superior nutritive value of gur.
Mahatma Gandhi in the course of an editorial in the " Harijan ", dated
13th April 1935, observed:

"Most undoubtedly people will be advised to use gur for their
milk and tea. They will be told, as they are being told, that it is
superstition to think that gur taken in milk or tea is injurious to
health. One correspondent says that on his wife beginning to talce
gur with her tea instead of sugar she lost her constipation. I am not
surprised, because gur has a mild laxative effect which sugar certainly
has not ".

Gur, a Wholesome Article of Diet

Indeed, it cannot be disputed that gur is a wholesome article of
food. It has been on the daily menu of millions of our countrymen
since generations. As the nutritive value of gur is being brought to
the notice of the people, it is expected that its consumption will show
an increase. We might give a warning, however, that the production

i Vide Tariff Board Report, 1938, pp. 56 and 57.

135

of gur, as it is carried on now is wasteful in many respects, and it
will be advantageous in the national interest if suitable improvements
were introduced in the manufacuring process of gur, for minimising
the waste of raw material, increasing the extraction of sucrose, for
producing it under more hygienic conditions, etc.

Necessity of Improvement in Village Factories Manufacturing Gur

The importance of the gur industry which consumes 3 to 4 times,
the quantity of cane consumed by factories approximating to about 62
per cent of the total cane-crop, cannot be over-emphasised. Any
improvements in and development of the gur industry will be of great
benefit to millions of cultivators, and should therefore receive careful
consideration of the various Provincial Governments,

Many of the village factories are inefficient, leaving behind in the
bagasse a considerable amount of sugar often as much as 20 per cent
of the total quantity. The difference in efficiency between the village
process and a good factory is visible from the fact that from a given
weight of cane, the factory obtains as much sugar (99J per cent purity)
as the village obtains gur (80 per cent purity). In both cases, the
amount of the product obtained is about 10 per cent of the weight of
the cane ; gur 10 per cent, factory sugar 9.5 per cent and Khandsari
sugar 5.5 per cent. It would be very helpful if village factories are
set up with efficient mills for extracting the juice, vacuum pans for
evaporation, and arrangement for clarification by filtering through
charcoal. Thus better quality and bigger yield can be obtained. We
are glad to note that experiments for ijnproving the making of gur are
being made in Bihar, Bengal, Punjab and the U.P. We are also glad to
find that the All-India Village Industries Association is taking a keen
interest in the matter, since the year 1937.

Palm-jaggery Production also deserves Encouragement

We would recommend adequate encouragement for the manufacture
of palm-jaggery along with sugarcane jaggery. Both are important
village industries deserving equal attention and encouragement for
creating employment and a better diet for the masses. The manufac-
ture of palm jaggery has become important from another point of
view also, viz. of diverting the energy of the tappers into a better channel.
This aspect has assumed greater importance, particularly since the
advent of the programme of Prohibition sponsored by the Congress
Ministries in various provinces. Nature's gift of palms can also thus
be utilised to the greatest advantage. Chemical analysis of jaggery
made from palm has shown that it has almost the same ingredients as
are possessed by the jaggery made from sugarcane juice and indeed
lakhs of people are using it with beneficient effects in the provinces
of Bengal and Madras. No one need have any apprehension that palm
jatgg;ery would be intoxicative. It is as useful and harmless as the
jaggery made out of sugarcane, and, indeed, is equally delicious. Palm-
juice gur finds a ready market owing to its flavour.

During the year 1939, since the introduction of the Prohibition in
several districts in Bihar, the Government of Bihar are making en-
deavours to manufacture gur from palmyra juice. They expect that

136

the experiment which is showing signs of progress will succeed in
obtaining employment to the old toddy-vendors and be profitable to
the owners of the trees also.

Statistics regarding Movement of Gur Scanty

No attempt has as far been made to estimate the quantity of gur
consumed in the various provinces of India. This is due to the fact that
information regarding the movement of gur is very scanty. Figures
for imports and exports of gur, by rail and river from provinces and
States are not separately available, these being combined with those
for molasses, etc. Large quantities of gur are transported by road
over long distance, and the error without allowing for this fact is
likely to be considerable. Therefore, any estimate of the quantity for
consumption of gur in the various provinces would be difficult. For
these reasons, such figures have not been calculated.

There is no carry ove^ of gur as in the case of sugar. Almost all
the provinces produce the bulk of gur needed for their requirements.

Till very recently there was no elaborate system for the marketing
of gur. With the efforts of the Gur Marketing Bureau it is believed
that there could be a considerable expansion in the consumption of
gur in the various provinces, the figures for Assam and Madras being
9 Ibs. and U.P. as much as 72 Ibs. The wide disparity in consumption
in the respective provinces is not in any way due to the difference
in the purchasing capacity of the people. The plain reason is that the
problem of distribution has received no attention. The maximum pro-
duction is of course in the UP. and the next highest in Bengal and
then Punjab, Madras, Bombay (including States) and Bihar.

The following table will show the net production of gur in India
by Provinces and States during 1938-39 and 1939-40 :

TABLE NO. 5

Provinces and States

1939-40

1938-39

United Provinces (including States)

9,16.000

7.28,000

Punjab

2.19,000

1.65,000

Bihar and Orissa

...

82,000

1,24.000

Bengal

...

3,91,000

3,50,000

Madras

...

2,67,000

1.87.000

Bombay and Sind (including States)

...

1,90.000

1,52,000

North-West Frontier Provinces

...

67,000

50,000

Assam

...

35,000

31.000

Central Provinces and Berar

...

38,000

41,000

Delhi

...

3,000

400

Mysore

...

36,000

20,000

Hyderabad

...

54.000

20,000

Baroda

5.000

5,000

Bhopal

...

3,000

2,000

We may now turn to other methods of manufacturing sugar. In
the sugar industry in India, as it is today, both the indigenous method
and the modern factory method are practised.

137

Methods of Manufacture of Sugar
The indigenous method comprises : *

(i) The Open Pan Process,

(ii) The Manufacture of Raw Sugar, i.e. Gur and Rab, and
(iii) The refining of raw sugar into white sugar by :

(a) either Bel-khanchi khandsaris, or

(b) Bel-centrifugal khandsaris, or

The modern factories are engaged in either

(a) the refining of sugar from gur or jaggery in refineries, or

(b) the manufacture of sugar from sugarcane, direct.

Indigenous Methods Raw Sugar, i.e. Gur and Rab

We have already described the manufacture of gur. We will now
describe rab or massecuite which is different from gur only in its
being of a thinner consistency. It is obtained by boiling the juice to
a slightly lower degree of concentration than gur. It is mainly used
for the manufacture of crude sugar known as khand. This process of
manufacture of rab is known as the Bel Process, and consists of boiling
the juice obtained from the cane in bullock or small power mills in
a series of open pans. This is prevalent largely in the Rohilkhand
Division of the United Provinces. Rab is also prepared from gur in
the Eastern Districts of the United Provinces.

Rab is manufactured generally within easy reach of the cane
supplies,

Refining of Rab into White Sugar 1

The Bel-khanchi khandsaris use no machinery. The cane-growers
crush the cane in animal power crushers (which are generally taken
on hire) and sell the juice (not the cane) to the khandsaris who con-
vert the same into rab in direct-fired open pans. The rab is placed
in bags, and molasses is squeezed out by applying pressure. The brown
sugar thus obtained is then treated with moistened weeds, and after
it becomes almost white, it is dried in the sun.

The Bel-centrifugal khandsaris adopt the same method as is
adopted by the Bel-khanchi khandsaris except that centrifugal machines
which may be hand or power-driven are used for separating sugar from
rab. In a modification of this process, the rab-boiler working in villages
sells his rab to owners of centrifugal factories, that are generally located
in towns.

The process of manufacture of sugar from the rab is accompanied
by even more waste than is found in manufacturing sugar from gur.

The open pan factories represent a further stage in the industrial-
isation of small-scale sugar manufacture. Such factories have general-
ly got cane-cnTshers driven by oil or steam engines or by electric

*Vide Tariff Board Report, 1938, p. 92.

138.

motors, Rab is boiled in open pans as before and power driven centri-
fugals are used for separating sugar from rab.

These factories differ from the modern sugar factories not only in
size, but also in regard to the simplicity of the machinery and process
employed. Most of these are large enough, however, to be classified
as factories under the Indian Factories Act.

Statistics of Production of Khandsaris

It is a matter of great regret that the statistics of the sugar produced
by the various types of open pan concerns which may collectively (as
also conveniently) be called khandsaris, are not available. The Imperial
Council of Agricultural Research sanctioned a grant of Rs. 3,000 for
taking a census of sugar production in villages and towns in the U.P.
by the khandsari process. The Government of the U.P. undertook to
carry out a census of production for the year 1933-34 1 and appointed
a special staff for carrying on a detailed enquiry in the towns. The
Punjab Government also undertook to compile figures of production of
sugar by Khandsaris in the Punjab. It is a matter of regret, however,
that despite these efforts it has not been possible to obtain any definite
and reliable statistics till now and that all the estimates of Khandsari
production are conjectural estimates.

A glance at the above table will show, however, that in recent
years the khandsari production has been on the decline and that it
was at its maximum in the. year 1932-33. The Indian Sugar Committee
of 1920 (paragraph 278) had estimated the production of khandsari
sugar at 2,50,000 tons per annum, while the Tariff Board's estimate for
the year 1927-28 amounted to 2,00,000 tons. It will be interesting to
observe, however, that 60 per cent of the total khandsari sugar produc-
tion in India is in the U.P, alone (there is little khandsari production
in Bihar).

Future of Khandsari Process of Production

Although one is naturally inclined to feel doubtful about the suc-
cess of this form of manufacture of sugar which is very wasteful and
uneconomic as compared with the modern factory, its importance in the
transitional stage of the industry cannot be minimised as it can be
undertaken in the interior parts of the country, where owing to lack
of communications or the scattered nature of cane growing areas, it
would not be worthwhile for modern factories to be established.

The Indian Sugar Committee condemned the khandsari industry,
largely on the ground of its inefficiency. Since then, as a result of
the imposition of the protective tariff on sugar, the industry has made
some progress as estimated above, due inter alia to the advantages it
has in purchasing cane at a rate, which is considerably lower than the
market rate, and the increase in the recovery percentage by improve-
ment in methods of manufacture, and the low overhead charges, etc.

*We understand that during the year 1933-34 according to this enquiry, 80,000
tons of sugar were manufactured by Khandsaris in U.P. and 4,000 tons in the
Punjab.

139

The Tariff Board expressed the opinion that the industry must un-
doubtedly play an important part in providing an outlet for surplus
cane, The Report also stated that these khandsari factories are easily
and quickly established, and their capital cost of crushing cane is
estimated at 6.79 annas per maund, against that of Re. 1 in case of
central factories. The industry, as seen above, is of great magnitude,
giving employment to thousands of people at a time when their labour
is running to waste and holds an important position in the agricultural
system of the United Provinces. A set-back to this industry would
therefore be a very great hardship to the cultivators, particularly in
Rohilkhand where the area under cane is about one-tenth of the total
area in India, and where the cane is almost entirely sold for white
sugar making by the Bel process. The only way of saving it or of
producing its existence, is to increase its efficiency, by carrying on
vigorous research, by the adoption of the improved Bel system known
as Hadi or Bhopal method, or by the modified Rohilkhand Bel, 1 as
was tried by the Sugar Technologist in 1932-33, and which yielded
larger quantity of rab, by the provision of technical assistance, and
skilled labour, and by a whole-hearted co-operation of the cultivators,
zamindars, the khandsari and the Government.

The Imperial Council of Agricultural Research 2 should continue
to help this industry which gives employment to a large number of
people and which is of great importance to the agricultural economy
of the country, by undertaking researches for effecting economy in
methods of manufacture, and by eliminating waste, wherever possible,
by the assistance of efficient machinery.

Mere sentiment alone, however, will not be of help in saving the
industry from sinking, with which it is threatened by efficient factory
production on a large scale. 8

The industry, if it wishes to survive, has an up-hill task before it.
Its future will depend considerably on its own efforts. It will have to
make earnest endeavours for deriving a better percentage of sucrose,
and improving the quality of sugar turned out by it.

Standard Methods of Manufacture

We may now pass on to a consideration of the manufacture of
white sugar in India. We may begin with noting the standard methods
of cane-sugar manufacture employed in modern factories. These are
briefly known as (1) Defecation, (2) Sulphitation, (3) Carbonatation.

DEFECATION PROCESS. According to this process sufficient time is
added to neutralize the raw juice, which is subsequently heated under

1 This was tried at the Nagalia Farm, Bilari, belonging to Lala Har Sahai
Gupta in 1932-33. The Imperial Council gave a grant of Rs. 4,000 for the purpose.
For a description of- the Bel, vide "The Open Pan System of White Sugar
Manufacture" by R. C. Srivastava, p. 114.

2 In November 1933, the Imperial Council sanctioned a scheme of Rs. 1,50,000
prepared by the Sugar Technologist for establishment of a Research Station for
making improvements in Khandsari method of sugar manufacture and indigenous
process of making gur.

3 Even the Tariff Board, 1932, which showed such great interest in the
Khandsari industry, could not help observing that the Khandsari system of manu-
facture, if the scheme of protection is successful, should to a considerable extent
give place to a system of central factories. (Vide para 81).

140

pressure, further " boiled " in open pans (defecators) and then allowed
to flow into settling tanks, or subsiders, where the separation of the
clean and dirty juice occurs. Of late it has been found beneficial to
send the juice through heaters before adding the lime-milk.

SULPHITATION PROCESS. The difference in this process from the
above method is that about double the amount of lime is added to the
juice, whereupon the latter is treated with sulphurous acid gas.

CARBONATATION PROCESS. In this process a considerable amount
of lime is added following by a treatment with carbonic acid gas.

The defecation process is used for making sugar intended for
refining. Since carbonatation and sulphitation are the classical processes
in the production of white sugar in factories, we may compare their
merits.

Carbonatation vs. Sulphitation

The carbonatation factories generally produce 2.6 per cent more
than that of sulphitation factories. This superiority of carbonatation is
due to the more intensive and thorough elimination of non-sugar ingre-
dients, so that both the purity and the colour of the clarified juice are
strikingly better than in sulphitation. The sugar made in a carbonata-
tion factory realizes a slightly better pride than in a sulphitation
factory, as the sugar turned out is whiter and more sparkling and retains
its qualities much longer. At the same time, the carbonatation process
is somewhat more expensive, costing perhaps about 5 annas more per
maund of sugar produced.

The carbonatation process is not generally as profitable as the
sulphitation process, due to the fact that the difference in price of
sugar is not very great.

Out of 150 factories over 90 are sulphitation factories.

Characteristic Features in other Countries

Let us first take Java. Java has various natural advantages over
other cane-sugar countries. To start with, the Island is situated most
favourably in respect of cane cultivation, lying as it does within the
tropical belt. It has been blessed with a climate agreeable to the growth
of rich cane of higher sugar content and of heavier yield than is found
in India. In point of labour also Java has several advantages.

It has a population of 35 millions and has an area of 50,000 square
miles. Labour is abundant, cheap and readily available.

There is intensive cultivation of cane combined with the application
of a well-devised scheme of economic manuring due largely to the
fact that only a small portion of the land can be allbtted to sugarcane,
as the bulk of the land is required for growing food for the population. 1
In regard to cultivation of cane, the universal practice in Java is to
grow exclusively "plant cane"; ratooning as is done in some other

1 Vide Economic Aspects of Cane-sugar Production by Maxwell, p. 52, where
he observes "more than 90 per cent of the total cane-grown area in Java is under
irrigation, and in the Hawaiian Islands, 50 per cent."

141

countries, is not done in Java. Owing to the necessity of growing rice
for the people, Java is forced to adopt a system of rotation of crops,
which .also implies that the planting of cane is done on irrigated land.
The most important feature, however, is that the cultivation of cane
and the manufacture of sugar are done by one and the same administra-
tion. As a matter of fact, it can be said that the cultivation of cane
as practised in Java may well be regarded as the most scientific and
efficient system of cane cultivation in the tropics.

Milling Results in Hawaii superior to Java

In regard to extraction results by the milling installations, how-
ever, Java has not yet reached the high level of Hawaii, which ranks
the highest amongst other cane countries.

Features in Hawaiian Islands

These islands lie on the northern fringe of the tropical belt, just
within the Tropic of Cancer. The sugar industry here is noted for its
extraordinary degree of efficiency and systematic thoroughness. The
relation of applied science to sugar manufacture is most intimate and
complete. Over 50 per cent of the total area under cane is irrigated.
In respect of extraction results, Hawaii ranks highest amongst cane
countries.

In Hawaii, ratooning is practised and the cane requires about 18
months to mature. 1

Features in Cuba

The chief reasons for Cuba's pre-eminence as a sugar manufacturing
country are the quality and quantity of its soil. The extraordinary
fertility of the natural cane lands in Cuba is well-known. Cane, once
planted, appears, as it were, to thrive like a weed.

Cuba is similar to Java in some respects. Both are long and
narrow lands of roughly the same area (about the size of England).
Both of them are within the tropics, north and south of the Equator
respectively, and have more or less comparable climatic conditions.
It is remarkable, however, that the population of Java is over ten
times that of Cuba, although both the islands are of about the same
size. On the other hand, the area of cane cultivation in Java is restrict-
ed by Government due to the necessity of growing food for the people.
Therefore, while land in Cuba is abundant and cheap, and labour com-
paratively scarce and dear, in Java the land is limited and labour is
abundant and cheap. As a result we find that cultivation of cane in
Java is intensive and in Cuba extensive. The average yield of cane
per acre is less than 20 tons, and of sugar, about 2 tons per acre. 2
Transport of cane in Cuba is not up to date, being largely done by
bullock carts.

In India, though the main sugar belt lies in North India, superior
qualities are grown in the Deccan and in South India. It is important

*Vide Economic Aspects of Cane-sugar Production by Maxwell, p. 51.
2 ibid., p. 55.

142

that a wide variety of agricultural conditions have to be borne in mind
when dealing with the problem of conditions of cultivation of cane and
manufacture of sugar. For the purpose of examining the methods of
manufacture, it should suffice if attention is confined to agricultural
-conditions in the U.P. and Bihar.

Nowhere is agricultural conditions impinge on manufacturing
conditions more than in the matter of the duration of the crushing season.
The following table giving the crushing seasons for the various sugar-
producing countries brings out the disadvantages which the Indian
industry suffers when compared to others :

TABLE NO. 6
Period of Crushing or Harvesting Seasons for Cane in various Countries

Cuba

JanuaryJune

Hawaii

DecemberSeptember

Java

May November

Mauritius

August December

Natal

May December

Queensland

June November

Egypt

December A pr il

India

November A pril

Generally speaking, actual crushing period extends from 4 to 6
months, although in districts where exceptional conditions climatic and
otherwise prevail, e.g. in Hawaii, it extends almost throughout the
year* The duration of crushing season depends upon a number of
factors, the most important of which is maturity of the cane, and the
availability of cane, by more than one crop per year. 1

The tables below give the average duration of the cane-crushing
season in India from 1933-34 to 1942-43 :

TABLE NO. 7

Capacity of Factories and duration of Crushing Season in India 2

Yea

Average cane-crushing capacity
of Factory (calculated on the basis
of tons of cane crushed per day of
actual working in India)

Maximum cane-crushing
capacity of factories per
day in India

Tons

1934-35

517

2,012

1935-36

568

1,807

L936-37

630

1,960

L937-38

660

2,000

1938-39

630

1,850

1939-40

710

1,960

1940-41

690

1,980

941-42

640

1,800

942-43

690

1,920

Economic Aspects of Cane-sugar Production by Maxwell, p. 22.
2 Vide Indian Trade Journal, Calcutta, 17th September 1942, and previous issues.

143
TABLE NO. 8

Duration of cane-crushing

1933-
34

1934-
35

1935-
36

1936-
37

1937-
38

1938-
39

1939-
40

1940-
41

1941-
42

1942-
43

season
(October-May)

No. of
Days

Mo. of
Days

No. of
Days

Mean duration of cane

crushing season in all-

India

106

104

126

138

112

129

113

101

Maximum duration of cane

crushing season in all-

India

208

172

179

203

181

184

203

264

313

278

Mean duration of cane

crushing season in U. P. ...

112

107

134

140

124

133

100

112

Mean duration of cane

crushing season in Bihar...

105

109

124

150

136

100

Mean duration of cane

crushing season in "all

other provinces".

112

138

103

119

144

117

As pointed out by us elsewhere, and by the Tariff Board 1938
(page 62) , the duration of the cane-crushing season is dependent on the
availability of cane and its economic operating purity. The Tariff Board
also reported (vide page 66) on the basis of the average for three years,
that the duration of the season in the sub-tropical region was 128, for
the tropical region, 132, and for the whole of India, 130 days. Taking
26 working days in a month in a crushing season of 5 months, the Tariff
Board thought 130 days as a fair average to adopt as an economic period
of working in the present conditions. 1

Age of Crop

The time taken to grow a crop of cane depends largely on climatic
conditions and the quality of cane grown which varies from country to
country. This point has an important bearing on the subject of yield
of sugar per acre, when comparisons are drawn between districts.

JAVA. In Java, cane takes 11 to 15 months from planting to harvest-
ing, thus practically constituting one year's crop. "Plant Cane" is
exclusively grown ; ratooning is not practised. This is due mainly to the
system of land tenure in Java, whereby land, although leased for long
periods, is actually occupied by the factory during the period of cane
growing, i.e. from 14 to 18 months.

CUBA. In Cuba, though ratooning over long periods is practised,
crops are usually harvested after an average growth of 12 to 15 months.

HAWAII. In Hawaii, two seasons are required for producing a crop
of cane. Though what is locally termed " short ratoons " are harvested
after 12 months' growth, the bulk of the crop matures in 18 to 24 months.
The common practice is to have 3 crops in the ground at the same time :

Ht is well known that one or two factories in the Bombay Deccan worked as
many as 180 days in a season, and the factory in the Mysore State worked for
264 days. The length of the crushing season can be extended by encouraging the
growth of the most suitable early and late ripening varieties of cane.

144

as one crop is being cut, another is being planted or cultivated for ratoons,
while a third is growing, to be harvested six months later. 1

Supply of Cane

In Queensland and Natal the entire crop of cane is grown by inde-
pendent European Planters, who supply their cane to the neighbouring
mills, while in Mauritius a considerable part of the crop, about 45 per
cent, is grown by small Indian Planters. The bulk of the cane in Cuba
is produced by outside planters and sold to mills.

In Java the whole crop is produced by the mills and in Hawaii about
90 per cent of it.

In India owing to the smallness of the holdings, large contiguous
plots of land cannot be put under cane by factories without great diffi-
culty. Small individual cultivators grow cane on their small plots of
land and sell their produce to mills as also to the Khandsaries and gur
manufacturers. More than 70 per cent of the crop is sold to gur and
other manufacturers, whereas only about 20 per cent of the crop is sold
to mills for manufacture of sugar direct therefrom. A tendency is, how-
ever, noticeable for factories to purchase their land, in close vicinity, for
cultivation under their own management.

Sucrose Content

The crop averages in the different countries indicate practically a
uniform percentage of sugar in the cane, i.e. round about 13 per cent.
Fibre content is roughly 12 per cent to 13 per cent and the purity of
juice is about 87 per cent.

Yield of Cane and Sugar per acre

The yields of cane and sugar per acre are necessary in comparing
the yield of sugar in one country with that of another. Some confusion
is sometimes caused by mixing up Long and Short tons with metric tons 2
and other factors also are ignored, e.g. whether the figure is based on a
one-year or two-year crop, whether based on white or raw sugar, whether
based on plant cane or ratoons, whether on irrigated or non-irrigated
land, etc.

IN JAVA. The average extraction of sugar in Java is about 11.9 per
cent. It must be borne in mind, however, in comparing these figures,
that in Java the crop consists of plant cane exclusively and is a one-year
crop.

IN HAWAII. In Hawaiian Islands, the extraction of sugar percentage
of white cane is 12 per cent but it must be borne in mind that ratooning
is practised and the cane requires about 18 months to mature. For the
sake of a fair comparison, the figure of the tonnage of cane harvested
per acre should be based upon the same unit of time as well as area, i.e.
tons of cane per acre per annum. The tonnage of cane harvested per
acre per annum in Java is about 45 (2,000 Ibs.) as compared with about
53 (2,000 Ibs.) of Hawaii. Both these countries, however, have one

1 Vide Economic Aspects of Cane-sugar Production by Maxwell, p. 22.

2 Long ton 2,240 Ibs. Short ton 2,000 Ibs. Metric ton 2,205 Ibs.

145

factor in common, viz. of intensive cultivation combined with irrigation
on an imparallelled scale. In Java more than 90 per cent of the total
cane growing area is under irrigation, while in Hawaiian Island, over
50 per cent of the area is under irrigation.

IN MAURITIUS. In Mauritius the average yield of cane is about 23
to 24 tons per acre on European estates. In Indian plantations, however,
the average is only about 14 tons per acre. Consequently the average
for the whole is 17.5 tons. This is equivalent to less than 2 tons of sugar
per acre. This is due to primitive methods of cultivation of the Indian
planters who occupy about half of the total area under cane. 1

IN INDIA. In India the average yield of cane is about 15.6 tons per
acre as compared with 12.3 tons in 1931-32 (vide page 19, Tariff Board
Report of 1938). Higher yields, however, have been recorded e.g. a
maximum yield of 100 tons was obtained in the Deccan in 1938. The
yield for improved varieties is between 20 to 30 tons per acre. The
production of sugar per acre in India works out between 1.25 to
1.50 tons. 2

IN CUBA. As regards Cuba, no reliable statistics are available in
respect of yields of cane and sugar. But from occasional statements it
may be taken that the average yield of cane per acre over the whole
island is less than 20 tons and 2 tons of sugar per acre.

IN QUEENSLAND. In Queensland the average yield of cane per acre
is about 16 tons and 2 tons of sugar per acre.

IN PHILIPPINES. No data is available. From an attempt made hi
1924 to compile a representative record of the yield of sugar per acre, it
was found that 1.28 tons of sugar was yielded by plant cane, 1.38 by
ratoons and the total average was 1.1 tons of sugar.

The following table gives particulars of average yields of cane and
of sugar (raw) in terms of short tons per acre in different countries :

TABLE NO. 93

Broad average of Yields of Cane and of Sugar (Raw) in terms of Short Tons
per acre for Different Countries

Countries

Cane
Tons per acre

Sugar
Tons per acre

Approximate period
of growth of cane

Java
Hawaiian Islands
Queensland

Cuba
Mauritius
Philippines
South Africa
India

Approx. 45
45
Less than 20

H * 20
20
M 20

M M 20

Approx. 12

Approx. 5*5
5'5
About 2

Less than 2

H M 2

2
2

M ., 1-1/2

11-15 months
18-24
Practically 2 years'
crop
12-15 months
14-20
11-14
2 years' crop
1 year's crop

1 For a detailed study, vide Economic Aspects of Cane-sugar Production by
Maxwell, p. 51.

2 Vide Tariff Board's Report, 1938, p. 67. It states this yield of 100 tons of
cane should give a yield of sugar of 11 tons per acre.

8 This table is not, however, up to date (the figures having been compiled in
1927 by Mr. Maxwell) and many improvements have been made since then as
observed by us elsewhere in this thesis, in the matter of increase in the yield
per acre due to improved canes and the higher yield of sugar due to better recovery.
In Java the sugar produced per acre is about 6.72 tons during 1938-39 (vide Review
of Sugar Industry in India for the year ending 31st October 1940, in the Indian Trade
Journal, 7th May 1942).

146

Labour supply is another point on which it is necessary to note how
the different sugar producing countries are placed.

MAURITIUS. Although the island consists of some 700 square miles
and has a population of 3,80,000 people of which 2,70,000 are Indians,
Mauritius is not well situated in respect of labour. The labour shortage
affects the welfare of the industry.

JAVA. Java is one of the most densely populated countries in the
world, and the result is that labour question is greatly simplified.

INDIA. In India also there is plenty of labour available and at cheap
rates too. The factories alone are estimated 'to be employing about
1,20,000 labourers during the crushing season, apart from the Khandsaris
and gur manufacturers. The total labour force dependent upon cane-
cultivation may be estimated at about 20 millions, on average of one
acre of cane per family of about 4 to 5 members, in addition to others
employed for weeding, harvesting and allied operations.

Output of Sugar Factories

The following table gives the average annual output of sugar per

mill in different countires :

TABLE NO. 10
Average Annual Output per Mill in Various Countries in 1927 1

Countries

Average annual output per mill

Cuba
Hawaii

26,000 tons of sugar
18,000

Philippines
Porto Rico

17,000
15,000

Australia

14,000

Java

12,500

South Africa

9,500

Mauritius

; 5,500

India

7,500

Labour Supply

It must be observed that Cuba stands out prominently amongst
the various countries for large outputs and large milling capacities.
In Cuba there are very few factories which produce less than 5,000
tons per year, and there are a large number of factories which produce
50,000 tons per year. There are three or four factories which produce
more than one lac tons. The factories in India were mostly of a small
size till 1931, but since the grant of protection this has been altered
and the average production of sugar per season after 1940 may be
taken at about 7.500 tons per year.

Size of " Economic Unit " Factories in India

The Tariff Board (1932) recommended (page 64) the establish-
ment of factories with a crushing capacity of 13 'lacs maunds of cane

1 Vide Economic Aspects of Cane-sugar Production by Maxwell, p. 104 pub-
lished in 1927.

147

per year i.e., about 4,000 tons of sugar as an " economic unit " in the
then conditions in view of the vastly scattered and small holdings
of cane. The capital cost of such a factory was estimated at about
Rs. 13 lacs, or roughly one rupee per maund of cane crushed. It is
gratifying, however, to find that the size of the factories in India is
increasing with the growth and availability of cane in the vicinity
of factories, and consequently the cost of manufacture is also decreas-
ing. The " economic unit " adopted by the Tariff Board of 1937 was
500 tons crushing capacity per day (page 61) as compared with
the crushing capacity of 400 tons adopted by the previous Tariff Board.
As 'pointed out, however, this expectation has been more than
realised and the size has been increasing still fuiither due to the
availability of cane and the desire of the factories to reduce the cost
of production. The capacity of a sugar factory is governed by a
number of factors which vary from country to country, the main
consideration being the amount of cane available, the yield of cane,
the duration of the milling season and the quality of the cane.

Crushing Capacities

By crushing or grinding capacity of a factory is meant the
amount of cane that goes through the milling plant per unit of time
with good extraction and is usually expressed in terms of so many
tons of cane per hour or per day. Of course, it would certainly be
more rational and desirable to define the capacity as the quantity
of cane which can be crushed by the mill with the highest extraction
results, for after all, the fundamental object of a milling plant is not
the mere crushing through of huge quantities of cane, but extraction
of the maximum sugar from the cane. The cane crushing capacity
varies considerably in different countries. In Cuba there are over
50 factories which crush more than 75 tons of cane per hour. It
appears, however, that the object of Cuban mills is capacity and
not extraction. While the Hawaiian industrialists regard the milling
plant as a means of extraction of sugar, the Cuban industrialists
consider the plant as a means of grinding cane, we find that the
highest extraction results are in Hawaiian Islands.

Factories in Java very widely in milling capacity, the majority
ranging from 30 to 55 tons of cane per hour.

In India the average cane-crushing capacity may be said to be
about 690 tons of cane per day of 22 hours (between 1940 and 1944) and
it is gratifying to note that this is on the increase. The maximum
capacity is 1,900 tons per day.

Over-all Efficiency

The " over-all " efficiency of a factory by which is meant the per-
centage of sucrose recovered from the total sucrose contained in the
cane in the form of commercial sugar varies on account of different
conditions. Of primary importance are the richness of the cane,
purity of the juice, the fibres in the cane, and method of manufacture.
The over-all efficiency combines the extraction of milling efficiency
with the recovery of manufacturing efficiency. The following table
from Maxwell's Economic Aspects of Cane-sugar Production (page
118) shows the tons of cane required to make a ton of sugar in differ-
ent countries.

148

TABLE NO. 11
Tons of Cane Required to make one ton of Sugar

Countries

Tons cane to
one ton sugar

No. of factories
averaged

Season

Observations

Cuba

8-50

1924

Raw sugar

Hawaii
Java

8-20
8-80*

Practically all
> >

Computed on the
basis of raw su-

gar (Standard

Muscovado)

Queensland
Mauritius
South Africa

7'80
10-66
1090

*>
20
12

1919
1925

Raw sugar
White
White and partly

raw sugar

India

11-50

130

1940

White sugar

The favourable position of Queensland is mainly attributed to
the rich canes there. In other countries, also notable improvements
have been made during the last few years.

We have seen that in the comparison between the Indian sugar
industry with that of other countries, there is hardly a single aspect
in which the comparison is in India's favour. Only in the matter of
labour supply would India seem to be favourably placed ; otherwise
in the yield of cane per acre, in the sucrose content of the cane, in
the duration of the crushing season, the average milling capacity of
factories. India's competitors possess notable advantages. That is
why, as we have never wearied of pointing out, the success of pro-
tection depends more on what is achieved in the farm than what is
attempted in the factory. Nevertheless, when one looks only at the
manufacturing process, the efficiency of the milling operation, con-
ditioned no doubt by the quality and state of the cane, is a factor of
the utmost importance.

And the Indian industry can claim that the steady increase in
the recovery percentage is a point in its favour which needs all the
greater emphasis, since protection to sugar often meets with scorn.
The Tariff Board (1938) observed (page 74) that from an analysis
made by the Sugar Technologist of the increase in recovery (vide
Appendix ' B ' of the report) , they found that the greater part of the
improvement was due to the increased efficiency, rather than the
better quality of cane. The Tariff Board also observed in the same
context (page 74) that the quality of cane had not improved to the
extent that might have been expected and had actually declined in
Bombay, North Bihar and South Bihar, and that this adverse factor
had to a great extent been offset by increased efficiency in milling.
The Tariff Board also pointed out (page 72) that the recovery of
sugar from cane and the cost of manufacture were largely influenced
by the Quality of cane over which the factories could exercise no
control, unless they were in a position to cultivate cane in their own
land or land under their control, an ideal arrangement, which, except

* In 1925 this figure was 8.1.

149

in Bombay, was exceptional in India. They also pointed out further
that in this respect factories in India were at a grave disadvantage
in comparison with factories in Java which were in a position to
control the cultivation of all the cane they required and could arrange
for harvesting at the time cane reached maturity and was in the best
condition for crushing.

The following table gives the average and maximum recovery
percentage in the various provinces and for India as a whole (and
for Java for facility of comparison) from 1931-32 to 1943-44 :

TABLE NO. 12

Average and Maximum Percentage of Recovery of Sugar in Factories in India

and Java since 1931-32 1

Voo-

India 1 U. P.

Bihar

Bombay

Java

India

i ear

Average j Average

Average

Maximum

1931-32

8-89 i 8'59

9'06

10'46 10

1932-33

8-66 8'55

8'60

1000

11-15

1933-34

8'80 ! 9-08

8-32

10-00

12-64

1934-35

8-66 8-56

8'79

1037

12-35

11-10

1935-36

9'29 960

8'93

10-47

13-21

11-34

1936-37

9-50 9-65

9'20

10-68

11-72

11-43

1937-38

938 i 9-18

9'58

1097

11-40

11-63

1938-39

i 9-29 914

9-00

11-29

12-25

1939-40

9-45 9-37

9-29

10-97 i

12'31

194U-41

9-70 9-87

9-86

9-94

11-16

1941-42

9'69 , 9-87

1035

9-87

12*45

1942-43

1 10'28 10*16

10-93

10-64

13-35

1943-44

10-02 i 9'92

10-53

10-98 |

12-84

It is interesting, however, to note the contention in some quar-
ters that the credit for this progress in the recovery percentage goes
to the cultivator, rather than the industrialist ; and this view draws
some strength from the fact that the best percentage is in Bombay,
the province in which the best quality canes are produced. Without
seeking to refute this contention, it may be pointed out here that the
higher percentage in Java is likewise due to the better quality of
cane which the mills there are able to procure, and their ability to
crush when cane is in an optimum condition. What matters is
whether or not the best results are achieved, given the kind of cane
which it is possible at the time to grow. The success of the sugar
industry rests as much in the lap of agriculture as of industry. When
one considers the achievement from the point of view of justification
of protection, one has only to reassure oneself that the rate of pro-
gress looked for and expected by the Tariff Board has been main-
tained. Though Mr, B. P. Adarkar points out that mills have been
wasting sugarcane and getting a low percentage of sugar recovery
by employing obsolete machinery and old methods, the expectations
of the Tariff Board of 1931 in this regard have been more than ful-
filled. It was expected that at the end of 15 years this country
should achieve a recovery of 9.4 per cent.

The average for all-India in 1940-41 was indeed 9.7 per cent and
in 1941-43, 9.69 per cent, and it looks as if there will be a further

I Vide Trade Journal, Calcutta, 18th Septsm!?er 1941 and J7th September 1942,

150

improvement in the recovery percentage. 1 Quoting the estimate of
the loss in sucrose due to insect pests and disease relating to 10
factories, the Tariff Board observed that the loss per month was
estimated at about Rs. 3,56,000 taking sugar at Rs. 6 per maund. For
a season of 5 months the loss would be estimated at Rs. 17,80,000. The
Tariff Board (1938) estimated an average recovery rate of 9.5 for the
whole of India. Fortunately, its expectation has been more than
realised in spite of the fact that adequate research has not been under-
taken to prevent insect pests and diseases in the cane.

Allowing for the lower sucrose content of the cane in India, the per-
formance of sugar mills in India is equal to the best in Java. For
ensuring satisfactory results in recovery of sucrose, the cultivator and the
industrialist must both join hands. This is absolutely essential because
roughly 78 per cent of the total cost of sugar is represented by raw
material and manufacturing charges. The Tariff Board (1938) observed
(page 78). that in the " economic unit " they adopted, the cost of the raw
material comes to 52.58 per cent and the manufacturing charges 25.49 per
cent.

The sucrose recovery in the process of manufacture in India as
compared with other sugar producing countries is given on page 71 of
the Tariff Board Report of 1938. A reference to that will indicate that
while Java recovered 86.57 per cent sucrose in 1933, the sucrose recovery
in 1936-37 was 79.35 per cent in the Punjab, 80.24 per cent in the U.P.,
79.69 per cent in Bihar, 78.99 per cent in Bengal, 76.17 per cent in Madras
and 81.05 per cent in Bombay. On the basis of these figures, the Tariff
Board concluded that some mills had an efficiency equal to Java as judged
by their recovery figures, but their loss percentage of sucrose was higher
as compared with that of Java, which was 1.0 to 1.5 (Tariff Board's
Report, page 72).

Charge of obsolete Machinery Leading to Efficiency

The charge levelled against the industry of the employment of
obsolete machinery and old methods is perhaps true of the older mills.
The charge that Indian mills have been technically inefficient is not gene-
rally correct and must be refuted. The Second Tariff Board has itself
pointed out that the progress achieved in recovery of sugar has been
mainly due to the increase in technical efficiency and that further im-
provement in the recovery percentage cannot take place without increase
in the sucrose content of cane. But for the employment of inefficient and
temporary technical staff the increase in the rate of recovery would
perhaps have been more pronounced. Even at the present moment most
of the mills engage their technical staff only for a particular season and
do not employ most of them beyond the season, thus driving them into
periods of unemployment of 4 to 5 months per year. It is also true that
when the next season begins there is new recruitment of staff. The
insecurity of the jobs of the chemists and engineers, and the lack of
employment for 5 months in the offseason every year cannot bring forth

1 It should be realised, however, that if higher recovery is to be achieved,
damage by diseases and insect pests should be controlled by research (vide telling
figures quoted by the Tariff Board (1938) wherein they point out (p. 68) that no
great improvement in the recovery rate can be expected unless the loss of about
42 per cent of the sucrose content is prevented by intensive research work.

151

the best of their work. It is regrettable that the importance of this
aspect of the problem is not properly recognised by the industrialists. 1
The Sugar Technologists Association, Cawnpore, has also made several
appeals to the industrialists in this respect at their annual meetings. No
tangible improvement has, however, been seen so far. The Tariff Board
in their Report of 1937 (page 76) also observed that a fair treatment in
the matter of employment of technical staff would lead to better effi-
ciency and recommended that if it was not possible to keep the whole
staff on a permanent basis, a reasonable retaining fee should be paid to
the technical employees whose services are not required after the season.
They also observed that " an annual hunt for staff and unseemly haggle
for salaries every season reflects little credit on the organised industry."
We entirely endorse this view of the Tariff Board. But it is fair to add
that such an attitude may have been due to the factory-owners' notion
(mistaken, of course) of reducing costs, which is wholly unjustified.
Owing to the short working season, however, there is always the tendency
to reduce overhead charges, unmindful of the advantages that would flow
from the sincere efforts of a contented staff. It will be seen, however,
that the manufacturing side leaves comparatively little scope for the kind
of economies which matter in bringing the cost of production to the level
of effective competition.

The general adoption of the sulphitation process instead of the rival
process of carbonatation which produces better quality of sugar of course,
at a slightly higher cost, and the appointment of not fully qualified techni-
cal staff and their employment for short periods are the counts on which
the industry may be exposed to criticism. But in all these matters, the
question of costs would form a highly extenuating factor, even if it cannot,
as we believe it will not, altogether exonerate the industry. The sulphi-
tation process, we have seen, is really the more economic since the higher
quality of sugar secured by the other method does not provide adequate
compensation for the higher capital and operating costs involved, parti-
cularly in this country, where such sugar fails to fetch an adequately
higher price.

India, A Price-Market

.As is well known, India is mainly a price-market due to the low
earnings of the people who cannot afford to make a higher initial outlay
on their purchases, although such higher outlay may be compensated by
the more lasting qualities or superior quality of the article purchased,
e.g. cloth, sugar, glassware. This phenomenon of India being a " price-
market " will also explain why various kinds of cheap Japanese manu-
factures which have the advantage of a low initial price have replaced
superior articles made by various countries like U. S. A., U. K., Germany,
Czechoslovakia, etc.

Likewise, in regard to the employment of staff, sugar manufacture
is so much of a seasonal operation that the industry cannot afford to
satisfy at the same time the criterion of expertness and fixity of tenure.
But for various considerations, it is imperative that the industry should

i The Bihar Government Labour Enquiry Committee of 1937 (of which the
writer had the honour to be a member) emphasised this point in their report,
and appealed for a more liberal treatment in the interest of the technical staff
as also of the industry as a whole.

152

show a greater regard for the personnel, technical as well as non-techni-
cal, and its general welfare. 1 One might, however, reasonably utter a
word of warning against the canker of nepotism to which Indian indus-
tries as a rule .are said to be prone in the matter of employment of their
staff. To this reproach may also be added a plea for increasing the size
of the manufacturing unit from the present small size where it exists, to
a more " economic " one, e.g. of about 600 tons cane crushing capacity,
and balancing the plant as soon as it is found feasible to do so.

But, taking the picture as a whole, it is far from disheartening to
find that the expectations of the Tariff Board regarding the technical
efficiency have been more than fulfilled. Further progress depends on
the all-round progress and general development of science and technology
in the country to the point at which all the points of comparison of one
sugar producing country with another, will be in India's favour. That,
however, is a task which devolves on other shoulders besides those of
the sugar industrialists.

1 In this connection vide the observation of Sir George Schuster, ex-Finance
Member, Government of India in " India and Democracy ", 1941, p. 307 : " Above
all, employers of labour must realise that an industry is doing no good to a
country unless it provides a good life for the masses who are employed in it, and,
accordingly, that good working conditions and a reasonable standard of living for
the wage-earners must be a first charge on industrial income/'

CHAPTER XI
PROBLEMS OF MARKETING

THE need for a strong selling organisation for the Indian Sugar Industry
was widely felt at quite an early stage of its career since the grant of
substantive protection. And it is no wonder than an industry which
achieved such break-neck progress in a period of no more than half-a-
decade should find special problems arising from its phenomenal rate of
growth. Even apart from this, it is well to remember that the days when
the industrialist could confine his attention to production and leave sales
and marketing to natural forces have been far left behind. When the
world as a whole is becoming in point of economic intelligence and sus-
ceptibility to political and other stocks but a small unit, the sensitivity
of markets increases hundredfold and the range of fluctuations of prices
is too wide for industry to stand up to. Industry has perforce to devise
its shelters when inclement weather becomes all too common. And this
explains why central selling organisations and various methods of
internal control and regulation with or without aid of one or more
governments have become such a dreary commonplace of the economic
history of our time. The Indian Sugar Industry, however, has in addition
to these world factors, special circumstances of its own, which argue
loudly for a common selling organisation, even if they have not been
powerful enough till now to force its hands in this matter. The all
important fact to remember in this connection is that a series of radical
changes in the nature and structure of sugar trade were compressed into
an almost incredibly short period ; and the adaptation to these altered
conditions hardly kept pace with the changes as they worked themselves
out. India changed within a few years from a large importer of white
sugar to one of the largest producers of it. As the imports were seaborne,
the movement of sugar was from the ports to the interior ; while India's
new role as producer called for sugar moving from the interior to the
ports which are the biggest consuming and distributing centres in the
country. So long as the port areas were the battle ground of imported
and indigenous sugar, the interests of the latter in these areas required
special care and protection, and in the early thirties at any rate, the plea
for a common selling organisation was based on this ground. Competi-
tion from foreign sugar has never quite ceased ; but the question of the
selling organisation has of late had to be viewed from the other angle of
evening out the differences of production and consumption among the
different provinces and states.

As is well-known, more than 80 per cent of the sugar produced in
India, is produced in the U. P. and Bihar, and this production is far in
excess of the consumption of these provinces which may be estimated at
only Jabout 20 per cent and this situation necessitates scientific marketing
of sugar in the various parts of the country in a manner which would
avoid over-lapping, which would eliminate unrestrained internal com-
petition, minimize freight charges with a well ordered system of distri-
bution from various production centres and the nearest consuming

154

markets and check the encroachments of foreign sugar in the vulnerable
areas in and around the ports.

Such an organisation could also arrange for marketing of sugar in
territories adjacent to India, viz., Tibet, Afghanistan, Nepal, Ceylon, so
that a portion of the production may find outlet in such areas and relieve
the internal pressure to some extent.

As mentioned earlier, the special requirements of the port areas first
pressed this problem to the attention of the sugar industry. But it was
not long before it became clear to the sugar mills that the sugar market
in India, as a whole and not merely the port areas called for an orga-
nisation which could regulate prices, the movement of stocks and the
like. There was also the fact that, while production was confined to
about five months during the year, consumption was evenly spread over
all the twelve months. So long as Indian sugar represented a small part
of the total consumption, its sale was quickly effected and there was no
problem of storage and standards to face. But when the importer was
virtually driven out of the market and merchants were willing to stock
indigenous sugar, storage became important ; and, obviously storage is
not easy when the keeping quality of sugar is at best dubious. The
question of standards also cropped up. The market was slowly adapting
itself to the changed conditions ; but only in the sense that Cawnpore,
instead of the ports, became the focal centre of the sugar trade, and
merchants slowly abandoned the idea of dealing with Indian sugar in the
same way as they had been dealing with foreign sugar. The price
differential between the two was more than was warranted by the differ-
ence in quality :

It was a very weak structure of the sugar trade that had to face
the frequent upsets which started with the outbreak of the Italo-
Abyssinian war. The increase in indigenous production, welcome as it
was from other points of view, only emphasised the Icp-sidedness of the
growth of the Indian Sugar Industry. In 1932-33 the output of the Indian
mills for the first time exceeded the quantity imported from abroad and
in the following year Indian sugar began to compete with foreign sugar
in the port areas. The outbreak of the Abyssinian war was the occasion
for the rise of speculative buying of sugar as of other commodities. The
reaction doubtless caused losses ; though it is not so certain how far the
subsequent difficulties may be attributed to such losses. But the after-
math of this speculative buying was the starting point of the difficulties
of sugar marketing. One direct result of it was that for the first time
since the advent of the Indian sugar industry, the available stocks of
sugar were distinctly in excess of the possible demand. The increase in
Indian production was not offset by a corresponding decrease in imports.
Not only the visible supply had increased, but the Indian sugar industry
had no control over its production programme, and was certain to have
a larger output in the next year.

Conditions were ideal for that landslide in prices which spreads
consternation among producers and dealers alike. On top of these, in
February 1937 came the increase in excise duty in anticipation of which
the mills had moved sugar out of the factories to dump it on an already
glutted market. The U. P. and Bihar factories decided at the same time
;to prolong the crushing season as the price of cane had been reduced.
The markets were flattened out by the dead weight of so many adverse

155

circumstances. By the end of June, 1937, the price of Indian sugar
reached the low level of Rs. 6-1-6 per maund for Cawnpore crystal sugar
No. 1. Such was the chain of events leading to the formation of a selling
syndicate by producers who had little or no tradition of corporate
action. The events proved more powerful- than the dispositions and
inclinations of personalities. The fortunes of the Indian Sugar Syndi-
cate, which was formed, will be recounted and examined at a later stage.
The events leading up to it have been sketched with a view to show how
the problems of marketing were forced on the attention of the industry. 1
To the extent that the interests of the cultivators were bound up with
it, the U. P. and Bihar Governments had to take interest in the marketing
of sugar and its price. The Excise Duty was the Government of India's
finger in the pie: And once the problem of marketing came up in this
formidable form, every aspect of it calls for examination.

The nature of the common organisation is of course, the most im-
portant aspect ; and we shall begin our consideration of it with an
examination of the origin and growth of the most successful of such an
organisation abroad, the Nivas, in Java.

The Single Selling Organisation in Java

It will be of interest to review here briefly the development of the
present Single Selling Organisation of sugar in Java. Before the war,
factories in Java sold their sugar as Indian factories did till 1936 before
the Sugar Syndicate was formed. As a rule, forward sales were made
through brokers. During the early stages of the war of 1914-18 large
purchases of Java sugar were made by the British Royal Commission on
Sugar Supply and the old system of sales was thus continued. A change
however came in 1917 when Great Britain arranged for most of her
supplies from other sources and when, by a coincidence, other important
buyers also withdrew from the Java market. The manufacturers of
Java, instead of selling in advance, as hitherto, were left with large
unsold stocks. Prices went down considerably and a complete demora-
lisation of the market was threatened owing to anxiety of the weak
holders to sell. To meet this danger, the sugar manufacturers of
Java established the Java Sugar Association as a Single Seller and
almost every holder of a factory joined it. This organisation however
failed to produce any substantial improvement as the dislocation of ship-
ping owing to war had brought export business almost to a standstill.
By 1918 practically the whole of that year's crop as well as a large part
of that of 1917 was awaiting sales.

At this juncture a new sales organisation, called the United Java
Sugar Producers' Association (V. I. S. P.) was formed in August 1918
covering about 90 per cent, of the industry. As most of the factory
owners belonged to Holland and as mail and cable communications
were uncertain at that time on account of war, the headquarters of the
new Association were transferred from Java to Amsterdam. Although
the original object in forming this Association was to dispose of the old
stock without undue internal competition as also the unsold stocks of the

1 For detailed reference to the formation of the Indian Sugar Syndicate, Ltd.,
attention is invited to Mr. M. P. Gandhi's Sugar Industry Annual for 1937, 1938,
1939 and 1940.

156

1917 and 1918 crops, the Association proved so very useful that it was
continued from year to year till 1932.

Difficulties, however, arose in 1930, when this Sales Organisation
experienced trouble in marketing the sugar produced by its members
due to the fall in prices. Prices were steadily falling till they ceased to
be remunerative. Discontent set in amongst the members, and during
the end of 1931 eight members left the organisation thus weakening its
position. On account of the decreased sales, the competition against 17
outside mills had also become increasingly difficult. This organisation
was therefore on the verge of collapse and in the absence of any
organisation to take its place and with the accumulation of large unsold
stocks, the entire industry in Java was faced with an unprecedented crisis.
Notwithstanding a hint thrown by the Netherlands Government to the
effect that a dissolution of the V. I. S. P. under prevailing circumstances
would not be countenanced, the dissolution of the V. I. S. P. became by
1932 a practical certainty as the members could arrive at no agreement
among themselves.

These advantages furnished an occasion for the Government to
investigate to what extent it would be necessary to take active measures.
Even before the producers themselves called the Government to come
to their aid so as to prevent, by a general ruling, the rise of ruinous
competition, the Government itself arrived at the conclusion that in the
general interest, it would have to step in to save the situation.

Upon a closer consideration of the problem it was found that the
Government's intervention would have to take the shape of a temporary
measure only and would have to be limited to the minimum require-
ments necessary to attain the end in view. It was also found that
Government would have to assume full responsibility for the working
of the organisation. Four suggestions were made to the Government
in regard to the manner of such intervention : (I) The Covisp Plan,
submitted jointly by the Ned. Ind. Handelsbank ?nd the Ned. Ind.
Landbous Mij., which involved a complete change in the existing
property relations and the current industrial methods, and under which
Government intervention would have to be a protracted one and last
many years and would also mean definite financial responsibility for
Government.

(2) The Segregation Plan, submitted by the President-Director of
the Java Bank proposing the pooling of supplies in a Central Sales
Organisation combined with a restriction to 50 per cent of the new
harvest.

(3) The Minimum Price Regulation Plan, submitted by the Head
of the Section of Agriculture, which was closely allied to the previous
plan ; and

(4) The 100 per cent Single Seller Plan, submitted by the Chair-
man and Vice-Chairman of the Boniso, proposing that all sugars be
disposed of by one Central Sales Organisation.

Before making a final decision, the Government held Conferences
on 21st September 1932 with a great number of producers and repre-
sentatives of the sugar trade and it was felt that the Government
intervention was indispensable. The majority of the producers, as also

157

the exporters, declared themselves to be in favour of bringing all sugar
into one strong hand. A minority of the producers seemed to fear that
a ' Single Seller ' would prove to be a continuation of the V. I. S. P.
and would, on this occasion, exercise coercion.

These expressions of opinion, as also the difficulties which were
steadily increasing with the development of political and economic con-
ditions prevailing in British India and in China convinced the Govern-
ment that a strong organisation was essential to tide over the crisis.
After having studied two different projects devising the technical details
for establishing a ' Single Seller ', the Advisers to Government prepared
a memorandum which was submitted on the 16th November to a Work-
ing Committee consisting of representatives of producers for their
opinion. Representatives of some 40 factories believed that the Govern-
ment's memorandum contained too much that savoured of the old
V. I. S. P. After considerable discussions and after projected ordinance
had been considered by the Council of State and by the Minister for
Colonies, it was presented for discussion in the People's Council, which
body adopted the Associated Sugar Ordinance on 23rd December 1932.

Finding that there were several modifications which totally marred
the principle that had been the main consideration of the Government,
the project could not be accepted. A few alterations were therefore
made in the original draft increasing the Government's influence, etc.,
after which the Governor-General promulgated the Associated Sugar
Ordinance to become effective from 1st January 1933.

Thus on the 31st December 1932 was founded in Batavia the
Netherlands Indian Association for the sale of sugar (Nivas) with head-
quarters at Sourabaya. Its constitution was also approved by the
Governor-General on the same date. He also appointed this Association
to sell the sugar produced in accordance with Article I of the Associated
Sugar Ordinance.

With this Act the transfer of new sugar, except such as was
prepared in the native manner, became subject, from 1st January 1933
to 1st April 1936, to restrictive regulations, the Nivas for the period
named, obtaining a sales monopoly for sugar.

The Nivas admits as its members any owners or exploiters of
one or more factories in Netherlands India that prepare sugar in a
manner different from the methods of the native.

Every year the members from among themselves appoint, for the
period of one year at least 15 members who, together with the President
of the Association (to be appointed by the Governor-General) without
his necessarily having to be a member of the Association, and the Java
Bank, jointly constitute the Board of Directors. To be a member of the
Board of Directors, the candidate requires at least l-25th of the total
number of votes that can be cast at any members' meeting, and this is
based on each one's share in the total normal production.

The members of the Board of Directors each year appoint six
members who together with the President and the Java Bank jointly
form the Diurnal Board with 3 members of the Board of Directors that
may be appointed by the Governor-General.

158

The executive body of the Association has its headquarters at
Sourabaya, which represents the Association both juridically and other-
wise, in relation to acts, whether of property or management.

The constitution further contains provisions for establishing a sales
office in Holland to be located at Amsterdam, as also a Supervisory and
Advisory Council in Holland which is to be composed of members of the
Association domiciled in Holland. Through such procedure the neces-
sary contact with the European markets remains constant and the
Association is able to utilise the large experience of owners of sugar
factories domiciled in Holland.

The Directorate and the Manager of the Sales Establishment in
Holland are responsible for their management to the Diurnal Board.

The powers of the Government, in addition to those already men-
tioned, provide that the Governor-General can annul and prohibit
decisions and notions of the organs of the Association. He can also order
certain actions to be performed by the various organs of the Association.
He appoints a Governmental commission consisting of two members, to
which he issues instructions.

One of the members of this Commission will exclusively occupy
himself with the sale and commercial aspects, while the other member
will look after the interests of the Industry as such and its relation to
the country as a whole and to the population.

As regards the cessation of the Association, the constitution and the
Bye-laws determine that, as long as the Associated Sugar Ordinance
remains in force, the Association itself cannot be dissolved. As soon as
the ordinance ceases to be effective each member has the right to resign
his membership at the end of a certain term which automatically dissolves
the Association.

The constitution finally contains an Article providing for the creation
of a Sugar Crisis Fund which aims at raising a subvention for such
personnel of members of the Association as can reasonably be consi-
dered in this connection and have become unemployed since 1st
January 1931.

The share of each member in the sugar sold is to be determined by
the sugar he must supply, as settled for each member annually, a
fraction whose numerator represents the export quantity assigned to
him and whose denominator is the total of the export quantities deter-
mined for all members conjointly.

In calling for sugar to be delivered to purchasers in the course of
any Association year the Directorate, in so far as is possible, will aim
at calling upon each member in proportion to his share of delivery. As
regards the call it has also been decided that, always observing the
proportionate quantities to be delivered the amounts to be called for
export and local sales will be divided amongst the members as equitably
as possible.

Furthermore the possibility is included of transferring the delivery
share or a part thereof. Through this measure a member may be able
to obtain a disproportionate share in the call for any Association year,
provided he can, find another member willing to transfer his delivery
share or a part thereof.

159

As regards the delivery of sugar, it is laid down that the members
shall take care to deliver sugar in good time at the usual shipping ports
and that each of them will be responsible for the accurate delivery of
his own quota. Costs of transport and delivery, including storage and
insurance prior to delivery, are to be borne by the member concerned.
Special provisions coyer delivery at unusual ports. A ruling
is also made to the effect that at a members' meeting it may
be decided, in case a reduction has been made on the purchase price in
favour of any buyer by reason of delivery at a port inconvenient to him,
that such reduction is to be charged to the member concerned. This
last provision allows the trade in many cases to remain indifferent as
regards the port of delivery of the sugars purchased, thus meeting
an old grievance on this score.

To guard against levelling the quality of the sugars down to the
average, the Board of Management shall make such proposals to the
members in Assembly as can secure an improvement of the quality
produced.

Payment of sugar sold, barring certain exceptions, will be made by-
purchasers directly to the member having made delivery.

The Directorate will keep a '* General Sugar Account " on which
the members will be debited for the prices received by them from
buyers (including possible bonuses for over-polarization), increased
by any allowances made and deducting whatever may be due or has
been paid out for brokerage, and where necessary, further settlements.
The members are to be credited with sugar actually delivered, with a
reasonable allowance already or still to be determined, in reference to
which provision is made in a combination of regulation.

Settlement is made on the basis of crystal. All sugars therefore,
will be reduced to crystal value for which certain forms have been
adopted, such as, superior head sugar and superior molasses on a basis
of 99.4 per cent crystal, canal molasses and sugar No. 16 and higher
at 97.15 per cent and Muscovado or so called " new assortment " at
95.45 per cent.

The arrangements regarding pre-sales prior to the 8th November

1932, and of which delivery was to be made on or after 1st January

1933, were as follows:

Such pre-sales, in so far as they relate to sugars ex-harvest 1933,
if in the judgment of the Director of Agriculture, Industry and Com-
merce they were concluded in good faith, and in the manner customary
in the sugar trade, are left entirely for the account of sellers under
certain conditions.

The quantity of such sugar will be regarded as having been called
from the party concerned on the share to which he will prove to be
entitled in the total sales made by the Association from the period
covering 1st April 1933, to 31st March 1934 ; should it become evident
that this share has been called against his share in the total sales
effected by the -Association in the directly subsequent period.

The members so concerned will share proportionately in the dis-
advantages to which the Association may be subject, as arising from

160

the sale of sugars to markets that can be reached only at the sacrifices
of price, that is to say, such markets as are situated outside the so-called
natural markets of Java.

With the coming into existence of the combination of arrangements,
stated above, the Java Sugar Industry entered upon a period in which
all producers whilst setting aside their special group interests, com-
bined, under the supervision and with the co-'bperation of the Nether-
lands Government, by means of a prudent sales policy to avert the
crisis then prevailing, with the minimum sacrifices and losses, in the
interests of the industry and people as a whole.

Such, indeed, are the history and constitution of the Nivas, the
common selling organisation of the Sugar Industry of the Netherlands
East Indies. But the example and experience of the Nivas have had
little influence on the Indian Sugar Industry. It would, indeed, be
interesting to apply the former to the conditions of the latter and to
determine what changes are called for in the Nivas to adopt it to the
conditions of this country. But the origin and development of the
Indian Sugar Syndicate have been shaped more by the uncontrolled
flow of events than by the deliberation and choice of the industrialists.
The origin of the Syndicate has been referred to at an earlier stage as
the anxiety of the sugar mills not to lose the battle against foreign sugar
in the weak spots of the Indian market, namely the port areas. Con-
sultations among the industrialists for the purpose of establishing a
common selling organisation, therefore, started earlier than the land-
slide in prices in 1936-37.

The first effort was made in this connection in the year 1934 and
the preliminaries and the nucleus of a central sugar marketing board
were also contemplated, but due to absence of the requisite support from
factories and the initial difficulties in launching such a new and big
venture, no headway could be made then. Meantime, individual sales
by factories resulted in such suicidal competition that factories began
to all sugar at prices which left no profit for them. At a Conference
of the Sugar Millowners held in Calcutta in August 1936, and March
1937, this question was brought up for consideration once again and
proposals were made to bring into existence a central marketing_bpard.
As a result of the crisis which commenced IrTlSlovember 1936 and
lasted till June 1937, and panic created in the minds of the manufac-
turers by the continuous drop in sugar prices, the efforts were redoubled.

Voluntary Sugar Syndicate

As a result, the Indian Sugar Syndicate Limited was established
in July 1937 on a voluntary basis with a membership of 92 sugar
factories. This Syndicate undertook to effect sales of sugar on behalf
of various factories which were enrolled as its members. 1 The Syndi-
cate had about 60 per cent of the unsold stock of sugar in the country
within its membership when it commenced operations and it was able
to prevent the demoralisation of the market and to bring in a steadying
effect on the prices. Of the 92 member factories, 2 were from Bengal,
2 from the Punjab and 4 from Bombay, the rest being from the U. P.
and Bihar.

1 No actual payment was made by the Syndicate. The factories get credit in
the books for the amount due to them.

161
Method of Sale by Issuing Quota and Fixing Prices

The Syndicate had its immediate task cut out for it. It refused to
be distracted by other problems connected with a common selling
organisation and addressed itself to the task of orderly disposal of
overgrown stocks. It pooled together a stock of 52,45,828 maunds.
The sale of this stock was made by the Syndicate through a system
of quotas which were issued in definite percentages covering definite
periods, and the factories sold their sugar themselves at the rates fixed
by the Syndicate during each period."} The period between July and
30th November was divided into 6 quota periods and by the end of
November 1937, more than half the stock of sugar was sold and there
was a balance of 23,98,641 maunds left in the hands of the Syndicate,
unsold.

After 30th November 1937, the Syndicate had to dispose of the
sugar in the best manner and cases where urgent relief was necessary
on account of heavy stocks were first tackled and about 8 lakhs of
maunds of sugar of members were sold off at a rebate of annas 0-2-0 to
0-4-0 under the then Syndicate's selling rates. This left a balance of
about 15,95,000 maunds, part of which was damaged sugar which
members wished to reprocess rather than sell. So by a Circular dated
20th November 1937, the Syndicate gave the members option to pur-
chase their sugar at a uniform rate of 0-6-0 under the Syndicate's selling
rates. All the members except two exercised this option and the entire
quantity was disposed of by the Syndicate by the 31st of December
1937. By its successful operation, the Syndicate was able to save a
large sum of money to the industry.

Fixation of Basic Prices

The basic prices of sugar belonging to members were fixed for the
stocks pooled, with reference to average prices at which the members'
sugars were sold in the month of February 1937, i.e., before the addi-
tional excise duty came into force. This appeared to be the nearest
approach to correct prices, but these were in some measure found to be
faulty. But as the Board had powers to reduce or increase the basic rates,
the rates that stood in the way of quick sales were duly reconsidered
and suitably reduced. This was inevitable in view of the fact that
prices were fixed by a rough and ready method with reference to average
prices at which sugars were sold in the month of February and March,
1937.

The selling rates which were fixed at so many annas above the
basic rates were gradually raised from one quota period to another so
that on the 30th of November 1937, the difference between the basic
and selling rates was annas 0-12-0 per maund. Tha basic rate repre-
sents the price at which the Syndicate purchases the sugar of members.
Therefore, this difference between basic rate and selling rate accrued
at a rate earning of the Syndicate, and was distributed pro rata at a
later date, among the members, according to the quantity of sugar pooled
by them with the Syndicate.
11

162

The Syndicate Established With 17. P. and Bihar Governments

Assistance in 1938

With the commencement of the 1937-38 crushing season, the
question arose as to whether the Syndicate should continue its opera-
tions for the next season. There was a measure of agreement and
satisfaction at the excellent work done by the Syndicate, a voluntary
organisation established in July 1937, but there was a section of opinion
which felt sceptical about the possibility of its working successfully
during the next season. It was also felt that the Syndicate could not
function successfully if all factories in the U. P. and Bihar did not join.
As a matter of fact, several factories which had joined the Syndicate
in July, 1937, resigned in November, as they were eager to secure the
privilege and advantages of effecting forward sales, which had been
prohibited by the Syndicate. These defections did not prevent the
general recognition that the formation of the Syndicate in July 1937 saved
the morale of the industry, prevented a complete breakdown, imme-
diately toned up the market and benefitted the industry as a whole,
including those who sat on the fence and watched others taking the
risk and the trouble. The price of sugar had been raised about Re.
1 per maund which saved the industry large sums of money it would
have lost.

But these facts did not obviate the need for Government help for
the continuance of the life of the Syndicate. Although there was a
section of members who felt that Government interference with the
industry would be detrimental, the majority who were inclined towards
the continuance of the Syndicate thought fit to invite Government's
intervention, at least for the sake of bringing unity in the ranks of
the members. Much as members liked the Syndicate to be established
on a voluntary basis, it was felt that there was little chance of that
desire being fulfilled and therefore the co-operation of the Government
had to be invited. Fortunately, however, for the industry, the Gov-
ernments of the U. P. and Bihar passed the Sugar Factories Control
Act 1 which recognised the Syndicate as the common sales organisation
of the sugar industry, for according to the rules under the Act, no
factory could obtain the license for crushing unless it was a member
of the Syndicate. At the suggestion of the U. P. and Bihar Govern-
ments an extraordinary general meeting of the Sugar Syndicate Ltd.
was held on 29th June 1938, at which the reconstitution was duly
effected.

Government Recognition of Syndicate

With the accordance of Government recognition to the Indian
Sugar Syndicate, the common selling organisation of the sugar industry
in India may be said to enter a new phase. We have seen that when
the Syndicate was first established in July 1937, it was on a voluntary
basis with a membership of 92 factories of which 13 were from outside
the U. P. and Bihar. Once the crisis of 1936-37 was tided over, it was
found impossible to continue the life of the Syndicate. And on this
threat to voluntary co-operation coincided with the passing of the Sugar

* For text of these Acts, vide M. P. Gandhi's Sugar Industry Annual for 1938,
1939 and 1940.

163

Factories Control Acts of the U. P. and Bihar, the Indian Sugar Syn-
dicate was promptly reconstituted as a body practically exclusive to the
U. P. and Bihar and enjoying or suffering the privilege or privations
of official recognition. The membership of the Syndicate during the
crushing season 1938-39 comprised 108 members of which 71 were from
the U. P., 34 from Bihar and 3 from Bengal ; and the last mentioned
left the Syndicate at the close of the season. The work of the Syndi-
cate during this season may now be briefly noticed.

The sale of this season's stock of sugar, the amount earmarked by
the sugar factories at the commencement of the season for the require-
ments of the manufacture of confectionery, etc. was made by the
Syndicate during the year, just as was done in the previous year
through a system of quotas which were issued in definite percentages
covering definite periods, and the factories sold their sugar at the rates
fixed by the Syndicate, or higher if such prices were available during
each period.

Fixation of Basic Prices of Sugar by the Syndicate

Adopting the same basis and the same method of calculation as
was followed in 1937-38, selling orders were released from 16th Decem-
ber, 1938, onwards. A meeting of the members of the Syndicate was
held on 13th November 1938, in order to fix the dates of starting of
crushing. Although no effectual decision could be arrived at so as
to bind all the factories, yet voluntary agreements were arranged
between factories in groups not to start crushing before definite dates
which were agreed upon and these were very useful in preventing
crushing of immature cane and inter-factory competition in the purchase
of cane in free areas.

As the members had started crushing at various dates, it was found
on 16th December 1938, that only a few factories had sugar available
for sales, and a quantity equal to 50 per cent of the first 10 days' pro-
duction of each factory was released as the First Selling Order, but
very soon release of further quantities for sale was found necessary,
and on 31st December 1938, a further quantity to make up 31 lacs of
maunds were released. This was distributed amongst members in
proportion to their capacity. This quantity was to be sold strictly on
Ready Sale Basis and not in anticipation of production, As in the case
of many factories, basic prices had not been fixed, interim basic prices
were fixed for Standard Grades by adding Rs, 2-4-6 to the last season's
price of that grade and this interim price held good, until the fixation
of new basic prices. To ensure the new season's sugar being imme-
diately put into the market, it was decided that all despatches should
be completed by the 15th of January 1939, on pain of undespatched
quantities being considered as cancelled and unsold. Later, this con-
dition was relaxed to this extent, that instead of despatches being
actually effected, it was required that despatching instructions must
be received within the time prescribed by the contracts. It was made
necessary that the conditions of the contract should be strictly enforced.

This method of apportionment of quantities between the members
was later changed to a proportion of actual manufacture, and in the
Second Selling Order issued on the 21st January 1939, it was decided
to .release 70 per cent of the new season's manufacture up to 15th

164

January 1939, inclusive of the quantities already released, and adjust-
ments were made to bring all factories to the same parity. By this time,
the prospects of the season's crops were more visible and it was feared
that a considerable quantity of sugar would have to be imported for
the country's requirements and that this quantity would naturally
increase unless prices of Indian sugars were kept at a low level. Accord-
ingly in the 3rd Selling Order issued on the 6th February 1939, it was
decided to release the entire manufacture of new season up to 31st
January 1939, including the quantities already released. Even this
was not found sufficient to bring down prices and finally on 7th March
1939, the 4th Selling Order of the entire unsold balance of the 1938-39
season's production, whether manufactured or programmed to be
manufactured, were released for sale. As a necessary corollary, sales
were permitted on a forward basis upon the conditions of the terms of
the Standard Contract Form being strictly followed with regard to the
receipt of despatching instructions. The members were only permitted
to bind themselves for deliveries up to 31st of August at the latest, any
deliveries made after that date being considered unauthorised.

Throughout the season, stress was laid on the strict enforcement
of the Contract in order to promote actual consumption of sugar. The
exact position with regard to imports of foreign sugar and of the provin-
cial distribution of Indian sugars was circulated to members from time
to time in order to guide them in their sales. Very soon it was clear
that an overbought position existed with regard to foreign sugars and
the consumption and sale of Indian sugars was being retarded. On the
14th of July 1939, it was found necessary to extend the period for sale
of the 4th Selling Order from 31st August 1939, to 15th September 1939,
with the condition that all despatches under these scales had to be
completed on or before the 30th October and strictly in accordance
with the terms of the Standard Contract Form. It was found that
owing to an overbought position, merchants who had purchased Indian
sugars were, in many cases, unable to give despatching instructions
within the time provided in the contract, and in order to assist the trade,
it was decided to permit members to extend the time till the end of
the month in such cases as they considered fit. This was of some help,
but the position again became difficult, and ultimately on the 29th July
1939, it was decided that the time for giving despatching instructions
against all existing contracts \ipto July delivery may be extended to
15th August 1939, and those for August delivery may be extended to
31st August 1939, Fresh sales were suspended upto 15th August 1939,
and members were to sell their unsold quantity between 16th August
and 7th October 1939, ready or forward, subject to the conditions of
the Standard Contract Form that all deliveries are to be completed by
31st October 1939. It was decided that in case of buyer's default,
members should not cancel their sales but should only make releases
on buyer's account. It was expected that the entire quantity produced
in the season would have been cleared off before 31st October. The
physical stock of sugar as on 31st October 1939, with member factories
of the Syndicate was 60,30,418 maunds, approximating to 22,300 tons.

We give below a chart showing the particulars of selling orders
released during the season 1938-39 by the Indian Sugar Syndicate :-r

165

TABLE NO. 1

Particulars of Selling Orders Released during Season 1938-39 by the Indian

Sugar Syndicate

Serial
Order
No.

Date of Release

Basis of Calculation

Quantity
released

Selling
Rates

(Maunds)

Rs. a. p.

1.
1A.

16th December 1938
21st December 1938

21st January 1939

50% of first 10 days' production ...

70% of last year's 1st February to
24th February production;
Less quantity adjusted while
releasing next Selling Order ...

70% of manufacturing upto 14th
January 1939 less Selling Orders
1& 1A

31,37,705
1,93,360

010
above
basic
rates

do.
do.

29,44,345

14,04,108

6th February 1939

Balance of total manufacture upto
31st January 1939 ...

46,51,624

do.

9th March 1939

Balance of season's entire produc-
tion

42,37,497

do.

1,32,37,574

The Syndicate effects its sales since its inception in 1937, by fixation
of quotas and prices from time to time, through the members. The
Syndicate had aftvays under contemplation a scheme of taking DIRECT
sales of sugar in its own hands, using as far as possible the present
agency of its members for the sale of their sugar.

As the Syndicate acquires more data and more experience, it
should be possible for it to undertake direct sales of sugar which will
enable it to save freight charges by an orderly distribution of sugar
in the adjacent markets eliminating cross-haulage of traffic in sugar.
At present all sales are ready sales which mean delivery within seven
days. The Syndicate does not normally permit forward sales at all
but in 1938-39 it did so with a view to put larger quantities of sugar
in the market and to arrest the increase in prices, brought about as
a result of the activity of speculators.

While the ownership of the sugar produced by the factories within
the membership of the Syndicate rests in the Syndicate, the factories
remain as trustees for the safe custody and storage of the sugar manu-
factured by them. The Syndicate does not make any payment to the
members for the sugar produced or sold by the factories. The factories
realise the money direct from the buyers as and when sales are made
in accordance with the permission given by the Syndicate, The Syndi-
cate also permits factories to hypothecate their stocks to banks or
bankers and take advances on them for their convenience.

To facilitate the conduct of the routine work of the Syndicate there
were two Standing Committees appointed by the Board, one, the Basic
Price Fixation Committee for new samples, and the other, the Advisory

166

Committee to assist the Chairman. The procedure adopted for new
samples was that their rates were fixed by the Directors and the mem-
bers concerned were duly informed immediately. But these rates were
only tentative, until the rates fixed were confirmed formally at the next
Board Meeting.

The close contact between the Syndicate and Governments enabled
them to have effective consultations on the question of extensions of
plants and establishing of new mills in the U. P. and Bihar. The Syn-
dicate stuck to the view that increase in the present capacity of the
factories in the U. P. and Bihar should be prevented. The Board of
the Sugar Syndicate also appointed a Technical Committee to deal with
the applications submitted by the factories to the Government for
extensions and to make recommendations to Government in regard to
them. The point of view of the Government of the U. P. appeared
to be that factories might be permitted to add machinery to their plant
which might help them to increase their efficiency, but a condition
should be imposed that they should not increase their crushing bv more
thpn 5 per cent of the existing capacity. There was a considerable
difference between the point of view of the industry and the Govern-
ment. TThe industry was anxious to protect itself against undue and
unnecessary expansion. The difficuHv is increased owing to the fact
that certain factories who are small units claim that they should be
permitted to extend in order to make economic units of their mills. This
has been conceded by Government in cases where sufficient cane is
available for the enhanced capacity. Permission was also given to
shift one plant of 1,000 tons hitherto not working from Bihar to the
U. P. and a license was given to two plants of 1,000 tons each which
were claimed to be under construction when the Act came into force.
Extensions to make economic units have also been granted to a number
of factories.

Towards the close of the 1938-39 season the Governments of the
U. P. and Bihar had joint consultations with the representatives of the
Indian Sugar Syndicate for the purpose of determining the conditions
for the grant of licenses for extensions to factories.

A sub-committee formed for the purpose fixed the basis of the
basic rates in the following way :

1. Factories were first divided into groups each of which included
all those factories on one Railway system with a common junction to
the nearest market. The most distant factory from the junction was
then taken as a datum for freight adjustment.

2. One factory in each group was found whose quality was
unchanged since the last season, and this quality was made a datum for
quality adjustments.

3. To the basic prices of the quality datum factories as adjusted
upto 30th November 1937, a sum of Re, 1-3-0 per maund was added to
arrive at the basic prices for 1937-38. The quantity of sugar placed
in the pool by factories in July was largely manufactured between
March 1937 and end of that season. The cane price during that period
had varied form annas 0-4-3 to annas 0-3-0 per maund in the U. P. and
from annas 0-4-0 to annas 0-3-0 in Bihar. The average cost of cane,
therefore, during 4he period was at least annas 0-1-6 per maund less

167

than prices fixed by the U. P. and Bihar Governments for cane in
1937-38, and this difference of annas 0-1-6 per maund in the cost of
cane represents an additional cost of at least Re. 1 per maund of sugar
in the 1937-38 season ; and the balance of annas 0-3-0 per maund is
accounted for by a general decrease in basic prices on 18th August
1937, which was made so that the Syndicate could have funds available
to meet contingencies. The actual increase in the basic prices of sugar
fixed in February 1938 as compared with selling rate last year was only
annas 0-7-0 per maund.

4. All the samples of the factories in each group were classified
according to Sugar Standards, and a chart was prepared to show differ-
ences in price between each grade. It was thus possible to arrive at
graded price for each factory's sugar as if freight paid by all factories
in the group was the same as that of the freight datum factory.

5. The advantage in Railway freight of each factory in the group
over the freight datum factory, in respect of its market, was added to
the graded prices fixed to arrive at the basic prices.

And it is worthy of note that a committee appointed in 1939 came to
the conclusion that this could hardly be improved upon.

Difference of Opinion Between Government and Industry

The close contact between the Sugar Industry and the Government
of the U. P. and Bihar was, however, soon to lead to a serious cleavage
of opinion and antagonism. It has been seen already that there were
differences of opinion both on the question of productive capacity and
on that of the price to be paid for cane. When a new sliding scale of
cane and sugar prices was adopted by the Government, the differences
came to a head. In June 1940 the Government of India convened an All-
India Sugar Conference to consider the urgent problems of the Sugar
Industry and suggest the best course of solving them. The constitution
and functions of the Syndicate also came in for review on the occasion.
While opening the conference, the Hon'ble Commerce Member to the
Government of India explained the views of the Central Government on
the subject, and expressed his doubts about the utility of an organisation
like the Syndicate, especially in the case of a protected industry. That
showed how the wind was blowing.

Official Recognition to Syndicate Withdrawn and Restored

In the midst of these circumstances came the announcement of the
Provincial Governments *bf the U. P. and Bihar rescinding the rule
under which they had made it obligatory for all factories in the two
provinces to remain members of the Syndicate. Such withdrawal of
recognition added to the problems of the industry, which was already
finding it difficult to keep its head above water. The expectation of a
carry-over of 4 lacs tons and of a bumper crop during the next season
had already wrought havoc in the market. The withdrawal of
Government recognition, coming as it did at a very inopportune
moment, made confusion worse confounded. Sugar prices dropped to
an uneconomic level and the members tried to clear away their stocks
unmindful of the Syndicate's rules and regulations. The Syndicate,
however, decided to continue itself on a voluntary basis, .But because

168

of numerous difficulties standing in its way, Government help was
sought once again. A deputation of the Syndicate waited on His
Excellency the Governor of the U. P. on July 28, 1940, at Allahabad,
and a similar deputation also waited on His Excellency the Governor
of Bihar on August 2, 1940, at Ranchi. Their efforts met with success
and the Governments agreed to restore recognition to the Syndicate
subject to certain conditions.

United Provinces and Bihar Government Communique

In the communique which they jointly issued, the Governments
of the U. P. and Bihar pointed out :

" In the month of June, 1940, the Governments of Bihar and the
United Provinces had withdrawn the rule under which it was obligatory
for a sugar factory to be a member of the Indian Sugar Syndicate
Limited. This was because the Syndicate was following a policy of
maintaining a very high price of sugar, which was against the express
purpose for which the Syndicate was originally recognised by the two
Governments . . . With the inflated price the sugar would not move, but
the Syndicate showed no inclination to bring down the price by cutting
the profits. The large carry-over and the consequent crippling of the
finances of the factories, who had taken large advances from the banks
against their stocks, meant considerable curtailment of the next crush-
ing season with its serious consequences on the cane-growers. The
Governments of Bihar and the United Provinces had, therefore, no
other alternative but to withdraw the recognition of the Syndicate . . .

" While the withdrawal has brought down the prices to a certain
extent, it has set loose the forces of disorder ... As a result of this
confusion, a large number of factories in Bihar and the United Pro-
vinces are in danger of complete breakdown, bringing out the urgency
of stricter Government control in the interests of the industry and the
cane-grower. The Board of Directors of the Indian Sugar Syndicate
in their last meeting held on July, 26, 1940, realised their helplessness
and the mistake of their past policy, and decided to approach the
Governments of Bihar and the United Provinces to come to their rescue
and, for this purpose, to restore the recognition of the Syndicate and
to take over such control of the production and price of sugar as they
may consider necessary. A deputation of the Indian Sugar Syndicate
accordingly waited on Their Excellencies the Governors of the United
Provinces and Bihar. The deputation urged the two Governments to
restore the statutory recognition of the Syndicate which has been with-
drawn, and thereby strengthen its hands and restore confidence, to stop
all forward sales, to set up an emergent board of control to regulate
the production and sale of sugar both as regards quantity and prices,
and to take such other measures as may be necessary to save the
industry.

" The Governments of Bihar and the United Provinces have given
their most anxious and careful consideration to the very serious situa-
tion that had developed in the Sugar Industry, and after discussion with
the representatives of the Syndicate at which the representatives of
the Government of India and the Imperial Bank were also present, have
come to the following conclusions :

169

" In order that the market may be stabilised and sugar may move
freely, it is necessary that the present prices must be brought down
and correlated with the probable prices of the next crushing season. It
is by this means that the factories be relieved of their stocks as much as
possible so that they may be able to crush cane during the next crush-
ing season up to their full crushing capacity and thereby give the
maximum relief to the cane-growers who have already planted their
cane. If the present cut-throat competition and speculation be allowed
to continue, some of the weaker factories will completely break down,
while the others may find it difficult to continue crushing during the
next season after paying an economic price for cane. These contin-
gencies must, therefore, be avoided in the interest of the cane-grower.

" Any surplus stock which cannot be sold during 1940-41 at the
minimum ecoriomic price may be carried over to 1941-42 and the
production of that year may be regulated according to demand by
regulating the cultivation in time.

" In order that the above measures may be given effect to, it is
necessary that a marketing organisation should be set up under the
full control of Government in respect of policy regarding price, quota
and production, so that it may not lapse into a monopolistic organisa-
tion. As the Syndicate is now willing to work in accordance with the
above scheme, the Governments of Bihar and the United Provinces
have decided to restore the statutory recognition of the Syndicate,
subject to the condition that it will forthwith amend its Articles of
Association on the following lines :

(1) The Syndicate, which will have its headquarters at Cawnpore,
would be a selling organisation only for the purpose of regu-
lating sales within the limits of prices and quotas fixed by
Government and will confine its activities exclusively to the
marketing of sugar.

(2) The Chairman of the Syndicate will be elected by its Board
of Directors, but his election will be subject to Government
approval. The Executive Officer of the Syndicate will be
nominated by the Governments of the United Provinces and
Bihar.

(3) A Sugar Commission would be set up by the two Govern-
ments which would be the final authority, subject to Govern-
ment control, on all matters connected with the production
and sale of sugar, as well as other matters regarding cane
prices, etc., whch are referred to it by these Governments,
provided that the Syndicate will have the right at all times
to approach the Governments direct. The Chairman and
members of the Commission will be Ex-Officio members of the
Board of Directors of the Syndicate.

(4) The basic prices and quotas for individual mills are to be fixed
by the Syndicate but will be subject to the approval of the
Commission,

(5) All information relating to prices, quotas, etc. will be con-
fidential till it is released for publication by the Commission.

(6) The Syndicate will furnish all the necessary information to
the Commission.

170

"It is hoped that with the restoration of the recognition of the
Syndicate and its re-organisation on the above lines, the sugar market
will speedily return to its normal working conditions."

The Sugar Syndicate accepted Che proposals contained in the
communique with evident satisfaction, but felt it necessary to append
a few provisos : (1) that the mills should not be required to produce in
1940-41 a quantity which might leave a carry-over of more than 4 lacs
tons ; (2) that the prices fixed by the Sugar Commission shall not be
below the cost of production, the estimate of which was specified ; and
(3) that the Governments may not insist on the Chairman of the
Syndicate being subject to approval of the Governments.

The Governments of Bihar and the United Provinces then
announced that they have heard with pleasure of the acceptance by
the Sugar Syndicate at its meeting held at Cawnpore on 15th August
of the proposals made by the Governments in their communique of
3rd August for re-organisation of the Syndicate as a condition of
recognition.

The communiaue continued that in the furtherance of those
proposals the two Governments have decided to appoint a Sugar Com-
mission at once which will consist of Mr. J. E. Podley, C.I.E., M.C.,
l.c.s., as Chairman, and the C?ne Commissioners of the two provinces
as members. The Commission, as already announced, will be the final
authority, subject to Government control, on all matters regarding cane
prices etc., which are referred to it by the Governments of Bihar and
the United Provinces. The selection of an Executive Officer for the
Syndicate, in accordance with the proposals contained in the com-
munique, is under consideration,

" In view of the heavy carry-over of unsold stocks, it is imperative
that a large proportion of these stocks should be cleared before the
commencement of the next crushing season.

" Owing to the high cost at which these stocks were produced, an
adequate clearance is not possible without financial assistance to the
industry to bring down the selling price to a price which can be related
to the probable selling price of next season's production-

" The Governments of Bihar and the United Provinces have
accordingly decided that the consent and help of the Government of
India to assist the industry by assuming immediate responsibility for
payment to the Government of India of Re. 1 of the excise duty payable
on each maund of sugar manufactured during the last season and at
present unsold. This will take effect from August 25, 1940.

"The method by which the Governments concerned will recover
this subsidy from the industry in future has already been discussed with
representatives of the Syndicate and is being considered by the Local
Governments concerned. The final decision will be announced as soon
as practicable.

" Future prices of sugar will be fixed in accordance with the
decision of the Commission and after consultation with the Sugar
Control Board, but it is expected that the prices of cane for the next
crushing season will be in the neighbourhood of 0-4-9 per maund.

171

" As has been made clear from time to time, however, in view of
the unusually heavy stocks, the quantity of cane, likely to be crushed
in the season 1940-41, will be substantially less than in the season
1939-40. Taking all relevant factors into consideration, including the
fact of a shorter crushing season next year, it appears probable that
next season's sugar price will be in the region of Rs. 9 per maund.

"The difficulties of the industry caused by the existence of
unusually heavy stocks, are not likely to be solved until the end of the
crushing season 1941-42. In consequence, arrangements must be made
for 1940-41 for converting into Gnr, Rnb or Khandsari sugar a con-
siderably greater proportion of the cane crop than was so converted
in previous seasons.

" Further, a scheme for restricting areas under cane in the
neighbourhood of sugar factories will have to be formulated for the 1941
sowing season."

The Directors of the Syndicate noted with satisfaction Government's
willingness to give temporary assistance to the industry at a critical stage
of its existence, and, in response to their wishes, reduced the selling
rates then in force by annas 14 pe** maund with immediate effect. At
this meeting, they also decided that from November 1, 1940, price of
sugar would be fixed at Rs. 8-12-0 per maund, at which figure it would
rule till such time as all the sugar produced during 1939-40 season is
sold out. As regards the price of the next season sugar, they announced
that it would not be less than Rs. 9-2-0 per maund.

Membership and Sale by Quotas

During the crushing season 1939-40, the Syndicate had 107 factories
as its members, of which only 100 operated during the season, 68 in the
U. P., and 32 in Bih^r. The total manufacture of su^ar bv members
came to about 2,67,00,000 maunds as compared to 1,33,00,000 maunds
for 1938-39. The total stock of sugar pooled by members was the same
as the total quantity manufactured less the amount earmarked for the
requirements of manufacture of confectionery etc. Till April 30, 1940,
the sale of sugar was made as in previous years in accordance with the
system of quotas covering definite periods. Factories sold their sugar
themselves at rates fixed by the Syndicate. Breaches of rules were not
wanting, as a number of factories during the season sold at rates below
the Syndicate's selling rates, but effective steps were taken from time
to time.

The balance of stocks with the member factories at the end of the
season 1938-39 totalled about 6,500 tons and members were given the
option of repurchasing their share of unsold quantity at the Syndicate's
selling price, namely, 6 pies above the basic prices. As it was felt that
stocks of Indian sugar in the market were very meagre, the Syndicate
decided as early as December 4, 1939, to put as much sugar in the market
as possible. Accordingly, the Directors decided to release all sugar
manufactured till the 15th January 1940, as the First Selling Order.
Basic prices, as a temporary measure, were fixed at Rs. 2-8-0 above the
basic prices of the similar quality of sugar produced in the last season,

172

the rise being due to the abnormal increase in cane prices, 1 and increase
in the cost of production due to war.

At an extra-ordinary general meeting of the Syndicate held on
November 23, 1939, to fix the basis for computing the prices to be
charged to the Syndicate for sugar to be sold to it by the members
during the season, the Board of the Syndicate was authorised to fix
the basis for the fixation of basic prices. Subsequently on December 4,
the Syndicate decided to fix sugar prices on the basis of Nawabganj D 24
for the season, the price for which was fixed at Rs. 12 per maund. The
selling prices were to be one anna above the basic prices. The period
earmarked for disposing of the quantities issued as the First Selling
Order, which came to about 70,60,000 maunds, had to be extended from
time to time as this amount could not be easily absorbed in the market.
Even as late as August 1940, there were certain factories which were
not able to dispose of their share of the First Selling Order. The
Second Selling Order was released on May 20, 1940, and was 20 per cent
of the balance of manufacture from January 16 to April 12, amounting
to 33 lacs maunds. The sales, unfortunately were very slow, stocks
sold by the middle of August being only 92 lacs maunds.

The first two Selling Orders comprised 45 per cent of the total
manufacture of the factories till April 12. After the price reduction
announced on August 25, the tone of the market improved and there
was greater demand for sugar. The recognition of the Syndicate had
imparted a steady influence in the market. The Syndicate released
the Third Selling Order on September 7, which consisted of 15 per cent
of the production till April 12. The quota came to 33,39,000 maunds.
The conditions for sale effected were similar to those of the first two
quotas.

The table on next page shows the details of the quotas released
by the Syndicate till 22nd January 1941.

On February 29, 1940, when the budget proposals of the Govern-
ment of India were announced, it was found that the excise duty on
sugar had been increased by Re. 1 per cwt. or 11.9 per maund from 1st
March 1940. In the usual course, this should have been followed by an
increase in sugar prices. But the Syndicate did not have recourse to
such increase. On the other hand, it decided that the industry should
bear the loss involved. The Provincial Governments also agreed to
amend the sliding scale by reducing cane prices by nine pies per maund
and this gave a certain amount of relief to the mills. Side by side,
efforts "were also made to persuade the Government of India to exempt
the stocks produced before March 1, 1940, from the operation of the
excise duty. The Syndicate's efforts in that direction met with success
and the industry got relief to the extent of Rs. 70,00,000, the share of
the U. P. and Bihar mills being Rs. 63,00,000.

On the occasion of the Third Annual General Meeting of the
Syndicate held at Lucknow on April 3, 1940, several decisions of a
far-reaching nature were taken. By that time, it was evident that
while sugar production during the season was much in excess of the

1 Cane prices till the first week of December 1939, ruled at 0-8-9 per maund,
excluding co-operative societies' commission and the cane cess,

Table

173

TABLE NO. 2

Showing the Quotas released by the Syndicate during 1939-40 and 1940-41
(in respect of sugar manufactured during season 1939-40)

Serial
No.

Date of Release

Quantity Released

Conditions

4-12-39

Production from the start of season to
15th January 1940, totalling 70,60,000
maunds.

Ready sales. Selling
0-1-0 above basic
rates.

20- 5-40

20% of the balance of production from
16-1-40 to 12-4-40 totalling 33,00,000
maunds.

Do.

7- 9-40

15% of the production upto 12-4-40 total-
ling 35,39,000 maunds.

Do.

5-10-40

1% of the production upto 12-4-40 total-
ling 2,36,000 maunds.

Do.

12-10-40

5% of the production upto 12-4-40 total-
ling 11,83,000 maunds.

Do.

6.
7.

8.
9.

22-10-40
38-10-40

7- 1-41
*22- 1-41

Do.
Do.

Do.

do.
do.

do.

Do-
Ready sales. Selling
rate 0-2-0 above
current selling rates
from 1st Nov. 1940.

Do.

* Quota released by orders of Sugar Commission, UP. and Bihar.

normal requirements of the country, and that a bumper crop was lying
ahead of it. It was at one stage even considered necessary to stop
crushing and thus avoid losses. But as this course involved unbearable
losses to the growers the Syndicate gave up the proposal. The Syndi-
cate, therefore, considered it essential so to regulate the production as
to minimise the losses to factories. It was decided to fix the basic prices
of sugar to be manufactured after April 10, (ultimately the date was
changed to April 12) at Rs. 3-6-0 per maund below the original prices ;
and the Provincial Governments were requested to bring down the
prices of cane to be purchased after that date. The sugar to be produced
out of this low-priced cane was to be treated separately and was only
to be released after all the sugar manufactured before that date had
gone into the market. A satisfactory arrangement was reached with
the two Governments, and, the Syndicate on its part, gave an assurance
to crush as much cane as available.

As the year advanced, conditions in the industry deteriorated.
Withdrawal of Government recognition and failure of the contemplated
export deal 1 had added to its difficulties. The banks who had given
loans to the factories on the security of their sugar were not willing to

i Negotiations were afoot for exporting about one lac tons of sugar to the
United Kingdom, but ultimately they broke down over the question of a fair
price, and over difficulties in shipment.

174

advance further loans for financing their off-season needs. On the
other hand, they even threatened to have recourse to forced selling
to realise their dues. In accordance with their wishes, the Syndicate
on July 22, 1940, decided to reduce the basic prices by Rs. 2-8-0 per
maund. This, it was contemplated, would lead to the movement of
sugar and reduce the stocks with the factories.

Further reduction by As. 14 per maund was made on August 25,
after the local Government's decision to take immediate responsibility
for the payment to the Government of India of Re. 1 per maund excise
duty on the unsold stocks of the Syndicate sugar as on August 25, was
announced. This reduction was in response to the willingness on the
part of the Government of India to defer realisation of excise duty to
the extent of Re. 1 per maund. It was contemplated that such a course
would enable the Syndicate mills to sell sugar at a cheaper price than
the one then prevailing and thereby reduce the stocks in their hands.

In addition to these reductions, the Syndicate also allowed in the
middle of the season a rebate on sales for despatch to port areas, where
severe competition from Java was felt. The rebate allowed on despatches
to Bombay, Karachi, Madras, Cochin and Calicut was fixed at As. 10
per maund on the current selling rates, and at As. 6 per maund on
stocks despatched to Calcutta and Chittagong. This came into force
from April 24, remaining in force till May 18, 1940.

New Method of effecting Sales of Sugar Adopted

By far the most important decision taken at the Annual General
Meeting related to direct selling. It had for a long time been felt
that the future of the industry to a great extent depended on the setting
up of a suitable organisation for marketing sugar an organisation
which would control the proper distribution and despatch of the com-
modity to the various parts of the country according to market require-
ments at different times. Direct sales not only stop the waste involved
in cross haulage on account of the defective system of distribution, but
are also calculated to minimise the activities of speculators, and, in
a season of over-production, serve to reduce the chances of the indivi-
dual members resorting to malpractices. It was also felt at that time
that direct selling would be of immense help to the industry in the crisis
through which it was then passing. It was intended that the scheme
of direct selling would be brought into operation from April 10, 1940,
but its commencement had to be postponed till May 1, 1940, as the
necessary arrangements could not be effected by that date. The
sales committee was empowered to dispose of the unsold quantity of
sugar with Syndicate members by directly calling for offers from
selling agents and accepting them on their behalf. As regards the
working of the scheme, the existing selling organisations of the members
were utilised as far as possible. The acceptance of the offers was
communicated to the selling agents, who were responsible for the ful-
filment of the contract, payment of all charges in that connection and
t -settlement of claims arising from them. The terms of agency between
the selling agents and the factories remained absolutely unchanged
excepting that the Syndicate, instead of the factories, accepted both
the * options ' and * firm offers ' made by the selling agents. The
Syndicate also advised the agents regarding selling rates for all qualities

175

of sugar produced by the factories concerned. The selling rates
included agents' commission or brokerage, but were not subject to any
reduction, discount or commission of any description whatsoever. Sell-
ing rates announced remained in force until cancelled or substituted by
others and alterations could be made at any time without warning.
It is gratifying to note that the scheme was worked out efficiently and
proved its merit.

Proportionate Sales of Members' Sugar

Throughout the season, the Syndicate laid considerable stress on
ensuring that the sales of all factories were made in definite proportion
to their production. The First Selling Order, which consisted of all
the sugar manufactured till January 15, had brought about considerable
disparity in the sales of different factories, those starting earlier having
a definite advantage over those who commenced crushing later in the
season. It was noticed that while some factories had sold as much as
52 per cent of their total manufactures till April 12, there were others
who had not even sold about 10 per cent of their production till April
12, 1940. In order to bring the sales of all the backward factories to
the parity of those who had made larger sales, the factories were divided
into various geographical groups and in each group the factories which
had made highest sales were asked to stop until other factories had
come to their level. The factories were divided into 6 groups, namely,
South Bihar, North Bihar, Gorakhpur, Basti Gonda, Meerut and Mid-
western U.P. and R.K.R. The limit of 33 per cent was fixed in the
case of factories in North Bihar, Gorakhpur and Basti Gonda groups
and of 45 per cent in the case of factories belonging to South Bihar,
Mid- western U.P. and R.K.R. groups. To avoid delay, sales were
effected through local offices at Bombay, Cawnpore and Muzaffarnagar
under the direction of local committees, which were specially set up
for the purpose and were empowered -to accept offers regarding sugar
of the factories, the sale of which they were required to direct in
accordance with instructions issued from the Head Office. In cases
of necessity, offers made by selling agents in respect of sugars of
factories to which they did not belong, were also accepted.

This scheme worked successfully and the heavy stocks v/ith the
backward factories were cleared away by the end of August 1940.
Therefore when on September 7, the Third Selling Order was allotted,
no provision of this type was made and all factories were given a
uniform quota of 15 per cent of their production upto April 12, 1940.

Export of Sugar

Another matter which occupied the attention of the Syndicate
and the Indian Sugar Mills Association, a body comprising sugar
factories all over the country, during 1940, related to the export of
sugar. The heavy surplus stocks of this season and the expected bumper
crop of the next, pressed for effective solution. In order to relieve
the pressure of heavy carry-over it was decided at the Syndicate's
Annual General Meeting to offer 2 lacs tons of sugar to His Majesty's
Government at Rs. 5 per maund ex port. The Government of India
was also asked to lift the ban imposed by the International Sugar Agree-
ment on exports of Indian sugar by sea. While Government did not

176

think it proper to remove the export ban 1 they succeeded in persuading
His Majesty's Government to agree to the purchase of Indian sugar.
The ;price offered for this sugar was, however, very low, namely,
Rs. 4-4-0 per maund ex port. The Syndicate, even then decided to
clear away 30 lacs maunds of sugar at this price. It was also expected
that the railway would give some concession on this sugar sent to the
ports and the loss of the industry would thus be reduced. However,
fresh difficulties soon cropped up. The banks with whom sugar was
mortgaged did not permit its sale at the reduced price without further
margins which the mills were not in a position to provide. Ultimately,
the scheme had to be postponed for the time being. For this failure,
there was, however, the consolation that the Government of the N. E. I.
volunteered to restrict the import of sugar into India to 35,000 tons
In the next year, due to shortage of shipping, Java could not export
to the Middle East, which therefore became a market for Indian sugar.

The season 1940-41, so far as the Syndicate was concerned, was in
the first place taken up with implementing the terms of the above-
mentioned agreement. Early in September 1940 the Provincial Govern-
ments nominated an executive officer of the Syndicate and Mr. K. G.
Ambegaonkar, i.c.s., was nominated to the post.

Early in 1941, the Head Office of the Syndicate was shifted to
Cawnpore, which is at present the main sugar market of the industry.
Thus remaining in close contact with the market and at ^the same time in
close touch with the Joint Sugar Commission, whose office is also
located in Cawnpore, the Syndicate has been able to act more effectively
than before.

Government Control over Prices and Selling Quotas

The most important change which has taken place on the marketing
side of the sugar industry since the recognition granted to the Syndi-
cate in August 1940, is that control over the sugar prices and the
sales quotas have been formally taken over by the Sugar Commission.
To this extent the Syndicate's Board has lost the initiative although
the Syndicate works in close collaboration with the Government. The
minimum selling price of the standard sugar is fixed by the Government
and selling prices of all other sugars are practically determined by the
Syndicate by the application of a chart of prices, though they are,
of course, subject to the formal approval of the Commission. The basic
price of the standard sugar produced in 1940-41 which, by the way is
Nawabganj D 24, was last year fixed at Rs. 9-2-0 and the price of all
other sugars was fixed on this basis. The release of sales quotas is also
under the control of the Sugar Commission. Chances of conflict have
been greatly minimised by closer collaboration between the Sugar
Commission and the Syndicate in all matters.

Standardisation

Before assessing the experiences of the Sugar Syndicate, reference
must be made to the technical requirements of an efficient selling

1 This ban was not lifted. But with the expiry of the International Sugar
Agreement in August 1942, India has not been a signatory to a fresh agreement,
and with effect frpm September 1942 she is free to export sugar.

177

organisation, which, as we noted at the beginning, the Indian Sugar
Industry was sadly lacking in. In the course of its working the Syndi-
cate was meeting these needs. We have referred to the fixation of
basic prices, the method of issuing selling orders, the evolution of
direct sales and the means by which proportionate sales of members'
output were secured. It remains now to note the progress achieved
in respect of the standardisation of Indian sugar. The Bureau of Sugar
Standards which was tackling this problem became from April 1940
an integral part of the Imperial Institute of Sugar Technology. The
Bureau continues to :

1. Prepare and supply the Indian Sugar Standards.

2. Publish an annual review dealing with the quality of Indian

sugars and giving comparative figures for competitive foreign
sugars.

3. Maintain a museum of samples of sugar and sugar products.

The standard sets are available for sale each year from July 1st.
The standards come into force from November 1st and remain valid
till October 31st of the following year.

Review of Quality of Sugar produced in India during the Season 1939-40

A ' Review of the quality of sugar produced by Central Sugar
Factories and Refineries in India during the year 1939-40 ' was publish-
ed by the Director, Imperial Institute of Sugar Technology, Cawnpore,
on 4th July 1940, in the Indian Trade Journal.

The total number of samples analysed for quality during the year
was 252 as against 231 last year. As in previous years the samples
continued to bear a very large number of different quality designations
even for the same class of sugars, a practice which must be discouraged
by Indian Sugar Factories for effecting uniformity in the quality of
Indian Sugars. Eight factories as against one of last year denoted
their quality in terms of I.S.S. numbers. The different grades of sugars
produced by Indian factories during the season 1939-40 with com-
parative figures for the last season are given in the following table :

TABLE 3

Serial
number

Particulars

No. of
Factories

Percentage

1939-40

1938-39

Factories making one grade only

27.27

26.26

two grades

37.27

34.34

three I 30

27.27

2626

., four

6.37

7.08

> five

1.82

6.06

Total

110

100.00

From the above table it will be observed that, while there has

been no reduction in the number of grades of sugars, the percentage

of factories producing one, two and three grades has increased during

the season of 1939-40. The majority of samples received this year were

178

also mixtures of varying grain sizes. The big and medium grain sugar's
lacked brilliance and contained twin, joint and mixed crystals. The
figures in the review also show that the quality in respect of first
crystal sugars has improved over the previous year but the general
grain size has been slightly smaller than the previous year's. A fairly
good number of superior Indian sugars compares favourably with the
Java Whites.

Evolution o/ Central Sales Organisation and its Future

We have traced, in somewhat wearisome detail, the fortunes of the
Indian Sugar Syndicate and the evolution of its methods of work. It
is no comforting thought that at the end of a decade the Indian sugar
industry as a whole has no common selling organisation and that the
existence of such an institution for the provinces of UP. and Bihar
is to be attributed only to a fortuitous circumstance. But it is perhaps
significant that what was first started as a voluntary selling organisation
for factories all over India should be changed somewhat abruptly into
a compulsory association under Government control and restricted to
the provinces of the UP. and Bihar. Within the limits set by its
position, the Indian Sugar Syndicate has, indeed, done much for the
sugar industry. It has proved itself equal to tackling every crisis as
it arose. It has evolved its own technique of operation and though it
was often oHlgecT to look to Government intervention which it secured
at a stiff price, it has revealed a substantial body of opinion within the
industry which has a firm recognition of the advantages of a common
selling organisation and the dangers of being without one. In the
years after the war it may well prove that the control which the Gov-
ernments exercise over the Syndicate will be the means of effecting
a satisfactory conciliation of the conflicting interests of the cane growers,
the industrialists and the consuming public. If one confines one's
attention to the UP. and Bihar, the history of the Indian Sugar Syndi-
cate has an obvious parallelism to that of the Nivas. But it can
hardly be pretended that the Syndicate is a common selling organisa-
tion for the Indian Sugar Industry as such.

A similar trend for the whole of India can be expected only with
the rise of a similar compactness in the sugar industry in India. At
the present stage, one can only regard the Sugar Syndicate as a striking
proof of the uniqueness of the position of the UP. and Bihar. That
uniqueness gives rise to a special set of problems to which we have
now to turn our attention.

The Indian Sugar Syndicate goes in Cold Storage in 1942

As a result of the Sugar Control Act brought into effect by the
Government of India from the, 14th April 1942 (later amended and
passed as the Sugar and Sugar Products Control Order in July 1943
for texts vide The Indian Sugar Industry Annual, 1943) the Sugar
Syndicate was obliged to curtail its activities. It gave up the practice
of releasing sales quotas which had been so far its main function. Its
present activities are curtailed to watching the general interests of its
members and making representations to the authorities concerned on
numerous aspects of control. It hopes to revive itself after the Govern-
ment control on sugar is removed, after the war is over.

CHAPTER XII
LOCALISATION OF THE INDIAN SUGAR INDUSTRY

Territorial Distribution of Sugar Industry and
Sugarcane Production

WE saw in the last chapter how the Sugar Syndicate which started
as a voluntary all-India organisation of the sugar mills was transformed
in a short time into a compulsory association of the sugar mills of the
U. P. and Bihar with more or less complete official control. Such a
development is demonstrably due to the uniqueness of the position
occupied by the U. P* and Bihar among the various sugar-producing
provinces in India. The simple fact that between them the two provinces
account for about 80 per cent of the total sugar production in the
country suffices not only to bring them together in close co-operation
but to mark them off from the rest of the provinces. The result is that
sugar mills in the other provinces are none too eager to join the U. P.
and Bihar mills who are obliged by virtue of their large export surplus
to market their output in other provinces, including the most distant
among them. It is obvious that such disparity between the U. P. and
Bihar on the one hand and the rest of the provinces on the other must
make itself felt in other directions besides that of the marketing of
sugar. At present the Indian mills are able to produce a little more
than the present total demand of the home market. 1 And it is natural
that when the expansion of the Indian Sugar Industry has been so
rapid, the benefits of protection should be appropriated so largely and
in such a large measure by the two provinces which were in the best
position to profit by it. It is a question, however, whether these dis-
parties in sugar protection as among the various provinces are bound
to last. That obviously is different from the problems which such dis-
parities give rise to, so long as they continue to exist. It is different,
too, though it is allied, from the aspirations of other provinces to in-
crease their sugar production. Inter-provincial jealousies in this regard
are of little importance so long as objective conditions are unfavourable
to the increase of production in these areas. And no action in the
nature of barriers to trade need be apprehended, as such trade barriers
depend in the first place on the separateness of the political entities and
in the second place on some encouragement being afforded by the
objective conditions referred to earlier. Nevertheless, inter-provincial
jealousies have often made themselves felt in the Indian Sugar Industry,
particularly when conferences of all-India scope were convened to
discuss matters connected with the Indian Sugar Industry. One concrete
result of these jealousies is that the U. P. and Bihar have not till now
been able to secure the consent of other provinces to the principle of
prohibiting the establishment of new sugar mills in India till domestic

1 If the existing sugar mills work to their full capacity and for the full length
of the season, they are capable of producing about 15 lacs tons of sugar per year.
(Vide Indian Sugar Industry Annual 1940-41 and Mr. M. P. Gandhi's speech at
the Rotary Club of Bombay on 13th October 1942, published in the Journal of the
Indian Merchants' Chamber, Bombay, for November 1942. Also vide his speech
before the Rotary Club of Ahmedabad on 3rd December 1943, printed in the Sugay
Industry Annual of 1943*

180

consumption increases, or the prospect of export markets become
clearly visible. And to the extent that popular ministries have in the
past attempted or given thought to the economic development of their
respective provinces, they have treated the expansion of sugar produc-
tion as no different from other channels of productive activity.
Doubtless, when the time comes for autonomous provincial ministries to
show their mettle to the electorate, plans for increasing production will
be formed and pursued, and the position of the sugar industry will be
found to offer a few conundrums. It may be supposed, too, that even
if the provinces were willing to avoid embarassments for the sugar
mills of the U. P. and Bihar, the provincial governments will find it
necessary to encourage the manufacture of sugar or at least gur as part
of the programme of insuring sufficiency of nutritive food for the millions
entrusted to their care. That an expansion of demand will enable the
other provinces to increase their production without causing any diffi-
culties to the U. P. and Bihar mills is clear. But it is rarely that
economic adjustments are so smoothly adjusted. It is necessary, there-
fore, to enquire into the position of the various provinces as producers
of sugarcane and of sugar.

Such enquiries were, no doubt, conducted in the past. The two
Tariff Boards which examined the position of the sugar industry com-
piled the cost of production of cane in the various provinces 1 and though
it was obvious that the U. P. and Bihar had definite advantage over
others, it is doubtful if the present position was foreseen with any
degree of clarity. Inasmuch as it developed within a few years, which
are hardly sufficient for any significant development in the other pro-
vinces, it is well to examine the position.

We shall begin by noting from the following tables the present
acreage under sugarcane, the estimated production of sugarcane, and

TABLE NO. 1

under Sugarcane, Yield of Gur or Jaggery and the estimated
Production of Sugarcane in India

Year

i Area under
sugarcane

Gross production
expressed as Gur
or Jaggery

Calculated total pro-
duction of sugarcane

Areas

Tons | Tons

1929-30

26,24,000

28,85,000 3,09,61,000

1930-31 ...| 29,05,000

33,59,000 3,57,89,000

1931-32 ... 30,77,000

41,16,000 4,33,16,000

1932-33 ...i 34,25,000

48,59,000 5,11,29,000

1933-34 ...i 34,22,000

50,55,000 5,24,55,000

1934-35
1935-36

36,02,000
41,54,000

52,92,000 5,43,46,000
61,02,000 6.12.02.000

1936-37
1937-38
1938 39

45,82,000
38,69,000
31,30,000

69,32,000
55,79,000
35,72,000

6,73,22,000
5,56,37,000
3,58,51,000

1939-40 . *
1940-41
1941-42
1942-43

36,40,000
45,98,000
35,15,000
36,00,000

47,48,000
57,94,000
43,71,000
50,76,000

4,76,72,000
5,90,90,000
4,60,30,000

1943-44

41,13,000

56,96,000

.. j erial , Council of Agricultural Research also undertook this investi-

gation in 1934 and published its estimates of costs of cultivation in various pro-

181

TABLE NO. 2

Distribution of the average Sugarcane Area and Yield of Cur or Jaggery
for 5 years ending 1939-40

Average

Percentage

Average Gur

Percentage

Province or State ; Area

of total

Production

of total Gur

; (5 years)

area

(5 years)

Production

U. P. (including Rampur)

2089.600

53.10 2940.000

53.36

Punjab

462.600

11.76 : 337.200

6.12

Bihar

413.000

10.44 499.000

9.06

Bengal ,, ,,

317.000

8.05 532.400

9.64

Madras ,, ,,

113.600

2.89 310.800

565

Bombay (Exc. States except Baroda)

120.400

306 318.000

5.77

N.W.F.P.

65.000

1.65 70.800

1.29

Assam

37.600

0.96 38.400

0.70

CP.&Berar

30.200

0.76 47.800

0.86

Orissa

32.000

0.81

58.000

1.05

Delhi

3.200

0.08

2.000

0.04

Sind

5.600

0.14

12.000

0.22

Mysore

49.200

1.25

60.200

1.09

Hyderabad

42.400

1.07

84.400 1.53

Bhopal

5.800

0.15

5.400 i 0.10

Baroda

2.600

0.07

4.800 ! 0.09

Other Areas

148.000

3.76

186.000 3.38

the present production of sugar (including Khandsari sugar and sugar
refined from gur) for several years :

Dearth of Reliable Statistics Deplored

It is a matter of regret that there is great dearth of reliable official
statistics in regard to such an important and vital matter. It should be
noted clearly that official statistics relating to the sugarcane crop give
only the area under carie, arid the yield of c;ur, no figures of the tonnage
of cane being available. Even in respect of acreage of cane, the figures
of such Provinces and States where land revenue system makes it
essential to undertake a survey and record of the crop raised annually,
may be fairly accurate, but in such parts of India where the Permanent
Settlement of land revenue is found, their figures are no better than
guesses. Thus, for instance, the statistics in relation to U. P., Bombay,
Madras and the Punjab are likely to be more accurate, but this cannot
be said of Bihar 1 and Bengal. While this is the position in respect of
statistics of acreage, the position in regard to yield is still worse. At
present all crop-cutting experiments on which official returns of yield
are based and in the weighment of gur and not of cane. Even these
unsatisfactory experiments have now been given up. With the available
statistics, therefore, it is hardly possible to calculate the exact figures of
the production of cane each year, as the weight of cane produced per acre
varies with the locality as well as with the variety of the cane grown.
Similarly, the weight of cane required for manufacturing a unit of gur
also varies with the variety of cane. Thus neither of the two official
figures of acreage and yield of gur can, therefore, by themselves be used

>te in the Statement of Objects and Reasons to the Sugar Factories
7, given in the "Indian Sugar Industry at a Glance", where it is

1 Vide footnote

Control Bill, 1937, g.,~ .-_ ____

stated that in the absence of an up-to-date survey, it is almost impossible to
obtain reliable estimates of cane areas.

182

for making an accurate calculation of the total yield of cane. The only
recourse, therefore, for calculating the production of sugarcane is to use
the forecast figures of gur as the basis. 1

The next table shows the production of sugar from cane and Khand-
j?ari together in the different Provinces from 1935-36 to 1939-40 :

TABLE NO. 32

Province

1935-36

1936-37

1937-38

1938-39

1939-40

Tons

United Provinces

. 6,45,600

6,92,800

6,28 400

3,94,200

7,60,300

Bihar

. 2,57,900

3,35,000

2,31,700

1,66,600

3,28 800

Punjab

29,000

26.100

23,100

15,100

24200

Madras

33,700

34,600

36.000

47,000

Bombay

35,900

43.200

46,900

57,300

75.500

Bengal

31.200 ! 29,400

26,000

14,900

45.800

Other Provinces

71.000

76,800

82,200

81,400

1,11,600

Total for India ..

. 11,05,000

12,37,000

10,72,000

7,65,500

13,93,200

It will be seen from the above tables that the U. P., a sub-tropical
region, has more than half the total acreage under cane, and more than
half of the total production of sugar in India.

The position in 1942-43 and 1943-44 is almost similar to that in
1939-40.

Sugarcane in the United Provinces

The United Provinces of Agra and Oudh lie between 23 52' and
3118' N. and thus fall entirely outside the tropics. The acreage under
cane is more than half of the total acreage under cane in India.

The province has made remarkable progress in extending the culti-
vation of improved varieties of cane. The United Provinces which
possess more than half the acreage under cane in India and
about three-fourths of that acreage under improved varieties, holds an
important position in the manufacture of sugar. The province is
fortunate in that hitherto the attention of the Coimbatore Research
Station has been focussed, as is natural, upon producing improved canes
suitable for conditions in the main sugar belt of India, i.e., in the United
Provinces and Bihar and Orissa. The results of such research have been
utilised by the U. P. with great avidity. The United Provinces Govern-
ment stated before the Tariff Board that while indigenous varieties may
be expected to yield 350 maunds of cane per acre, Coimbatore varieties
cultivated in the same system yield 600 maunds and cultivated exten-
sively on the Java system, would yield up to 1,000 maunds per acre.
The United Provinces are also endeavouring to cultivate special kinds
of cane, e.g., Co. 214, which ripens sharply, and cane which ripens late,
to enable the factories to extend the crushing season.

The Department of Agriculture of the United Provinces stated in
one of its reports that Co. 213 was the most widely grown of the newer

1 This question was discussed at a meeting of the Sugar Committee of the
Imperial Council of Agricultural Research, but no decision was arrived at for
remedying the present position, till July 1937.

2 Vide Supplement to the Indian Trade Journal, 7th May 1942, p. 18.

183

canes. It is high yielding and capable of doing well under normal crop
conditions but has shown itself unduly susceptible to monnic disease.
Co. 200 and Co. 244, it is observed, have considerable vogue in the west
of the province. The former appears to yield better in the west than
elsewhere and the latter does well on less highly manured lands.

The total area under improved and ordinary varieties of cane in the
United Provinces during 1939-40 was 19,14,000 acres out of which
17,06,000 were under improved varieties and the balance under ordinary
varieties. The cost of growing cane, the Tariff Board observed in 1931,
was estimated at between 4 and 5 annas a maund. The Tariff Board of
1938 estimated the cost of cullivation at 3 annas and 7 pies per maund.

Bihar and Orissa

The Provinces of Bihar and Orissa He between 193' and 2731' N.
Orissa occupies the most southerly position in the province and is thus
entirely within the tropics, whereas Bihar is entirely sub-tropical.

The special features of Bihar are that its climatic conditions are
transitional between the tropical and the sub-tropical, that much of its
cane is grown without irrigation, and that it was till lately (before the
advent of protection) the chief centre for the manufacture of sugar direct
from cane in India.

Orissa, however, is essentially a rice-tract and offers hardly any
prospect of cane.

The spread of Coimbatore varieties of sugarcane has been pheno-
menal during the last 5 years. Out of a total of nearly 4,41,000 acres
under improved canes in 1939-40, nearly 4,25,600 acres are in Bihar
proper. The spread is increasing so rapidly that it is felt that local
varieties will completely be ousted before long.

The total acreage under sugarcane in Bihar was about 3,02,000 in
1932-33 and 4,41,000 in 1939-40,

The yield from indigenous canes in Bihar was about 13 tons per
acre, while the yield from Coimbatore variety is about 18 to 20 tons.

The Tariff Board (1931) remarked that the cost of cultivation of
cane worked out at between 4 and 5 annas a maund ; another Tariff
Board (1938) estimated the cost at 3 annas 4 pies per maund.

The Punjab lies between 2739' and 342' N. It is well outside the
tropics, but comes closely behind Bihar, the U. P. being the first. Although
the Punjab grows about 4 lacs of sugarcane, the prospects of manufac-
ture of white sugar are limited to a small proportion of that acreage, due
to the short monsoon period and the extremes of temperature which are
serious handicaps. The short duration of the crushing season and the
danger of frost are the limiting factors. The possibility of establishment
of sugar factories, therefore, is confined to the south of the Punjab
where conditions are similar to those of the United Provinces.

The yield of cane in the Punjab from indigenous varieties is about
13 tons per acre, while from Coimbatore varieties it is about 15 tons.

The Tariff Board (1931) remarked that the cost of cultivation of
cane was estimated at about 5 annas 6 pies per maund. The Tariff

184

Board (1938) estimated the cost at 5 annas per maund in the areas
where factories are situated.

Improvements in Madras

The Madras Presidency lies between 804' and 2060' N. and is
entirely within the tropics. Although nowhere in India are the climatic
conditions more favourable for the successful cultivation of cane, the
area under sugarcane in Madras is both small and scattered. The
acreage under cane in 1932-33 was a little over one lac and 1,32,000 in
1939-40. In spite of its tropical situation Madras offers limited prospects
for cane, due largely to the widespread preference for rice wherever
supplies of irrigation water are assured, and to the very scattered area
on which cane is grown, Madras has not benefited from the Coimbatore
Research Station, as the experiments conducted there have so far been
directed to production of cane suitable for sub-tropical conditions. The
average size of a holding in Madras is extremely small and the difficulties
in the way of sugar factories obtaining control over a sufficiently large
area for cultivation of cane are very great. But these difficulties are
slowly being overcome. The yield of cane has improved to 35 tons per
acre, and the cost of cultivation of cane has now come down to about

4 to 6 annas per maund, due to fall in prices, chiefly of manures, fall
in wages, etc. The area under cane in Madras was 1.32.000 acres in
1939-40.

The cost of production of cane, according to the Tariff Board of 1931,
was estimated at from 7 to 12 annas per maund. The 1938 Tariff Board
estimated the cost at 5 annas 5 pies per maund.

Improvements in Bombay

The Bombay Presidency proper lies between 13 53' and 2443' N.
and is thus almost entirely within the tropics. The area under cane
was 1,05,000 acres in 1932-33 and 1,29,000 in 1939-40.

The Deccan lands and their projected extension afford the brightest
prospects for the extension of cane in Bombay, Bombay is also capable
of producing a higher yield of cane per acre perhaps than any other
part of India. The Tariff Board were informed that in certain fields
at the Belapur Estate a yield of 40 tons or more of cane had actually
been realised. This represents about 1,080 maunds per acre and com-
pares well with Java production. The actual average for the Belapur
estate was about 24.69 tons, i.e. 679 maunds in 1929-30, and indeed on
one plot of land in the Deccan the yield was over 100 tons in 1936-37. 1

The cost of cane was estimated to be about 12 annas per maund by
the 1931 Tariff Board. The 1938 Tariff Board estimated it at 5 annas

5 pies per maund.

Improvements in Bengal

The Presidency of Bengal lies between 2035' and 2713' N. and is
almost entirely sub-tropical. In point of acreage in India, Bengal stands
fourth now, although in the early years of the 20th century, it was

Tariff Board Report, 1938, pp. 2 and 67.

185

second. Cane is grown in every district of the province, but the crop
is of small importance. The total area under sugarcane in Bengal was
2,33,000 acres in 1932-33 and 3,10,000 acres in 1939-40.

The province appears to afford suitable facilities for the develop-
ment of cane-manufacturing industry, particularly in view of the decline
in the demand and price of Jute, which is the crop of greatest impor-
tance to this province.

The cost of cultivation per rnaund of cane, the Tariff Board (1931)
were informed, was about 7 annas. The Bengal Government now
believe that the cost has come down to about 3 annas per mauncl. The
1938 Tariff Board estimated the cost at 3 annas 7 pies per maund. 1

Provincial Distribution of Factories

Having seen the developments in the cultivation of cane, and the
possibilities thereof, let us now turn our attention to the progress of the
cane-manufacturing industry, and see its relative position and develop-
ment in the various provinces. We will compare the production of
sugar in the chief provinces during the last few years, the recovery
percentage of sugar, the duration of the crushing season, etc., and
consider the possibilities of the development of the industry in various
provinces :

TABLE NO. 4

Comparative growth oj Sugar Industry in the various Provinces since 1931-32
i Number of cane factories working

Province

1931-
32

14
12

2
2

1932- 1933-
33 34

1934-
35

1935-
36

1936-
37

1937- 1938- 1939- 1940- 1941-
38 39 40 41 42

U.P.
Bihar
Punjab & Sind
Madras
Bombay
Bengal

33
19
1
2

59
33
5

4
4

65
34
6

35
4
8
6
6

68
33
5
11
6
6

68
33

8
7
6

f>9
32
3

7
7

8
2
11

70
32

9
2

70 70
32 32
4 5
11 11
8 8
9 9
2 2
12 13

Indian States

Total for
INDIA ...

Burma

32
1

112

130

; 137

137

136

139

145

148 150

1 2

i 2

i 3

3 i un-
known

Burma excluded from 1936-37 onwards from the total for India.
Even in 1943-44, the position is very nearly the same.

The number of factories in the U. P. in 1941-42 (also in 1943-44) is
more than double the factories in Bihar and only a little less than half the
number of total factories in India. Bihar stands a good second, Madras,
Bombay, Bengal and the Punjab are third, fourth, fifth and sixth res-
pectively. More than 125 factories have been established after the grant
of protection, and plants of several old factories have been considerably

1 The 1938 Tariff Board estimated that 3J annas per maund may be taken as
a reasonable estimate of the cost of cultivation for the whole of India (page 36).

extended. Let us now see the figures of production of sugar in these
provinces.

Production of Sugar in the Various Provinces

The production of sugar year by year, since 1932 in the United
Provinces and Bihar, and in all-India, can be seen from the following
table. The table also gives statistics of the quantity of cane crushed :

TABLE NO. 5
Cane Factory Production of Sugar in V. P., Bihar and All-India (in tons)

Season

U.P.

Bihar

All-India

Total quantity of cane
crushed in all factories

1931-32

66,312

75,091

i 1,56,581

17,83,000

1932-33

1,40,344

1,26,610

j 2.90,177 33,50,000

1933-34

2,73,774

1,39,957

! 4,53,965

51,57,000

1934-35

3,15,600

1,84,038

; 5,78,115

66,72,000

1935-36

5,30.000 2.50.200

! 9,32,100

98,01,000

1936-37

6,08,600 3.29,300

1 11,11,400

1,10,87,000

1937-38

5,31,300 2,25,300

9,30,700

99,16,400

1938-39

3,20,300 61,600

6,50,800 : 70,04,800

1939-40

6,59,500 3,22,100

12,41,700 1,31,31,700

1940-41

5,13,300 2,46,100

10,95,400 1,12,90,000

1941-42

3,82,900 1,17,300

7,78,100 80,26,300

1942-43

6,12,500 2,37,400

10,70,700 1,04,18,500

1943-44

7,27,100

2,12,400

12,16,400 i 1,21,37,800

The following table gives similar production of the various provin-
ces, along with recovery percentages for 1939-40 and 1940-41 :

TABLE NO. 6

Number of Sugar Factories in various Provinces working in 1940-41. Estimated
Quantity of Cane Crushed, Sugar Produced and Recovery Percentage

obtained, etc.

(Official estimates of the Director, Imperial Institute of Sugar Technology, Cawn-
pore, published on 18th September 1941)

Province

: No. of Mills
working

Cane Crushed
Tons

Sugar

Recovery Sugar
I percent cane (a)

1940-41

1939-40

United Provinces...

51,99,800

i 5,13,300

9.87

9.37

Bihar

24,94,300

! 2,46,100

9.86

9.29

Punjab & Sind ...

2,42,700

i 21,360

8.93

8.39

Madras

! 4,82,000

44,100

9.15

9.11

Bombay

i 8

8,52,400

84,600

9.94

10.97

Bengal & Assam

6,11,300

52,000

8.50

9.23

Orissa

; 2

34,200

3,000

8.77

8.39

Indian States

- 13,74,200

1, 30,300

9.47

10.03

Total (India)

148

i 1,12,90,900

10,95,400

9.70

9.45

Burma

i 3

3,99,300

39,300

9.84

10.04

(a) The All-India- average recovery in 1941-42, 1942-43 and 1943-44 was 9,69,
10.28 and 10,02 respectively.

187

From the previous tables it would be clear that though the other
provinces are backward in point of acreage under cane and cost of
production, in point of recovery percentage some of them are quite ahead
of the U. P, and Bihar. The differences in the cost of production are
there ; but these did not prevent the provinces from voicing their dis-
satisfaction with the rate of progress in the industry, so far as they were
concerned, in the year 1933.

All-India Sugar Conference, 1933

The question of the development of the industry in the various
provinces was discussed thoroughly at the Sugar Conference held by
the Government of India at Simla on the 10th, llth and 12th July, 1933.
The discussion gave rise to a sharp conflict of opinions, and gave an
interesting spectacle of provincial jealousies.

Madras Says "No"

The representatives from Madras, Punjab, Bombay, Mysore and
Hyderabad felt that their provinces were yet lagging behind in the
development of the industry, while the United Provinces and Bihar had
forged ahead, having the advantage of an earlier start. 1 They declined,
therefore, to accept the Resolution moved by the Hon'ble Khan Bahadur
Sayiyid Muhamad Hussain, Minister-in-charge of Education and Deve-
lopment Departments, Bihar and Orissa, which appeared to suggest that
there should be no more factories than what existed then. In fact, it
was pointed out that Madras consumed sugar to the extent of 1,00,000
tons a year, out of which 55,000 tons was imported by sea in 1932-33.
Madras, therefore, need of more factories unless it desired to remain
dependent upon Java or Northern India. It was also pointed out that
the Tariff Board had emphasised that the strongest aspect of the case
for protection of the industry was that based upon the national impor-
tance of promoting the cultivation of sugarcane, and that from that point
of view there was need of promoting sugar factories in Madras.

It was further stated that hitherto it was thought that canes pro-
duced in Coimbatore had been suitable only for the Northern Pro-
vinces. But recently in one of the Government farms Co. 213 had been
raised and it had been found very suitable with a yield of about 35 to 40
tons and the cost of cultivation of one ton came down to only Rs. 2-8-0.
The Minister for the Punjab also supported the Minister for Madras,
and observed that while the Punjab had increased its cane cultivation
from 3 to 5 lacs acres, they had only two factories. The Director of
Industries from Bombay also expressed himself in opposition to the
Resolution moved by the Minister from Bihar. He pointed out that
conditions in Bombay were somewhat different from those prevailing
in the United Provinces and Bihar. In the Bombay Presidency factories
were established on the basis that they must grow their own cane ; they
could not easily buy cane. The acreage in Bombay under cane was
1,00,000, but they were distributed. They had only one factory work-
ing up to 1931-32. The Bombay Government were considering how

iAs pointed out by B. N. Adarkar in "The Indian Tariff Policy", p. 128,
" Each Province has its own reason why an expansion of the sugar industry within
its borders is imperatively necessary."

188

best facilities could be given to capitalists to enable them to obtain
suitable lands on lease so that they might be able to start factories.

Bombay was fortunate in regard to the yield of cane. The Belapur
factory had its own farm which yielded 37 tons per acre, and the per-
centage of recovery of sugar was II, the highest for the whole of India.

It was also pointed out that the Bombay Government had invested
about 10 crores of rupees on irrigation in Deccan, and it was felt that
it would be difficult to make those canals financially successful unless
the white sugar industry was established in that area. The Govern-
ment of Bombay were therefore keen on promoting the development of
more factories, and they therefore could not agree to the Resolution
proposed by the Minister from Bihar.

The Resolution moved by the Minister from Bihar was, however,
accepted by a majority of votes (18 to 11), at the Sugar Conference.
The Resolution reads as under :

" Whereas the recent development of the sugar industry in
India has been rapid, although it cannot be said to have been
excessive, and whereas, owing to the general fall in prices of
agricultural produce there has been a natural tendency towards
an increase in the area under sugarcane, the Conference is of
opinion

(1) that when the modern factories now under construction are
working at full capacity, it is likely that these and existing
factories will produce sufficient white sugar to meet the exist-
ing demand for white sugar ;

(2) that in view of the consideration that whilst the potential supply
of raw material is very large, the demand for sugar in India
is limited, further extensions, should be carefully watched in
the interests of the establishment of a sound industry ; and

(3) that if the production of sugarcane expands beyond the actual
requirements it would be extremely difficult, and indeed most
impossible, for any reasonable level of prices for gur to be
maintained."

Bengal's Niggardly Development and Apprehensions against

Restriction

The Hon'ble Nawab K. G. M. Faroqui, Minister for Bengal, pointed
out his apprehension that if the Resolution were passed by the Confer-
ence, the United Provinces, and Bihar Governments might approach the
Government of India with definite proposals for restricting the starting
of new factories elsewhere by legislation. He was, however, assured by
the Chairman of the Conference, Sir Fazl-i-Hussain, Member of the
Executive Council of the Governor-General-in-charge of the Department
of Education, Health and Lands, that the passing of the Resolution would
in no way help any of the provinces to come to the Government of India
and ask for any particular- legislation.

A representative of the Indian Sugar Mills Association took up the
brief on behalf of Bengal. He pointed out his firm conviction that in
order that India may prosper, it is desirable that each province should,
as far as possible, prosper along parallel lines.

189

It need hardly be said that the expression of such a view struck a
responsive chord in the hearts of the representatives of other provinces.
But it is a far cry from aspiration to achievement. And though there
has, doubtless, been a slow increase in the number of sugar factories in
provinces like Madras, the assertion of a major trend, such as above
would undermine the pre-eminence of the U. P. and Bihar in the Indian
Sugar Industry. In the case of Bengal it may be readily conceded that
not only is she most anxious to secure the expansion of her sugar in-
dustry, but she has also the advantage that in her case, the cost of pro-
ducing cane is less than that of Madras and Bombay. A detailed con-
sideration may, therefore, be attempted of Bengal's position in relation
to sugar manufacture.

Bengal's Position

Bengal has always grown a certain amount of sugarcane and was
once a sugar producing country. In point of area under cultivation of
cane Bengal now stands fourth in India, but it is well known that in the
early years of the 20th century Bengal took the second place. This
decline in the cultivation of the cane crop in this province has been due
largely to the spread of the jute crop in which Bengal enjoys a monopoly
in the whole world. The question of the development of the sugar
industry assumed groat importance whenever the decline in the demand
for jute, and the consequent need to restrict the acreage under jute
suggested the need for an alternative cash crop. If the deterioration in
the economic life of the province was to be arrested, some alternative
crop had to be found and sugarcane would seem to answer this purpose
best.

Quality oj Cane Available in "Bengal

It is well to note here that cane cultivation had not been ignored
by the Department of Agriculture in Bengal. A variety of cane called
" Yellow Taanna " was introduced as early as 1931. This is a very hardly
and drought-resisting cane. And though its juice and gur produced
from it leave much to be desired, its other good qualities and heavy yield
led to a great expansion of its cultivation throughout the province.
Some ten years ago the Department of Agriculture introduced new
Coimbatore varieties of cane. These were very hardly canes and were
heavy yielders with very rich juice. Of these Co. 213 has proved the
best, and is now spreading very rapidly in most parts of the province.
It is a matter of satisfaction that experiments are being continually
made for finding out a quality of cane even better than Co. 213. The
present position is that the area under Coimbatore cane is spreading
rapidly, but so far in only a few localities there is sufficient crop to
supply large factories.

The total area under cane is over 3 lacs acres. Of this about more
than 2 lacs are under improved variety and it is gratifying to find that
the recent crop-cutting experiments indicate that the normal yield of
gur which was 37 maunds per acre has now increased to over 50 maunds
per acre, due largely to the introduction of the improved varieties of
cane by the Agricultural Department. Taking even the lower figure of
37 maunds of gur per acre the total production of cane gur comes to

190

above 1,17,00,000 rnaunds. In addition to this date-palm juice yields gur
estimated at about 27,50,000 maunds.

It is in consideration of these circumstances that His Excellency Sir
Stanley Jackson, Governor of Bengal, also observed in the course of a
speech delivered at the Annual Meeting of the Associated Chambers of
Commerce in Calcutta on the 14th December, 1931, as follows :

" Large areas in four out of five divisions in Bengal are
eminently suited for growing sugarcane. It is reasonable to
expect that the rapid adoption of the Bengal Agricultural
Departments high yielding strains of jute must not only limit
the expansion of the area under jute but, even in normal times,
may bring about a reduction of that area. The Agricultural
Department envisages an eventful reduction from this " cause
by as much as 25 per cent of the area normally under jute, or
about 5,00,000 acres. If even half of the area thus liberated
could be put under sugarcane and if that sugarcane could be
locally converted into gur for transportation to a refinery, we
should not need to import a single ton of the 3,25,000 tons which
we are now importing annually into Calcutta alone. We have
the market, we have suitable land, we have the cane, the hybrid
known as Co. 213 from the Government of India breeding
nursery at Coimbatore which has been found admirably suited
to Bengal, although I am informed that the Agricultural De-
partment is confident of producing an even better cane in the
near future."

The possibilities of the establishment of sugar factories in Bengal
were also discussed by the Tariff Board in their report to the Govern-
ment of India, and the Annual Reports of the Agricultural Department
also show that there are several places where the surplus of canes
remaining after fully meeting the demands of Gur can feed a number
of factories. The Government of Bengal felt a natural diffidence about
encouraging the establishment of large scale sugar mills, while they
believed that conditions would soon be ripe for such a development.
In the meantime, the policy of the Government of Bengal was to advocate
establishment of small ten-ton factories for the manufacture of sugar
from gur in order to enable the cultivators to dispose of their cane pro-
fitably. The Government of Bengal further observed that this system
was suitable for small capitalists and co-operative associations to adopt.

The public mind was exhilarated at the thought of establishing a new
industry ; and it would be useful to summarise the main points which
emerged out of the frequent discussions on the question of the develop-
ment of the sugar industry in Bengal.

14 Points in Favour of Bengal

1. Climatic conditions in Bengal quite favourable for the growth
of sugarcane.

2. The grey-silt areas, too, usually consist of fairly rich soil which
makes it possible to produce a heavier yielding crop than any
other province.

191

3. Irrigation, too, usually an expensive proposition, is generally not
required over the major part of the province, as rainfall, both
in incidence and amount, is sufficient for the needs of the crop.

4. It should also be noted that Co. 213 variety of sugarcane is
capable of standing water-logging : in fact it has been found to
grow in a foot of water, for one or two months during the
monsoon without any serious deterioration.

5. The Bengal Government are of opinion that the sugar factories
should be more profitable in Bengal than any other province
as the cost of production of cane is comparatively low (vide
" Sugar in Bengal/' page , . .)

6. Increase in area near some places makes it possible to establish
sugar factories on a large scale.

7. Ryots will also be benefited by the establishment of sugar
factories, for while they will undoubtedly still continue to make
gur, it would almost certainly be not more than the quantity
required for themselves and their immediate neighbours, and
their excess cane can thus be sold to factories. They will thus
free their bullocks at a time when they require them for land
preparation for Kharif crops and will relieve them from the
exacting work of cane-crushing.

8. The establishment of the cane-sugar factories in Bengal will be
blessing in another way, viz., effective competition, which the
factories in Bengal will be able to offer, with the imported
sugar at the port of Calcutta and the neighbouring places, owing
to the great reduction in the cost of transport, as compared with
factories situated, for instance, in Bihar, selling sugar to Bengal
after paying high freight charges.

9. The advantage in freight, which the mills in Bengal will have
over the mills in other provinces in supplying the large demand
of sugar in Bengal, as also in the provinces of Burma and Assam,
will be a compensating factor, which would counteract the dis-
advantage which Bengal may have as compared to other pro-
vinces in regard to higher cost of production (vide Tariff Board's
Report) due to the inferior quality of cane, shorter duration of
the working season, etc.

10. The Bhadralog class will find an excellent avenue for employ-
ment in large-scale cane factories.

11. The development of the cane factories will also be instrumental
in preventing the wastage of cane in refining sugar from gur
and this will be a national advantage.

12. The realisation of some price for molasses required for con-
sumption in Bengal will be another compensating factor in
favour of mills situated in Bengal.

13. Another incidental advantage of the establishment of sugar
factories in Bengal will be a better distribution of the profits
arising from the protected industry in the various provinces and
the elimination of any feeling about disproportionate burden of
protection being felt by consuming provinces for the sake of
manufacturing provinces.

192

14. The efficiency of the Bengali cane-grower is on the whole fairly
high (vide Indian Sugar Committee's Report) 1

It should be easy to detect that in the points listed above, the
benefits to be derived from the establishment of the sugar industry are
somewhat sedulously mixed up with the advantages which argue for
and afford encouragement to its establishment. It need hardly be said,
therefore, that of the two, the former, however much it may figure in
popular discussion, is of little or no importance in determining the
localisation of the industry.

Position of Industry in U. P. and Bihar, as Compared
with other Provinces

The one simple fact which arrests attention in this context is that
the U. P. and Bihar have an overwhelming advantage over other pro-
vinces in the matter of the cost of production of cane as also the ready
availability of cane within a short distance from the factories. As
already shown elsewhere, about 65 per cent of the total cane require-
ments of the factories in U. P. and Bihar is obtained from within a
radius of 16 miles usually transported by cart. Cane so delivered is
commonly known as u gate " cane. The advantages of u gate " cane are
several, i.e., it requires less handling, arrives in fresh condition and a
uniform supply can be regulated for feeding the factory. The balance
of the cane is brought by rail being transported from a distance of as
long as 125 miles, the average distance being about 40 miles. In certain
areas the cane is also transported by tramways as, indeed, also by water-
ways, and in one case by an aerial ropeway (in Bihar) . The fact that
the cost of production of carie in U. P. and Bihar is lower than in other
areas seems to offer an advantage to the factories in these two pro-
vinces, but the factories are at present subjected to various other
handicaps as compared with other provinces. The table on the next page
gives a comparative position to the sugar factories in the U. P. and Bihar
as far as compared with Indian States and the rest of British India.

A special committee appointed by the Governments of the U. P.
and Bihar in 1938 for investigation into the question of working of
sugar factories in the U. P. reported that the U. P. and Bihar factories
suffered a handicap to the extent of Rs. 2-8-0 per maund of sugar as
compared with factories outside. This advantage of cheaper cane culti-
vation of the U. P. and Bihar has been nullified by the U. P. and Bihar
Governments, who have been fixing high minimum prices of cane from
year to year, as stated elsewhere (and other Provinces and States have
no such minimum prices) by the cess on cane, etc. And these two pro-
vinces, therefore, have at the present time hardly any advantage left to
them on this score.

We have also pointed out that the price of cane represents more
than half the cost of producing sugar, and in view of this, no province
can economically engage in the production of sugar, however much it
likes to do so, unless it can bring down the cost of production of cane.
Provinces other than the U. P. and Bihar at the present time can only

1 Vide Indian Sugar Industry Its Past, Present and Future, by M. P. Gandhi,
1934. Also vide Report of the Industrial Survey Committee of Bengal, 1941.

193

TABLE NO. 7
Comparative Position of Sugar Factories in Different Parts of India

U. P. and Bihar

Indian States

Provinces outside U.P.
and Bihar in Br. India

1. High prices of cane fixed by law
2. High wages fixed by law (0-6-0 minimum)
3. Cess : originally anna and now 3 anna
per maund on cane or As. 11 per
maund on sugar
4. Co-operative Society charges: about
As. 2 per maund of sugar
5. Short season

Free market
No law
No cess

No charges

Free market
No law
No cess

No charges
Very much longer

5. Short season

...

Very much longer

season in the West

and the South

6. Recovery 9./3% '

10% to 12% in the

West and the South

7. Income-tax, Super-tax and Excess

No tax

[ncome-tax, Super-

Profits tax

tax and Excess

Profits tax

8. No concessions

Concessions of land

No concessions

and/or refund of

Excise Duty in part

or in whole in one

form or another

9. No such relief

Import duties on out-

No such relief

side sugar and free-

dom from taxes

10. Not so

In most cases big

...

1 farms are owned;

and very little tax

is paid due to the

bulk of the income

being considered as

derived from farms

11. No exemption

No Excise Duty in

In the South no

case of Palmyra

Excise Duty on

sugar

Palmyra sugar

12. Competition with the Khandsari which

No competition

is free from all the abovementioned

charges

13. Freight disadvantage computed at over

Smaller disadvantage

tactically no dis-

Re. I/- in marketing 75| of sugar to

advantage

other distant provinces

14. Storage cost and interest charges as

No costs. Sold im-

sugar can only be sold by quotas,

mediately

having to be carried forward for

more than 10 months

15. Restriction of production by quotas

No disadvantage

leading to higher manufacturing

charges

16. Molasses return from low

Higher

ligher

17. Municipal tolls on transport of cane-

No disadvantage

cane carts

IS. Implicit obedience to Rules, Regulations

Complete freedom

and Returns of various sorts, made

(

under Control Act, on paid of heavy

penalties

19. No.

No. ]

ligh irrigation

charges in Bombay

Vide Gandhi & Co.'s Indian Sugar Industry Annual, 1940 and 1941.

194

produce cane at higher cost, (this is partly compensated by the better
quality of cane with higher sucrose) but it should not be forgotten that
these distant provinces will have an advantage over U. P. and Bihar
in that these provinces have to incur a charge in transporting sugar
to distant markets in Bombay, Madras, and to a less extent Bengal. It
is necessary to have a precise idea of the freight advantage that is
enjoyed by the provinces, which are now to a large extent the markets
of the sugar industry in the U. P. and Bihar. It works to about
Rs. 1-2-0 per maund of sugar on an average and this may be regarded
as the margin between the costs of production in the U. P. and Bihar
and the costs in the other provinces. The following table on p. 195
illustrates the position.

In view of the above position, it is easy to see that nothing can
deter the other provinces, where the industry is not adequately
developed at present, from effecting an expansion of their sugar pro-
duction, although it would be necessarily at the expense of the sugar
industry in the U. P. and Bihar in the present state of the country's
sugar consumption, which is smaller than the productive capacity of the
factories already established.

An analysis of the cost of cultivation will also show that the differ-
ences between the Northern and the Southern provinces are accounted
for in a large cost by the irrigation charges. In so far as these irriga-
tion charges 1 are bound up with the larger problem of help to agricul-
ture, one cannot be quite sure that the first step of agrarian reform in
the regime of a popular ministry will not include substantial reduction
therein, and if it should coincide with the evolution of a better type of
cane suited to the tropical areas, there might well be very far-reaching
changes in the territorial distribution of sugar production in India, just
as there have been over the wider sphere of the world's sugar industry.
Such speculation, however, is fruitless to indulge in at the present time.

Principles of Localization and Position of Sugar Industry
in Relation thereto

At this stage, let us examine generally how far the " concentration "
of the sugar industry in the U. P. and Bihar is scientific, well-planned
and how far it satisfies the theory that industries generally, and pro-
tected industries particularly, should be suitably located with refer-
ence primarily to geographical and economic factors.* An examination
of the location of the industry in the various provinces at present, as
also the sites on which factories have been established will reveal at
once that the industry has not been ideally spread over the various
provinces looking to the needs of " transport relations," and that there

1 The Director of Industries, Bombay, speaking at the All-India Sugar Con-
ference in Simla in 1933, stated, " The Government of Bombay' have invested
between 9 and 10 crores of rupees for irrigation in the Deccan and every Com-
mittee and Conference that has sat on the subject has held that unless the white
sugar industry is established in the Deccan, it will be very difficult to make these
canals financially successful. Therefore, the Government of Bombay have been
very anxious to see that new factories are established." (Also see report of the
Deccan Canals Financial Inquiry Committee, 1932.)

2 Fide "Theory of Industrial Location" by Mr. Alfred Weber, "Inter-regional
and International Trade" by Mr. B. Chlim and "The Structure of Competitive
Industry' 1 by Mr. E. D. G. Robinson.

195

-2

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196

has been verily a drift in this important matter, sites for location of
factories having been haphazardly selected, and even two factories
having been located at one site (Fipraich in the Gorakhpur District)
in the U. P. The " modern " tendency of the world appears to be
against excessive concentration of the industry in any one particular
place, and in view of rapid improvements in connection with " transport
relations " available in respect of raw materials and manufactured
articles, the phenomenon of a more even spread of the industry is
becoming common all over the world. That the development of the
sugar industry has not been uniform 1 will be seen from the fact that
out of the 150 mills operating in the country, as many as 102 have been
located in the U. P. and Bihar, Madras having 11, Bombay 10 and
Bengal, only 9. Elsewhere, we have given a table showing the growth
of factories over all the provinces from 1931-32 till 1941-42.

Factors which Determine Locations

Localisation of the industry depends to a large extent upon the
" transport relations " with reference to natural resources, like power,
fuel, and consuming markets. In the case of sugar, however, the
question of location of the industry is dominated by the f acto W; of easy
accessibility to raw material inasmuch as cane should be fresn when it
arrives because its sugar content deteriorates rapidly within a few hours
of its being cut from the fields. This one single factor has, in our
opinion, been largely responsible for the concentration of sugar factories
in the U. P. and Bihar at the commencement of the period of protection,
due to the ready availability of cane in large quantities, and in con-
centrated areas in the vicinity of factories, thus enabling the economic
operation of factories. Proximity to power is not a factorV of any
importance (as, indeed, the raw material, which costs about 52 per
cent of the total cost of manufactured sugar, is) in the location of the
sugar industry, as Bagasse (residue of cane) itself provides the neces-
sary fuel and factories are practically independent of coal.

Curious Concentration of Industry in Sub-Tropical Area

As we have already observed, however, it is somewhat curious
that the industry has been concentrated in the sub-tropical areas
(comprising Northern and Central India), although the tropical area
(comprising Bombay, Hyderabad, Madras, Mysore and other States)
is more favourably suited for the growth of sugarcane inasmuch as
the conditions there approximate to conditions in the West Indies in
Java. But here in India, the case is actually reverse for no less than
91 per cent of the area under sugarcane is grown in the sub-tropical

1 In his speech at the Bombay Rotary Club on " Problems and Prospects of
Sugar" on the 13th October 1942, Mr. M. P. Gandhi pointed out that the sugar
industry had not developed uniformly all over India. Few industries did. The
iron and steel industry was confined to Bihar and her borderland with Bengal.
In Cotton Textiles, Bombay and Ahmedabad had a big share of the total Indian
market. In Jute, Bengal had the sole monopoly, and in Mica, Bihar dominated.
He pointed out, however, that the position of sugar ought to be different, for
every part of India can grow cane and has its own supply of labour, skilled and
unskilled. According to him, however, this position was due to the fact that the
U.P. and Bihar grew cane more cheaply than other provinces with the result that
in the first flash of liberal protection to the sugar industry, the U.P. and Bihar
jhad more than a lion's share of the development of this industry in the country.

197

region and only 9 per cent in the tropical region, in spite of the higher
yield and superior quality of cane there. The reason is the compa-
ratively high cost of cultivation in the tropical region. The rich
alluvial soil of the Gangetic Plain is an initial advantage in favour of
the main sugar producing belt of the U. P. and Bihar.

Thus, the only combination of factors which will explain this
phenomenon of " concentration " of factories in the U. P. and Bihar is
(1) ready availability of cane in large quantities in the U. P. and Bihar
when protection was granted to the industry. (2) the fact that as many
as 26 out of the 32 factories which existed in the pre-protection period
were located in the U. P. and Bihar (14 being in the U. P, and 12 in
Bihar), (3) cheaper cost of cultivation in these provinces, (4) avail-
ability of suitable quality of cane as a result of researches carried on in
the Research Station in Coimbatore (Southern India) for evolving a
suitable quality of cane for the sub-tropical region and (5) availability
of capital and business enterprise in Northern India.

Further Development of Industry should be Outside the U. P. and Bihar

A glance at the distribution of factories will at once indicate that
this phenomenon of excessive concentration of the factories in these two
provinces, which leads to compulsory transport of 75 per cent of their
production to other territories which are thus dependent upon the
former for their supplies of an important article on the diet of millions
in their areas, should be remedied at the earliest opportunity. As
observed elsewhere, however, with the per capita consumption of sugar
in the country remaining at its present low level, more factories are not
required to be set up, as the existing factories, if they work for the full
season and up to their full capacity, are capable of producing about
15,00,000 tons of sugar, which is about 25 per cent more than our
present annual reauirements. But, when there is an increase in the
demand as a result of either increased consumption of sugar or possi-
bility of export of sugar, any new factories that may be necessary
should be located outside the provinces of the U. P. and Bihar in order
that the various provinces may be able to supply to a larger extent
their own requirements of sugar, and thus be free from the danger of
lack of supplies of sugar from these distant provinces owing to the
transport difficulties. This phenomenon of scarcity of sugar in various
areas located at a distance from the main sugar producing belt, in spite
of there being large quantities of sugar in the godowns of the sugar
factories in the U. P. and Bihar, due to transport difficulties caused by
the shortage of wagons and locomotives since the outbreak of World
War II, was witnessed for the first time in the latter half of 1942, when
various provinces had to go on ration in spite of the country having
sufficient stocks of sugar. It is a matter of gratification to note in this
connection that the Indian Sugar Mills Association, as also the Govern-
ments of the U. P. and Bihar have reconciled themselves to the above
view which is only fair, natural and justified on the part of the other
provinces, viz. that any further development of the industry should be
in other territories. Indeed, the Indian Sugar Mills Association has
passed resolutions at its various Annual Meetings since 1937 express-
ing its opinion that in order to achieve a balanced development of the
industry and in order to prevent inter-provincial jealousy, future expan-
sion, when necessary, should be outside the U. P. and Bihar. In fact,

198

in order to regulate the industry properly and rectify the present posi-
tion, proposals were also made to the Government of India for legislating
that no factories should be allowed to be set up without a license, but
the Government of India have shown their unwillingness so far to take
any action on these lines. In the interest of an orderly development
of the industry, we feel that the Government of India should control
location of factories except under licences, as is done in the U. P. and
Bihar. It should be observed here, however, that it was as early as 1937
that the Government of the U. P. and Bihar passed legislation 1 whereby
no new factories could be constructed and no extension of the plant of
an existing factory, which is likely to increase its capacity for crushing
cane, could be made, unless it had been granted a license by the Govern-
ment. This step of the Government of the U. P. and Bihar was very
timely and commendable as it prevented any further concentration of
factories in these two provinces.

Future Trends of Development more even spread Desirable

We may venture the opinion that the future trends of the sugar
industry and its localisation in India will depend to a large extent on
the trends of consumption. While the other provinces may now be
reconciled to the present disproportionate share of the U. P. and Bihar,
they will certainly insist that every increase in the demand ought to be
met by their own domestic production with a view to ensure a certain
amount of self-sufficiency and freedom from dependence on other pro-
vinces for the supply of such an essential article of food. And this will
remedv the present uneven distribution and bring about a diffusion of
the industry. In fact, looking ahead to the possibility of export of
sugar from India, we may unhesitatingly state that factories near the
Port towns would be an ideal location. These factories would make a
great saving in freight charges while exporting sugar out of India, and,
in addition, they would also be able to offer a more effective competition
if any attempt was made at anv time to dump sugar in India by foreign
countries, although this is unlikely in view of India's present produc-
tion, and high tariff duties which are bound to continue till the 31st
March, 1946, under the Sugar Industry (Protection) Act, 1932. 2

Comparative Increase of Production and Consumption of Sugar

It will be interesting to see at a glance the comparative figures of
production and consumption of sugar in the various Provinces. This
interesting study, in addition to pointing out the great disparity
between figures of production and consumption in various areas, also
shows how widely varying the per capita consumption of sugar is, in
the various provinces. 8

*Vide Clause 9 of the Sugar Factories Control Act, U.P. and Bihar. The
entire text is given in the "Indian Sugar Industry", 1941, pp. 12-33.

2 The present protective duty on suear is continued from year to year, under
the Indian Finance Act, since 1939. The Government have not passed an Act
for continuing the duty till the 31st of March 1946.

8 It was a revelation when, in a speech at the Bombay Rotary Club on the
13th October 1942, Mr. M. P. Gandhi pointed out that Bombay was the sweetest
province in India, her per capita consumption being about 17 Ibs per annum as
compared with Bengal, a province popularly believed to be a large consumer of
sweets and sugar, which consumed only about 6 Ibs. Vide Indian Merchants'
Chamber, Bombay, Monthly Journal for November 1942.

199
Bombay's Advance in Production

Bombay is making a steady advance towards self-sufficiency
since 1936, and it must be said that in this matter the factories in
Bombay have been helped by the high profits which they have been able
to make during the last few years due to high prices of sugar ruling in
the country owing to fixation of high minimum prices of cane by the
Government of the U. P. and Bihar since 1937. A comparison of the
balance sheets of the factories in Bombay and Madras with those of
the factories in the U. P. and Bihar for the last few years will bear this
out. The Bombay factories have their own cane plantations unlike the
factories in the U. P. and Bihar which have to buy all the cane from
cane cultivators. The high profits provided by the industry in Bombay
(and also in Mysore) have resulted in large extensions to the existing
plants and establishment of new ones. In 1932, Bombay had only two
factories and in 1941 there were 12, including the factories located in
Indian States in the Bombay Province. Production of sugar in Bombay
has gone up from 19,000 tons in 1931-32 to 81,000 tons in 1943-44 :

TABLE NO. 9

Production, Consumption and Per Capita Consumption of Sugar in various
Provinces and States, during the years 1937-38 and 1938-39 (Nov.-Oct.)

1937-38

1938-39

Province
Production

Consump- g*

Production

Consump-
tion

Per capita
Consump-

! " j tion

tion

: i

Tons Tons Lbs.

Tons

Lbs.

Bengal

26,000 | 1,90,000 7.9

14,900

1,39,000

5.8

Bombay

62,000 2,30,000 16.3

73400

2,44,000

17.0

Madras

35,000 ! 1,00,000 3.9

700

88,000

3.4

Bihar

2,32,000

58,000 3.3

1,66

600

50.000

2.8(a)

UP.

6,55,000

1,50,000 6.4

4,05

400

1,70,000

7.1

Punjab

30,000

2,06,000 14.9

19.

800

1,64,000

11.8

C. P. & Berar

44,000 5.0

i 37.000

4.2

Assam

18,000

4.0

19,000

4.1

Sind and British

Baluchistan

30,000

12.6

34,000

14.1

Orissa

8,000

...

8,000

N.-W. F. P.

22,000

10.5

13,000

6.2

Delhi

10,000

30.3

16,000

44.8

Rajputana

43.000

9.9

37,000

6.7

Central India

i 23,000

4.5

24,000

4.6

Nizam's Territory

21,000

3.0

19,000

2.7

Kashmir

2,000

1.2

3,000

1.7

Mysore

4,000

1.3

8,000

2.6

All-India

11,59,000

7.2

10,73,000

6.6

(a) Includes Orissa also.

Localisation of Gur Industry

Incidentally it would be interest also to see the position of the
localisation of the gur industry. The following table gives the net
production of gur in different Provinces and States of India during the
periods from 1st November, 1938, to 31st October, 1940 :

200

TABLE NO. 10

Net Production of Gur in India (November-October) by Provinces and States

Provinces and States

1938-39

1939 -40

Tons

United Provinces (including States)
Punjab

7,28,000
1,65,000

9,16,000
2,19,000

Bihar

1,24,000

30,000

Bengal

3,50,000

3,91,000

Madras

1,87,000

2 67,000

Bombay (including States)

1,52,000

1,81,000

North -West Frontier Province

i 50,000

67,000

Assam

31,000

35,000

Central Provinces & Berar

41,000

38,000

Orissa

52,000

Sind

9,000

8,000

Delhi

400

800

Mysore

20.000

36000

Hyderabad

50,000

54,000

Baroda

5,000

Bhopal

2,000

3,000

The output of gur has increased in most of the provinces. In Bihar
it fell considerably, due perhaps to the utilisation of a greater proportion
of the cane crop for the manufacture of white sugar.

The estimation of consumption of gur in the Provinces presents
great difficulties. In the first place, figures for imports and exports of
gur by road for the different provinces, are not available. The error on
this account is likely to be considerable. Further, the figures for
imports and exports by rail and river are not known separately for gur,
but only for gur and molasses combined. The difference between the
initial and the closing " invisible " stocks are again unknown. Lastly,
the exports of gur to places outside India are not known separately for
each Province. It is, therefore possible only to make very rough
estimates.

The table No. 11 shows imports and exports of gur into and from
various Provinces and States, during the same periods.

A glance at tables No. 10 & 11 will show that the production of gur is
concentrated in the U. P., the next being Bengal, Madras and the Punjab.
The U. P. has to export a large bulk of ijs production to other provinces.
Amongst those importing gur in large quantities are the Punjab, Bengal,
and Bombay.

Shortage of Sugar and Black Markets in 1942

We would also like to point out that this factor of the concentration
of the production of sugar and gur in the U. P. and Bihar attracted
considerable attention in the middle of 1942, as, due to transport diffi-
culties caused by shortage of wagons and restrictions placed on the
movement of sugar by the Sugar Control Order of 1942, the distribution
of sugar was badly affected leading to enforced rationing of sugar in
various distant provinces like Bombay, Madras, Sind, etc. even when

201

TABLE NO. 11

Imports and Exports of Gttr, Hab, Molasses, etc. into and from the various

Provinces and States

Period. November to October

Provinces and States

1937-38

1938-39

__ ., ___

i "

Imports

Exports

Imports Exports

Tons

United Provinces

2,181

3,62,692

5,000

2.59,000

Punjab

1,48,658 ! 7.363

1,03,000

24,000

Bihar

35,371

96,701

18,000

89,000

Bengal

1,42,519 ! 6.392

1,23,000

6.600

Madras

9,431

30,890

12,600

38,000

Bombay

50,980

19,237 43.400

16.000

Assam

10.089

1.446 10.000

300

C P. and Berar

35.781

186 30.000

168

Sind and British Baluc

\ stan

19,383

119 14,000

Orissa

2,083

581 2,334

2,664

N.-W. F. P.

551

32,980

527

20,500

there was enough sugar in the country. This phenomenon of " poverty
amidst plenty " and of " black " markets demanding unconscionably
high prices of sugar due to shortage in a particular area was witnessed
in 1942 and also in 1943. The chief reason 1 of this distress caused to the
people who had to form long queues for obtaining a few Ibs. of sugar
in various cities like Calcutta, Bombay, Madras and other similar
places in these provinces, who had also to go on ration in respect of
sugar, if not entirely without it for some time, was the lack of an even
spread of the industry in the country, due in a large measure to the
absence of farsighted planning by the State and the industry.

No Expansion Possible During War Period

No further expansion of the industry appears to us to be possible
till the duration of the World War, after which there are bound to be
considerable changes in the sugar economy of the world, as also of this
country. The destruction of the well organised system of production
in Java, as a result of the " scorched earth " policy 2 and the dislocation
of the sugar industry in countries like France, Russia, Czechoslovakia
large producers of sugar may result in the necessity of a large develop-
ment of cane sugar in this country for catering to various markets flung
all over the world. Increased consumption of sugar which is required

1 Vide Mr. M. P. Gandhi's speech before the Rotary Club of Ahmedabad on
3rd December 1943, reproduced in the Indian Sugar Industry Annual, 1943.

2 An authoritative account of the destruction caused by the " scorched earth "
policy relating to the sugar industry in Java by Dr. Honig Hano of the famous
sugar experimenting station at Pasoeroean (Java) stated that Java had to sur-
render the sugar industry which was completely broken up, the warehouses at
the ports which contained about 4,00,000 tons of sugar were burnt, harbour instal-
lations were demolished and lighters used for transport of sugar from the ware-
houses to coastal towns were burnt, workshops at the sugar factories were knocked
to pieces, etc. Vide an article in "Indian Sugar", Cawnpore, issue for September
1942.

202

according to the International Standards of Nutrition for the people of

this country would also point to the necessity of a further expansion
of the Indian sugar industry. For this and other reasons we feel that
a further development of the sugar industry in India is in the offing in
the post-war period, and when this opportunity presents itself we hope
that Bombay, Madras and Bengal will make up the leeway and will

develop the industry in their areas to a very large extent.

Incidentally this post-war reconstruction 1 will provide an excellent
opportunity for the reorganisation of this great industry the second
biggest industry of the country next only to Cotton Textiles,- in the
various provinces on proper lines, and we fervently hope that full
advantage would be taken of this opportunity for a suitable and well
planned territorial distribution 1 ' 5 of the industry along modern trends
of economic thought.

1 During the middle of 1944, the Hon. Sir Ardesher Dalai, Member of the
Government of India in charge of Planning and Development issued a communique
emphasising the necessity of regional development of various industries in the
country in order to ensure a more orderly economic development of various
provinces.

2 M. P. Gandhi's " Indian Cotton Industry Annual " for 1941, 1942, 1943.
s Vide " Industrial Organisation in India ", 1935, by Dr. P. S. Lokanathan,

CHAPTER XIII
SUGAR CONTROL IN THE U. P. AND BIHAR

IT is only_ to be expected that with the uniqueness, among Indian
industries, of its origin and the peculiarities of its position, the sugar
industry should confront the industrialists and the governments alike
with a number of knotty problems.. We have so far confined our atten-
tion to the issues that arise from the grant of a high degree of sub-
stantive protection to the sugar industry in India. Though, as we
endeavoured to show in the earlier chapters, the grant of such protection
is to be attributed to the impact of deeper economic and social forces,
the fact remains that in rearing a sugar industry on a large scale, the
costs which the nation lias had to incur are apparently on an even
larger scale. The primary question to be faced, therefore, is whether
the experience of the last decade is on the whole calculated to reinforce
our faith in this method of stimulating industrial development and how
far the concrete results of a decade's working of the sugar industry may
be deemed to be an adequate return for the costs of protection. In
answering these questions, we brought out the fallacies of the anti-
protectionists, their calculations of cost to the consumer, and urged the
view that, if the price of Indian sugar wore compared with the price
of foreign sugar as it would be if no Indian industry had come into
existence, then the price paid by the consumer could not be held to be
unreasonable. We urged at the same time that the benefits of pro-
tection do not depend only on the protected industry any more than
they are confined to investors in that industry, that if the cost of produc-
tion of sugar were to be genuinely reduced, then equal attention must
be given to the development of cane cultivation and of industries which
can utilise the bv-products of the sugar industry. We have also sketched
at length the short history of the Sugar Svndicate which is now the
common selling organisation of the su^ar mills of the U. P. and Bihar.
We also showed how the special position of the U. P. and Bihar mills
in the su^ar industry of India led more or less inevitably to the exten-
sion of the intervention of the Provincial Governments from the fixation
of cane prices to the complete control of production and of sales. It
is true that most of the problems arise primarily from the nature of the
attemnt at State regulation ; but, as we shall see later, they are also
problems which the industry would have had to tackle in due course ;
and this chapter will be devoted to an examination of such problems
which may be said to concern the Indian sugar industry inasmuch as
they affect by far the largest section of it.

The origin and history of government intervention in the working
of the sugar industry have been indicated in the chapter on the
" Fixation of Cane-prices ". Here, it should suffice to say that the
natural solicitude of a popular ministry for the interests of the cane-
grower vis-a-vis an industry with a verv liberal measure of protection
led the Government of the U.P. and Bihar by rat>id stages to an as-
sumption of the complete control of the working of the sugar factories
in their respective territories. The identity of interest has impelled

the Adviser to Governments of these two Provinces to continue the
precedent set up by the Congress Ministries of working with the utmost
co-operation and on identically similar lines. The chaotic conditions
which often arose in the sugar market and the inability of the sugar
mills to maintain a common selling organization on a voluntary basis
compelled the Governments of the U.P. and Bihar to abandon half-
hearted measures and aim at the most thorough-going forms of control.
Once it became clear that the Sugar Syndicate could not survive with-
out government recognition, all pretensions of adherence to laissez jaire
were abandoned ; and the Sugar Factories Control Act and the Rules
made under it vested the most far-reaching powers in the hands of the
administration.

We may now proceed to examine the main features of the new
regime which was thus instituted for the sugar mills of the U.P. and
Bihar.

According to the statement of Objects and Reasons, the Indian
Sugarcane Act, 1934 (XV of 1934), was not sufficiently comprehensive
for dealing with the problems of the sugar industry, and it was found
necessary to replace it by a new measure which will provide for a better
organization of cane supplies to sugar factories.

The Bill deals only with factories worked by the vacuum pan process
and its provisions relate to :

(a) the licensing of sugar factories,

(b) the regulation of the supply of sugarcane to factories,

(d) the establishment of Sugar Control Board and Advisory Com-
mittees, and

(e) a tax on the sale of sugarcane intended for the use of factories.

Section 9(1) of the Act (U.P.) lavs down that "no person shall
commence the construction of any building intended to be used as a
factory or any extension of the plant of an existing factory which is
likely to increase its capacity for crushing cane unless he has been
granted a licence by the Provincial Government. An application for
a licence under this sub-section shall be made to the Provincial Gov-
ernment in the prescribed form."

And Section (II) lays down that " the licence shall be subject to
such conditions as the Provincial may, after consulting the Board,
impose in respect of all or any of the following matters at the time
when the licence is granted :

(a) membership of any organization of the sugar industry the
main object of which is to regulate the sale of sugar and which
is recognised by the Provincial Government ;

(b) the price below or above which, the terms on which, and the
persons to whom or organisations to which or through whose
agency, and variety, grade or quantity of sugar produced in the
factory may be sold ;

205

(d) the quantity of cane that shall be crushed during the crushing
season, or the quantity oi sugar that shall be manufactured
during the period of the licence ;

(e) such other matters as may be prescribed, including conditions
of labour.

The comprehensive nature of the control sought to be established is
evident from the conditions set forth above. As regards the regulation
of the supply of sugarcane to factories, the Act provides for the purchase
of cane

(a) in an area reserved for factory ;

(b) in an area assigned to a factory ;

The differences were explained in the Statement of Objects and
Reasons thus :

" In a reserved area if a cane-grower or Cane-growers' Co-
operative Society offers to sell cane to the factory for which the
area has been reserved, the factory is bound to enter into agree-
ments with such cane-grower or Cane-growers' Co-operative
Society to purchase such minimum quantity of cane as may be pre-
scribed in the rules. In other words, a cane-grower or a Cane-
Growers' Co-operative Society in a reserved area is given an assu-
rance that his or its cane will be taken by the factory in accordance
with the terms and conditions of an agreement, but the factory will
not be bound to enter into agreements with such cane-grower or
Cane-growers' Co-operative Society for more than the prescribed
quantity of sugarcane."

This prescribed quantity is determined by thg area under cane
cultivation with a proper system of rotation of crops. Latitude is allowed
in fixing the boundry reserved. The Act, therefore, makes provision
for a survey of reserved areas. It further provides that the factory
shall make direct purchases from cane-growers or Cane-growers 7 Co-
operative Societies. Purchasing agents are not allowed to function
within a reserved area. In return for the assurance regarding the
purchase of cane, the Act prohibits the purchase of cane within the
reserved area by or on behalf of other factories. As in some years
there may be overproduction of sugarcane within the reserved area,
the Provincial Government is given power to direct that the factory
shall not purchase cane outside its reserved area unless it first agrees
to purchase all the cane available for sale within its reserved area. This
provision does not, however, affect agreements entered into by the
factory with growers outside the reserved area. The object of creating
a reserved area for a factory is to encourage factories to enter into
direct relations with growers and to take an interest in the develop-
ment of cane cultivation within its reserved area.

There are three important differences between a reserved area
and an assigned area ; firstly, in a reserved area a factory is bound to
enter into agreements with all cane-growers or Cane-growers' Co-opera-
tive Societies, whereas in an assigned area the only obligation is to enter
into agreements for a specified quantity of cane ; secondly, in an assigned

206

area, cane may be purchased through a licensed purchasing agent
whereas in a reserved area cane can only be purchased direct from
cane-growers or Cane-growers' Co-operative Societies ; and, thirdly, in
a reserved area only the factory for which the area is reserved may
purchase cane whereas in an assigned area any factory or its licensed
purchasing agent may purchase cane. fo assigned areas and in areas
which are neither reserved nor assigned cane may be purchased by

(a) the occupier of a factory or any of his employees specially
authorised to purchase cane ;

(b) a licensed purchasing agent or any of his employees specially
authorised to purchase cane ; or

In order to encourage the organisation of Cane-growers' Co-
operative Societies, the Act provides that a factory shall not enter into
agreements direct with any members of such Society.

As regards the minimum price for sugarcane the Ac I left a great deal
to the discretion of the Government and provided the Sugar Control
Board and the Advisory Committee for the consultation ol the Govern-
ment, the former iri dealing with the major problems of licensing of
factories ""and price-fixing, and the latter, the minor and local problems
of determining reserved and assigned areas. The Act provided lor penal-
ties of an effectively deterrent kind. It is to the rules, therefore, that
one has to look for the working of this part of the Act.

It is laid down in the Rules that, subject to the control of the Pro-
vincial Government, the Sugar Commission shall be the final authority
to deal with the Indian Sugar Syndicate in all matters connected with
the production and sale of sugar and such other matters as may be
referred to it by the Provincial Government. And the Sugar Commis-
sioner may, subject to the control of the Provincial Government, by
order, require the occupier or manager of a factory to submit to the Sugar
Commissioner or to any other authority specified in such order any in-
formation or any return relating to the production, supply and crushing
of cane, the manufacture of sugar, and the quantities and grades of sugar
manufactured, in stock and issued and the quantities in which and the
prices at which such sugar is sold. An Inspector may, within the local
limits of his jurisdiction, issue instructions to ensure " the equitable
purchase of cane."

In the Rules framed under the Act, the conditions. for the grant of
a licence are further detailed. No licence for a new factory is to be
granted, if it is within 10 miles of another and if the quantity of cane
available for it after meeting the cane reserved for another factory is less
than 60 per cent of its estimated cane requirement and if the additional
production of sugar is likely to affect adversely the interests of the sugar
industry.

As regards supplies of cane, the submission by the factory of its
normal requirement based on its average daily crushing capacity is an
essential preliminary for action to be taken by the Cane Commissioner.
This officer may, after a certain stipulated procedure, declare an area to
be a reserved area for the purpose of supply of cane to a particular
factory and in doing so, he must take into consideration the position

207

obtaining previously, the distance between the factory and such area
and the facility of transport therein. The factory shall then enter into
agreements with cane-growers, Cane-growers' Co-operative Societies or
purchasing agents for the purchase in the assigned area of such quantity
of cane and in such manner as may be fixed by the Cane Commissioner.

Provided that the total quantity of cane for which the factory is
required to enter into agreements with cane-growers, Cane-growers*
Co-operative Societies or purchasing agents in an assigned area shall be
such that this quantity together with the estimated quantity of cane
available in the reserved area of the factory shall not exceed 80 per cent
of the provisional cane requirement of the factory as determined under
Rule 21. Rules are also framed to ensure quick attention to cane-carts,
correct weighment, i.e. with a margin error of 2 per cent, and payment
without unfair deduction.

It is unnecessary to go further into the details of this unique piece
of legislation. What is important is that the Sugar Control Act con-
fronts the sugar mills of the U. P. and Bihar with a jait accompli in a
number of matters which were formerly subjects of keen controversy.
As soon as it was evident that the majority of mills which protection
would give rise to were established in these two provinces, the attention
of the industry as well as ol those who were closely following its fortunes
was concentrated on the various possible methods of ensuring an adequate
supply of cane on economic terms, the agencies through which the pur-
chases were to be effected and the modes and nature of payment to the
cane-growers. There were, of course, in addition to these, questions of
restriction of output whether of cane or of sugar and the fixation of price
for cane. At quite an early stage, the industry was found to discuss such
questions as zoning, licensing, the adoption of a system of licensed con-
tractors for the purchase of cane, the advantages and disadvantages of
having intermediaries between the cane-growers and the mills and the
desirability of co-operative activity among the cultivators. It may be
readily recognised that the industry naturally viewed these questions
from its own standpoint while it was ready to appreciate suggestions
calculated to improve the well-being of the cultivators. It could not see
the justice, not to speak of the wisdom, of the Government fixing a mini-
mum price for cane. It was alive to the need for regulating the output
of sugar and for preventing needless additions to the total productive
capacity of the industry. But the danger of having to pay a stiff price for
State help in this direction was never overlooked. Likewise, a system
of licensed agents for the purchase of cane from the growers was gene-
rally viewed askance. In fact, in the early thirties, opinion in the Sugar
Mills Association was decidedly against zoning. But the advantages of
zoning were at the same time sought to be realised by bringing about
private arrangements amongst a number of millowners calculated to have
the same effect as formal zoning. The Indian Sugar Mills Association,
which was established in June 1932, assisted several factories in coming
to an amicable settlement on this question. The Association was also
instrumental in getting the convention accepted that no factory should
place its weighbridge for purchase of cane at another station where a
factory is located, and wasteful competition was thus eliminated. Even
the Railways co-operated in this matter, and they did not allow any
factory to place a weighbridge on Railway land, on outside stations where
factories were situated. Natural zones were then established, and there

208

was no difficulty, except perhaps at the fag end of the season, owing to
the paucity of supplies, and even this was not very frequent. It is ^
question how far this system of private arrangement would have pro-
gressed.

But the position in regard to the licensing of contractors was some-
what different. The factories no doubt preferred to deal with the
growers direct ; but as the ignorant cultivators sometimes defaulted and
could not be educated to a live sense of their responsibilities, it was
found necessary to employ contractors. Complaints were oiten heard
that even when the factories paid a fair price lor cane, the growers got
little of it and were, therefore, hard hit. The United Provinces Govern-
ment suggested at that time that there ought to be a system of licensing
contractors which might provide that the licensee should give the actual
grower from whom he gets the cane, at least 90 per cent ot the price he
receives from the factory. The licence of a contractor who lailed to
comply with this condition, it was suggested, would not be renewed. It
was also suggested that the contractor would be responsible for giving
out pass books to all growers in which the amount of cane supplied by
them and the money paid to them would be duly entered. In answer to
this suggestion, Mr. H. C. Prior, Revenue Secretary of the Government
of Bihar and Orissa, pointed out at the Simla Conference of 1933 that he
felt that the nature of proceeding for the cancellation of a licence of a
contractor when he misbehaves, would be very complicated and stated
that it seemed to him- that it was likely to be somewhat in the nature of
Section 100 proceeding with a large number of witnesses appearing on
either side. There is no guarantee, he observed, about the integrity and
probity of the contractors and the system of licensing would only
increase the abuses. The suggestion did not meet with approval ; and
the sugar mills representatives who met at Gorakhpur at that time
passed a resolution calling on the factories to buy cane from the
cultivators.

It should be mentioned here that both in regard to zoning and in
regard to licensing, opposition was based in the main on (1) administra-
tive difficulties and complications, and (2) the undesirability of state
interference in the affairs of private industry. It may be supposed that,
when they drafted the Sugar Control Bill, the Governments of the U. P.
and Bihar neither had qualms about the latter nor apprehensions about
the former. On all these matters which were subjects of controversy,
the governments arrived at definite decisions and the Act is based on such
decisions. Inasmuch as the control effected by this legislation is of a
comprehensive kind, the argument about administrative difficulties loses
much of its force. And the system adopted under the Act for ensuring
the supply of cane to factories can hardly be said to be exclusively a
system of zoning or of licensing. For the essence of the system, so far as
purchases are concerned, is that factories enter into agreements with
growers or Co-operative Societies or, in the alternative, purchasing
agents for the bigger part of their cane requirements. The dangers which
were formerly stressed have to a large extent been provided against. The
entry of new factories coming in and competing for the identical supplies
of cane is rendered impossible by the insistence on licence and by the
provision that no licence shall be granted to a new factory within ten
miles of an old one. And when the price of cane is fixed by the Govern-
ment, there can be no danger that the seller or the buyer of cane would

201

be able to tyrannize over the other. The preservation of zones which are
neither reserved nor assigned and the grudging recognition given to pur-
chasing agents may be regarded as buffers against miscalculations or
unforeseeable upsets. That such dangers are expected may be seen
from Rule 4 of the Rules made under the Bihar Sugar Factories Act :

If the cane-growers or Cane-growers' Co-operative Societies in
the assigned area are not willing to enter into agreements to
supply, or fail to supply, the requisite quantity of cane, the
occupier or manager of the factory or the purchasing agent may,
after giving a fortnight's notice to the Collector having jurisdic-
tion over the area concerned, purchase the balance of the cane
required from outside the assigned area unless otherwise directed
by the Collector.

An element of unfairness is discernible in the provision which provides
conditions for the manager of a factory being left to his own resources
in a difficult emergency.

The thoroughness of the measure is obviously both the defence and
the chief offending of the Sugar Control Act. Clearly, the merits of the
questions which have thus been settled cannot change merely because the
U. P. and Bihar Governments have chosen to decide them in a particular
way. But it may be readily recognised that the Act solves, necessarily
in a rough and ready way, a number of questions which would have
worried the industry and which the industry would have been unable to
solve solely by its unaided private effort. Inasmuch as fixed price for
cane is of longer standing than the other features of the Sugar Control
Act, the relief from the vexatious problems of a minor character, not to
speak of the major problem of regulation of output may be regarded as
something to be thankful for.

But by far the most significant result of the Sugar Control Act is to
be seen in the determination of the provincial governments to help the
agriculturists by education, by promotion of co-operative effort, by intro-
duction and encouragement of better methods of khandsari and gwr
manufacture, etc. Before proceeding to describe the efforts in these direc-
tions, it must be noted that the governments utilised the control which
the new Act gave them, to introduce the system of deferred payment to
cultivators. This, as we have seen in the chapter on price-fixing, is an f
indispensable corrective to the errors inevitable in the system of price-
fixing by Government.

Deferred Payment to Cultivators 1941-42

When fixing the minimum price for sugarcane for 1941-42 season,
the U. P. and Bihar Governments made it clear that a deferred payment
should be made to cultivators in the event of the price of sugar moving
above Rs. 9-6-0 per maund and the average price for the season happened
to be above Rs. 9-12-0 per maund. The exact method by which the
deferred payment was to be made was clarified later as below :

(1) If the average selling price of sugar produced in 1941-42
exceeds Rs. 9-12-0 per maund but does not exceed Rs. 10-8-0, an addi-
tional price of one pie per maund of cane shall be payable for every anna
by which the average selling price exceeds Rs. 9-12-0.

210

(2) If the average selling price of sugar exceeds Rs. 10-8-0 per
maund an additional price of one pie per maund of cane for each increase
of 0-1-9 above Rs. 10-8-0 shall be payable.

(3) The average selling price of sugar shall be determined in a
matter to be prescribed by the Government in terms of the average selling
price of standard sugar i.e. D-24 Nawabganj.

(4) In reckoning the additional price payable, amounts returned
by the Indian Sugar Syndicate to members from the reserve shall be
reduced to annas and added to the average selling price of the sugar.

(5) Excess payments for cane made by factories to growers above
the minimum cane price will be set off against the amount calculated as
the additional price due to the growers or the Society,

At the end of the season, a total of 0-7-0 was paid per maund of
cane,

Improvement in Khandsari and Gur Manufacture

We may now turn to the efforts made to improve the position of
khandsaris and gur manufacturers. It should be emphasised that all
these efforts are not directly traceable to the Sugar Control Act. As
often happens, ideas originate in one or another of the technical bodies
like the Imperial Council of Agricultural Research. Grants are obtained
from various sources ; and the efforts, too, date from an earlier period
than the passing of the Sugar Control Act. Nevertheless, in so far as the
Act gives the Governments the power and the machinery to deal with
these problems and particularly co-operative sales, they may be said to
be linked to this piece of legislation.

In regard to the Khandsaris, it is noteworthy in the first place that
no minimum price has been fixed by the Governments of the U. P. and
Bihar for cane purchased by Khandsari factories and the price paid
depends upon the locality. During 1939-40 some Khandsaris in the U. P.
purchased cane at 0-6-5 to 0-7-11 per maund, while those in Bihar at
0-6-9 per maund. This compares very favourably with the minimum
prices paid by the factories in the U. P. and Bihar varying from 0-8-9 to
0-10-9 per maund. Besides the Khandsaris have not to pay any cess
which the factories have to pay at the rate of 0-0-6 and have not to incur
other expenses by way of commission to Co-operative Societies and rail-
way freight on out-station cane. The total cost of manufacture of Khand-
sari sugar may be taken at Re. 1 per maund. The Tariff Board has given
interesting figures on the cost of production of sugar by Khandsaris and
open pan concerns. The average price of Khandsari sugar is about six
to eight annas lower than the prices realised by factory sugar.

The Khandsari industry is at an advantage in the interior areas, far
removed from factories where cane is available cheaply and which cannot
be disposed of in any other way. Amongst other advantages may be
mentioned the following :

(a) Negligible transport and other charges on cane.

(b) Saving of 0-0-6 per maund on cane cess.

(d) Less transport charges on sugar which is consumed in areas in
close vicinity.

(e) Some preference for Khandsari sugar by orthodox people.

211

The Khandsari sugar factories can be helped by the Government by
improvement of their equipment and introduction of improved types of
crushers, juice-boiling bels etc., by improvement of the methods of manu-
facture in order to improve the quality of the finished product ; by better
facilities for getting the necessary equipment on hire and by better
marketing facilities. The Imperial Council of Agricultural Research had
sanctioned a grant of Rs. 1,67,380 for the establishment of a Sugar
Research Testing Station for the indigenous system of gur and sugar
manufacture for a period of 5 tears ending in November 1941. A small
grant was also made to the Government of Bihar for investigation into
the possibilities of manufacturing Khandsari sugar by single pan method.

Gur Development Scheme in U. P.

As regards gur, a gur development scheme has been in operation
for some time in the United Provinces. Every rupee spent on the scheme
has added much to the cane-growers' income. The improved types of
mills alone introduced in the last two years are estimated to add Rs. 3
lacs a year to the grower's income. The objects of the scheme of deve-
lopment of gur are to avoid wasteful processes of manufacture and
increase the quantity as well as quality of sugar by : (a) replacement of
local Kolhus by improved ones to obtain better extraction ; (b) intro-
duction of improved tvpas of furnaces to prevent waste of fuel and time
to avoid inversion and charring ; (c) popularisation of cheap and simple
methods of juice clarification to improve colour, taste and quality of
the product, and (d) provision of marketing facilities to capitalise the
results of improvements effected.

The scheme was inaugurated in 1937-38 in almost 2,000 villages and
has made great progress since then. The gur industry is growing in
importance daily as it has become the only practicable method of dis-
posing of the cultivator's surplus cane. Kolhus are being installed in
areas which never saw one before.

One important development affecting the gur industry is the in-
auguration of the Gur Market Information Service by the Department
of Industries, U. P. The object of the Gur Marketing Information
Bureau is to collect and disseminate information regarding the condi-
tions prevailing in all the important gur markets where, as in the case
of the reserved areas, the cane-grower is assured of a fair price, gur-
making is definitely discouraged, and this definitely is a point on which
the apprehensions of the sugar industry were readily set at rest by the
U. P. Government.

The measures cited above are for the normal times. Special efforts
are also put forth when the Government is confronted with the problem
of surplus cane as a result of a large cane crop, and decline in mill con-
sumption, and the consequent restriction in production. The Govern-
ments of the U. P. and Bihar decided to levy a cess on cane in order
to give relief to cultivators. At the same time there was a reduction in
the minimum price in certain districts in the U. P. and in the whole
of Bihar in 1939-40. The Government of the U. P. took steps in time
to convert the surplus of cane into gur and carried on a widespread
campaign to impress upon the districts where there was a real paucity
of Kolhus (indigenous cane-crushers). Special efforts were made to

o jo

supply these on hire. A sum of Re. 1 lac was sanctioned on account of
Takavi for supply of improved types of Kolhus and pans on payment
of hiring charges. The big farmers were also advised to instal power
crushers and financial help was promised in deserving cases by the Cane
Commissioner. The staff of the Gur Development Department was also
augmented so as to enable co-operation between the cultivators and to
ensure fullest use of all available Kolhus. It would be a wise course
for the cane-growers in the province of the U. P. to possess gur manu-
facturing equipment for use in abnormal years.

Development of Co-operative Cane Societies in Bihar and United
Provinces by means of the Sugar Control Act

The Government realised that it was through the encouragement
of co-operative activity that the utmost good could be done to the culti-
vators. And here the Governments of Bihar and U. P. have the credit
of having evolved a comprehensive and well thought out plan of deve-
loping the spirit of co-operation among the cane-growers.

Co-operative Activities n? Bihar

The Government of Bihar sanctioned a scheme for the organization
and operation of: Cane-growers' Co-operative Societies in December
1935, from the assistance given by the Government of India from
the excise duty on sugar for organizing the cane-growers into Co-
operative Societies and to enable them to obtain a fair price for their
cane or for other purposes directed to the same end. Two Special
Officers, with headquarters at Chapra and Samastipur, 13 Organizers
and 13 Supervisors were appointed under the scheme with instruc-
tions to form experimental Cane-growers' Co-operative Societies in
the areas of a few factories, in consultation with the local officers
and the representatives of sugar factories interested in the well-being
of the cane-growers. Only 103 Cane-growers' Co-operative Societies
operated in the crushing season 1936-37. These Societies supplied
9 lacs maunds cane to the sugar factories. The number of these
Societies increased to 215 and the amount of cane supplied by them
to 16.28 lacs maunds in 1937-38.

Cane-growers' Co-operative Societies under the Bihar Sugar
Factories Control Act, 1937

When the Bihar Sugar Factories Control Act, 1937, came into
force, the Government of Bihar announced their decision to form
Cane-growers' Co-operative Societies in all the villages in the reserved
areas of the sugar factories to enable cane-growers to obtain the"~full
protection vouchsafed to them by the aforesaid Act. As it was
impossible for a small staff to form Societies in the reserved areas
of all the sugar factories, the local Government sanctioned an addi-
tional staff of 3 Special Officers, 22 Organizers and 57 Supervisors to
take up the organization of Cane-growers* Co-operative Societies in
the areas of all the factories in the province. Four circles under 4
Special Officers, 3 in North Bihar and one in South Bihar, operated
in 1938-39. The total co-operative supply of cane by 425 Cane-growers'
Co-operative Societies amounted to 13.40 lacs maunds cane in this
season. Witl\ the appointment of additional officers, it became possible

213

to organize 671 Cane-growers' Co-operative Societies in 1939. Thus,
1096 Cane-growers' Co-operative Societies operated in the crushing
season 1939-40 and supplied 66,75 lacs mauncls cane to the sugar
factories.

Cane-growers Co-operative Societies in Bihar upto 1941-42

The policy of cautious expansion of Cane-growers' Co-operative
Societies was followed in the year 1940 as well. Although a large
number of Cane-growers' Co-operative Societies were formed in this
year, most of the Societies were placed on probation for periods vai'ying
from 6 months to a year to enable them to qualify them for registra-
tion under the Co-operative Societies Act. Only 392 Cane-growers'
Co-operative Societies were registered under the aforesaid Act.
Altogether 1,488 Cane-growers 1 Co-operative Societies functioned and
supplied 88 lacs mauncls cane to the sugar factories, representing
approximately 13 per cent of the total cane crushed in Bihar in the
crushing season 1940-41.

Most of the Societies placed on probation were registered in the
next year under the Co-operative Societies Act. Over 2,000 Cane-
growers' Co-operative Societies with 40,000 members functioned in the
crushing season 1941-42, in Bihar.

The Cane Department was sought to be unified by placing the
Cane-growers' Co-operative Societies under the control of a Cane
Commissioner from the 16th November 1939. The Cane Commissioner
was appointed the Joint Registrar of Co-operative Societies and vested
with the powers of a Registrar of Co-operative Societies, for adminis-
tering these societies. To ensure the maximum co-ordination between
the different sections of the Cane Department, he was further appointed
as the Cane Development Officer, Bihar. The main intention in
bringing the three sections mentioned above under unified control
was to ensure the maximum co-ordination among them. A detailed
plan for co-ordinating the work of these sections was laid down at
a meeting of the gazetted officers of the department held on the 9th
November 1940. Amongst other things, it was decided that the
gazetted officers of the department posted in the various circles should
meet at least twice every year and more frequently, if need be, to
decide on their common programme and that local committees should
be formed to carry out this programme into effect. The Assistant
Directors of Agriculture were directed to conduct development work
mainly through the societies and the Special Officers were instructed
to select villages for the formation of the Cane-growers' Co-operative
Societies with the concurrence of the Assistant Directors of Agricul-
ture.

The scheme of co-ordination has been extremely successful so
far. During the period, demonstrations were carried on cane cultiva-
tion, green manuring, compost making and the use of improved
implements, of which by now there are 768 sets in Cane-growers'
Co-operative Societies. In addition, interesting lectures were delivered
at which members were advised not to ratoon their cane and where
they were instructed how to recognise the prevalent diseases of cane

214

and how to prevent their spread by the use of good seed. As a
result of these efforts, the cultivation of cane in line is now universal
in Cane-growers' Co-operative Societies in North Bihar. Nearly 95
per cent of cane planted by the old members of these societies for
supply to the sugar factories in the crushing season 1941-42 is under
improved varieties of cane. Altogether 4,526 demonstrations were
conducted in the Cane-growers' Co-operative Societies by the staff
employed under the scheme for the improvement of sugarcane cultiva-
tion in the province.

Along with cane development, the Cane-growers' Co-operative
Societies interested themselves in the campaign of Mass Literacy initia-
ted by the Hon'ble Dr. Syed Mahmud, the late Minister of Education
and Development, Bihar. The number of Mass Literacy Centres
increased from 250 to 350 during the period under review. There was
also a corresponding increase in the number of attending adults. More
than 100 Societies are receiving copies of the " Roshani," the organ
of the Provincial Mass Literacy Committee, Bihar. About 100 sociotic^
have equipped themselves with books issued under the u Mahmud
Series ".

Other Improvements

As the resources of societies are increasing, they are undertaking
projects of general welfare in the villages. In the South Bihar Circle
20 surface wells were dug and two tube wells were sunk and two Rahat
pumps were bought in the Saran Circle ; 1,176 yards of village roads
were repaired in the Champaran and South Bihar Circles by co-opera-
tive efforts. In the Samastipur Circle eleven village roads were built
at a cost of Rs. 4,000, two-thirds of the cost having been contributed
by the Government of India from the grant for rural uplift in the
Darbhanga District.

Common Good Fund

All the Societies have been advised to establish a Common Good
Fund by voluntary contribiilDns from their members. The rate of
contribution varies from one anna per cart to 3 pies per maund of the
cane supplied by them. The purpose of this fund is to create a capital
of at least Rs. 1,000 in each Society to enable it to undertake short-
term crop financing. A sum of Rs. 4,000 was collected in this fund
during 1939-40. These efforts are being continued so that the fund
may be built up as quickly as possible.

Lack of Uniformity in various Areas

Heartening as is the progress recorded above, it must be said that
there was no uniformity in the various circles as to how societies should
be organized, audited and inspected ; the bye-laws of the Primary
Societies and Co-operative Development and Cane Marketing Unions
varied from Circle to Circle ; and the forms and registers used varied from
factory to factory. But the work of the standardization was taken up
and very considerable progress has been achieved so far. The neces-
sary minimum number of registers were planned, standard forms were
drafted, bye-laws for Cane-growers' Co-operative Societies and Co-

215

operative Development and Cane Marketing Unions were framed and
standard rules of financing were issued. Standard forms of audit and
inspection notes are being framed and the procedure for systematic
inspection and audit of societies has alrefdy been laid down. The work
of re-organization is continuing.

Training of Members

Along with the re-organization of the department, attention was
paid to the training of the members of the Cane-growers' Co-operative
Societies. Unless the members are thoroughly trained in the principles
of co-operation, they will not be able to manage their societies success-
fully. The administration of these societies is extremely technical and
calls for a specialised knowledge of accounts and business organization
in its administration. The Registrar, Co-operative Societies, Bihar,
deputed the Principal of the Co-operative Training Institute to train
the members of the Cane-growers' Societies by holding peripatetic
classes for a year. The training commenced in 1940 and it is hoped that
it may bring about an all-round improvement in the working of these
societies in this province in the near future.

Cane-growers' Societies in the United Provinces

Having referred to the organization set up by the Government of
Bihar for development of the Cane-growers' Co-operative Societies in
Bihar, we may refer in brief to the co-operative organization in the
United Provinces. The U.P. Co-operative Societies have played an
important part in assisting the solution of some of the major problems,
e.g. regulation of cane supplies and development of cane. During the
first years of the development of the sugar industry after the grant of
protection in 1932, there was considerable inefficiency and confusion
chiefly in the matter of cane supplies owing to lack of organization. As
is observed elsewhere, factories sprang up like mushrooms and were
located without much thought or plan, sometimes two factories working
at the sarre station. This led to very conflicting arrangements over cane
supplies and resulted in confusion. The cane cultivator who brought
cane in bullock carts had to wait for a long time, sometimes more than
two days, before his turn came for the weighment of the cane. In the
meanwhile the cane dried causing loss in weight to the cultivator and
causing loss in sucrose to the factory. Many of the contractors employed
by the factories also robbed the growers of the legitimate price of cane
also. There was no minimum price of cane before 1934-35. Factories
were known to be paying only As. 3 per maund of cane and this
gave a bad name to the industry as a whole. 1

We have already referred elsewhere to the legislation undertaken
by the Government of India for controlling prices of cane as also on
other matters relating to the weighment and purchase of cane (Sugar-
cane Act of 1934 and the Rules made by the U.P, Government under

1 Vide observations of Pandit Jawaharlal Nehru in his Autobiography, 1936, the
chapter on " Paradoxes " : " In recent years the fall in agricultural prices of
most foodgrains and other articles suddenly led to millions of the peasantry,
especially in the U.P. and Bihar, to cultivate sugarcane. A tariff on sugar had
resulted in sugar factories cropping up like mushrooms, and sugarcane was in great
demand. But the supply was soon far in excess of the demand, and the factory
owners cruelly exploited the peasantry, and the price fell."

216

this Act). The Co-operative Department of the UJP. Government was
then a very small one with limited resources of staff and funds. It
was in 1935 that a grant of one lac of rupees from the Central Sugar
Excise Fund was made " for the improvement of cane cultivation with
a view to its co-operative marketing ". The U.P. Government organ-
ized a scheme for the development of cane in the " gate " areas of such
factories as were willing to pay an annual contribution of Rs. 3,000 to
the Government to purchase cane through a co-operative society in the
area. At the start about 20 factories joined the scheme. The primary
intention of the scheme was to improve the quality of the cane both in
respect of its yield per acre and its sucrose content. The factories, how-
ever, generally did not like the intervention of the Co-operative Societies
in the matter of their cane supplies. Nor were they pleased in paying
a commission to these societies at the rate of 3 pies per maund of the
cane. With the passage of the U. P. and Bihar Sugar Control Act of
1938 after the advent of the Congress Governments in these Provinces,
action was taken for reservation of specific areas for each factory, fixation
of minimum prices, compulsion cm factories for accepting cane from a
co-operative society within a reserved area, and prohibition of factories
in dealing directly with members of co-operative societies. The very
form of agreement to be entered into among the societies by factories
was prescribed by rules. A cess on the sale of sugarcane was also
imposed, and it gave the Provincial Government a revenue of 30 to 40
lakhs of rupees per annum, which is being utilised for the development
of cane, transportation facilities in several areas and other development
objects. A separate department with the Cane Commissioner as the
head was established to administer the scheme. Co-operative Societies
were established freely in the areas of many factories. The object of such
cane societies was to develop cane, to arrange for its ordered supply and
also for financing these members lor these objects. Latterly, they have
also included, in their objects, all agricultural improvement and rural
reconstruction work. These societies have done a great deal of
work in introducing suitable se^d of developed varieties and getting cane
sown according to improved methods. The societies are thus responsible
not only for the improvement of cane, 1 but also have done useful work
in combating diseases and pests in cane. It must be observed, however,
that factories have not taken kindly to these societies, partly because
there are various defects in the societies, which have been organised
with " terrific speed " and partly because combination of growers is
not very convenient to factory owners.

The cane societies, we feel, need a better organisation and have to
work, as far as possible, in collaboration with the factories in order to
achieve best results. And if they succeed in doing so, they can play an
effective part in the rural reconstruction of the provinces, and can add
to the wealth, welfare and well-being of the cane-growers by evolving an
improved cane of higher yield, free from diseases, ensuring at the same
time full payment of the cane to the cane-growers without any inter^
mediaries.

1 Vide an article in " Indian Sugar ", Cawnpore, of July 1942, on " Co-operative
Cane Societies in the United Provinces", by Mr. R. P. Mathur, Assistant Registrar
of Co-operative Societies. He estimates that the average increase of sugarcane
as a result of Co-operative Societies has been over 33 per cent.

CHAPTER XIV

CENTRAL GOVERNMENT CONTROL OVER SUGAR INDUSTRY
IN THE WAR-PERIOD

ON the 14th April 1942, the Government of India passed the Sugar
Control Order with a view to check the steep rise in prices of sugar
and to prevent profiteering by particular mills situated in advantageous
areas* Under this Sugar Control Order which was made effective from
the 14th April 1942, and which was introduced under the Defence of
India Rules, the Sugar Controller for India was empowered to fix ex-
factory price of sugar which, for some qualities, was to be the same
throughout India l to register dealers and to control distribution of sugar
from specific factories to specific markets in view of the need for
securing utmost economy in transport. The order was made applicable
to all sugar made in factories in India by the vacuum pan process.

While no exception can be taken to the introduction of the Sugar
Control Order with the avowed object of checking any undue rise in
the prices of sugar and of achieving an orderly development of the
industry, it must be stated that the control over the affairs of the indus-
try instituted by the Central Government was in complete disregard
of the advice offered by the industry, and^ what J^s_more^jsuch_control
was introduced without, jMrevJQUs consultatjon with the industry. As
a result of the assumption of this control on the industry and the deci-
sion of the Government not to avail themselves of the offer of the Indian
Sugar Syndicate which was the marketing orgamsatipn^pf the sugar fac
tories located in the U. P, and Bihar from 1937 to 1942, to use its agency
for sale and distribution of sugar, the Syndicate had no other alternative
but to suspend its principal activities for the duration of the control
scheme. This was done with effect from June 1942 and the erstwhile
functions of the Indian Sugar Syndicate, as. also of other smaller sales
organisations in Madras and Bombay in regulating sales of its members'
sugar in a manner which would maintain equality in their sales position
ensure adequate supply of sugar to the market according to its varying
seasonal requirements by releasing the sales quota from time to time,
etc., have fallen in disuse as Government evolved their own organisa-
tion for the purpose. Doubtless there were several noticeable defi-
ciencies in the working" of the" Sugar Control Order during the first
few months and black markets were in evidence in various parts of
the country, but the initial difficulties in administration were slowly
got over and a fairly satisfactory position was achieved Mwhereby. jjt
was possible to sell sugar at the scheduled rates varying from 0-3-9
to 0-4-0 per pound in various parts of the country. All sugar recovered
from factories under Central Government's permits, is now consigned
to Provincial Governments, or their nominees, and all intermediate
agencies of recognised dealers have ceased to exist. Factories despatch
sugar uniformly according to the plan prepared by the Sugar Controller
and all factories are treated alike in the matter of disposal of stocks.

218

With a view to bring under control confectionery and peppermints
in the manufacture of which sugar was diverted, the original Sugar
Control Order was amplified and the Sugar Controller was given powers
to regulate the price and movements of sugar as well as sugar pro-
ducts. Accordingly* the Sugar and Sugar Products Control Order,
1943, was passed in July, 1943. The Act, with all amendments up to
30th, June, 1945 is given in the Sugar Industry at a Glance, vide page
xxiv.

Gur Control Order passed in 1943

The Sugar Controller fixes ex-factory prices of sugar according to
its grades and quality, and also the quantity of sugar to be despatched
from each factory during each month to various destinations. Not
a bag of sugar can now be removed without his permit. In order to
assist in the proper maintenance of the control over sugar and in order
to enable the Government of India to get production of sufficient quan-
tity of sugar from sugar factories, the Gur Control Order was als o intro-
duced on the 24th July, 1943. Under the Gur Control Order, the Gur
Controller (the Sugar Controller is also the Gur Controller) can prohibit
or restrict export of sugarcane to aay place, direct that cane-growers shall
deliver sugarcane to a specified cane factory or factories in accordance
with such conditions in regard to quantity, prices and time of delivery
as he may specify, prohibit or restrict to such quantities or qualities
or both, the manufacture of Gur by all or any class of producers, if
in his opinion, unregulated production of Gur in any area is likely
to affect adversely the production of sugar in any quantity which, in
his opinion, is required for the needs of the community. Immediately
after the Order was passed, movement of Gur was controlled and price
fixed. The texts of these Acts are given earlier in the portion The
Sugar Industry at a Glance vide page xxvi.

Rationing of Sugar in India from 1943

In view of the fact that the total production of sugar was not enough
to meet the requirements of the country and the defence forces and
the neighbouring countries to which sugar had to be exported, ratioiiing.
of sugar supplies was introduced in all provinces of the country in
1943, and ffie TSugar Controller allotted quotas for civilian consumption
for the various areas jin the country/ and specified how much of such
Quota was to be ma3e available tc the area from local production and
how much should be transported from the U. P. and Bihar, the two
largest sugar manufacturing areas in the country producing far larger
quantities of sugar than were needed for consumption in those areas.
The Provincial Government, in turn, introduced rationing for indi-
viduals in big cities, and specified quotas for smaller towns and villages.

Annual Quotas fixed for Provinces

These annual quotas for the various Provinces and States were
fixed by the Sugar Controller generally on the basis of consumption
averages during 1934-35 to 1938-39. The sugar allotted for civilian
consumption in 1942-43 was about 25% less than the present consumption
requirements of the country which have appreciably increased as com-

219

pared with the average of the pre-war years. This has been due to
various reasons including increase in the population in many towns
and cities, which are known to be consuming larger quantities of sugar
than the villages, the large influx of refugees in the country, the increase
in the allied forces stationed in the country and the changes in the
social habits of the people leading to a higher demand of luxury food-
stuffs. The production of sugar in 1943-44 season was very much
higher than in the 1942-43 season, and therefore allocations to the Pro-
vinces were increased. But the production during 1944-45 being expec-
ted to be much smaller due to the large reduction in the cane crop of
the country, partly as a result of the divergence of cane areas into
food crops as a result of the " grow more food " campaign, and partly
as a result of the fixation of comparatively low prices of sugarcane
as compared with the yield obtained from other cereals like wheat,
rice, etc., the quotas for various Provinces were again revised in 1944-45.
(Vide Table No. 35 in Sugar Industry at a Glance.)

For the text of the Sugar and Sugar Products Control Order, 1943
and Gur Control Order, 1943, as amended up-to-date a reference is
invited to the pages in the portion entitled Sugar Industry at a Glance.
The ex-factory prices of sugar fixed of various qualities as on October,
1944 are also given in Table No. 29 on page xiii.

Continuance of Official Control not Welcomed by Industry

Industry, as a rule, resents any official control, particularly when
in the case of an industry like sugar, it extends right from the fixa-
tion of cane price and the method and manner of its purchase to the
sale not only of the finished product, i.e., sugar, but even an important
by-product like molasses.* It was also the industry's contention that the
manufacturing costs were not computed liberally, when fixing prices
of sugar. What is more, such rigid attitude has put a severe limitation
on the capacity of the industry to make large sized profits, even during
the war-period, as in the case of other industries like cotton textile,
cement and coal, and has prevented it from building up adequate reserves
during the war-period for reconstruction and replacement of machinery
and spare parts which were greatly depreciated and became obsolete.
The industry has, therefore, had no opportunity from the war for
ameliorating its position. This being so, it is quite understandable that
it wishes to be decontrolled at the earliest possible date. It appears
to us, however, unlikely that the Government will relax control, on sugar
and Gur, at any rate, before a couple of years from the date (15th
August, 1945) of cessation of hostilities in the Far East.

We feel, however, that in the interest of an efficient and orderly
development of industry in the post-war period, the present form of rigid
control shou Id be relaxed^ and a suitable scheme should be devised by
the industry itself to ensure (1) that there is proper dispersal of the
industry all over the country whereby all new factories to meet the
expanding needs of sugar are put up at appropriate centres outside
the U. P. and Bihar, bearing in mind the necessity of Province-wise
development of industry and the desirability of minimising transport
of sugar over long distances from producing centres to consuming areas,

*For details regarding the Molasses Control Order, in U. P. and Bihar vide
page xxviii in the "Sugar Industry at a Glance".

220

and (2) that there is a Central Marketing Organisation for the entire
industry which should study and arrange for adequate supplies of sugar
in all markets at all times, and promote the utilisation of sugar for
human consumption both in towns and villages by propaganda and by
bringing home to the people the nutritive and energising qualities of
sugar, and also for other industrial uses, as in the western countries, e.g.,
in confectionery, road making, etc.. (3) that there is a proper correla-
tion between the output and demand and a suitable carry over of sugar
to the extent of 2 to 3 lacs tons at the end of every season, to provide
against bad crop or other unforeseen circumstances, e.g., outbreak of
hostilities, sea-blockade, etc.

Licensing of Factories Central Control Recommended

There has been some controversy in regard to the appropriateness
of Government intervention in the matter of establishment of factories.
The Sugar Conference convened at Simla in 1933 comprising of repre-
sentatives of various Provinces did not view with favour the proposal
of a factory acquiring a licence before its establishment. This was due
largely to the apprehension that the interests of nationals would suffer
as also perhaps of various Provinces. But as a result of the haphazard
development of the industry during the last 12 years, the consensus of
opinion today is in favour of Government taking powers to issue licences
before factories are established or the capacity of existing ones is in-
creased. As a matter of fact, the U. P. and Bihar Sugar Control Acts,
passed in 1937 have conferred such powers on these two Provincial
Governments and indeed they have exercised it. Only in August 1945,
the U. P. Government issued a circular permitting under particular
conditions factories having a cane crushing capacity of less than 800
tons to increase the capacity to 800 tons and stating that the Govern-
ment would not permit the establishment of any further factories in
the United Provinces. We definitely favour the system of licensing
of sugar factories by the Central Government in the interest of a pro-
per dispersal of the industry all over the country and suggest that the
Government of India should take such powers at once for ensuring
the object in view, viz., the properly regulated development of industry
along planned lines to ensure the establishment of economic units (we
recommend units of 800 tons of cane-crushing capacity*) in suitable areas
well spread over the various Provinces and Indian States. We also
suggest that no new factories should be allowed to be established here-
after until a licence for this purpose is issued by the Government of
India. f

* The list of sugar mills given in the appendix shows the cane crushing capacity
of factories established in various Provinces and States.

fin this connection, we give below a general resolution, adopted by the National
Planning Committee in 1940, with which we are in agreement.

" This Committee is of opinion that no new factory should be allowed to be
established, and no existing factory should be allowed to be extended or to change
control without previous permission in writing of the Provincial Government. In
granting such permission the Provincial Government should take into consideration
the factors as the desirability of the location of the Industry in a well -distributed
manner over the entire province, prevention of monopolies, discouragement of the
establishment of uneconomic units, avoidance of over-production and the general
economic interests of the province and the country, llie various Provincial Gov-
ernments should secure for themselves requisite powers for the purpose, if neces-
sary by undertaking suitable legislation/'

221

Dividends of Sugar Factories from 1935 to 1944

In an early paragraph we referred to the action of the Government of
India in fixation of prices of sugar since 1943 in a manner in which
even during the war-period the industry had no opportunity of making
satisfactory profits of which they were deprived during some years in
the past. At this stage it will be of some interest to see how profitably
the industry has worked during the last ten years and particularly
during the war-period. A glance at the table on page 222 will
show the dividends declared by a few representative sugar companies
from 1935 to 1944. It will be seen that the industry has had a che-
quered career, its fortune swinging from year to year, depending on
various factors such as availability of suitable quantity of cane, quality
of cane, fixation of minimum cane prices, prices of sugar, imposition
of cesses, excise duties, etc. On the whole, however, it must be stated
that the industry has had a satisfactory period and has been able to dis-
tribute fair dividends on the investment of capital in the industry. It
will also be clear from the tablfe that factories outside U. P, and Bihar,
e.g., those in Bombay, Mysore, have been able to make larger profits
and declare better dividends as their cane cost compared very favourably
with the cost of the factories in U. P. and Bihar and they also had the
advantage of a better and longer season. We feel that in appreciation
of the part played by the industry in supplying the sugar requirements
of the country during the war-period without any profiteering, the
Government should accord it a liberal treatment as and when necessary
during the post-war period, particularly as this industry, unlike other
major industries, e.g., Cotton Textile, Coal, Iron and Steel, was unable
to lay by adequate reserves for depreciation, replacement of machineries
during the war-period, and against lean years of depression, due to bad
crop, uneconomic competition, etc.

222

TABLE No. 1

Capital and Net Block of Sugar Companies,, and Dividends

since 1935

]
Paid-up !
Name of Sugar Capital j Net
Factory with De- \ Block
bentures*

DIVIDENDS %

i (
193519361937

1 1

1938

19391940

1941

1942

1943

1944

Balarampur
"Basti
Belsund
Belapur
"Bharat
Buland

Rs.

28,00,000
18,00,000
20,49,950
37,59,800
6,25,000
24,00,000

Rs.

23,94,169 : 10
18,94,611 15
14,47,872 : Nil
36,07,486 24
4,91,832 Nil
22,69,814 i ...

10 3J
25 : 15

Nil 1 Nil
16 14
74 10
5 6

24 Nil

15 i 12
Nil Nil
14 * 20
5 i 5
111 HI

Nil Nil
10
Nil Nil
20 14
Nil 5

124 174

Nil
20
Nil
12
74
224

30
Nil
18
12J
224

5
20
Nil
18
10
25

*Carew
Cawnpore
Champarun

65,00,000
25,0n,000
18,00,000

56,14,075
27,66,414
19,47,896

12i 12J
25 10
10 20

10 10
5 5

5 - 5

Nil
24
74

Nil Nil Nil

24 15 i 15
24 15 15

124

10
15
20

Deccan Sugar and
Abkari

'East India Distilleries
& Sugar Factories ...

Durbhanga
*Deoria

Ganesh
Ganga
*Gaya

*Mahaswastika
Modi
'Mysore

*Nawabganj
New Savan Sugar
*New India

23,60,000

314,780

26,00,000
8,99,452

8,00,000
8,52,841
9,84,200

6,50,000
12,00,000
30,79,280

19,46,030
11,00,000
14,12,700

31,02,528

3,09,055

18,19,829
10,33,906

8,25,407
9,36,912
11,27,452

5,42,176
16,22,542
21,79,280

19,83,186
8,00.000
12,68,372

35 20 10 10 < 10
10 10 5 10 15

124

10
10

124

124
20

10
74

Nil
*8

10
HI

10
Nil

15
Nil

Nil
6J
Nil
124

Nil

*9
15

10
10

Nil

Nil
10
Nil
15

rj
9

Nil

i 11
^Nil
Nil

24
18
8

Nil
12
15

Nil
Nil

Nil

Nil
12
8

Nil
12
20

Nil
Nil

'"if

15
20

12
10
Nil

"74
Nil

20
20

124

15
15

Punjab
Purtabpore

*Ramnugger
Raza
*Ryam

*Samastipur
Shree Sitaram
*Sitalpur
"South Bihar

*Upper Ganges

11,93,642
15,00,000

24,00,000
15,00.000
10,97,400

17,19,000
10.95,462
13,01,310
13,25,000

11,99,900

26,17,247
16,02,376

28,99,038
20,28,609
7,10,917

11.94,577
10,20,378
12,05,659
16,79,861

10,38,095

20
7i

10
10

Nil

Nil
8
115

Nil

Nil
12}
Nil

Nil
10
2J
25

Nil

124

Nil
Nil

"2J

Nil
Nil

Nil
124
Nil

Nil
5
Nil
9

Nil"

10
5

Nil

174

Nil

74
Nil
15

174

10
Nil

10
12J

22*
5

124

5
10

221

10
15

25
15

74
"'61

* Only those marked with asterisks include Debentures.

CHAPTER XV

METHODS OF UTILISATION OF SUGAR AND GUR IN INDIA

IT will be useful to recapitulate and to set out, briefly, a few impor-
tant data relating to supply of sugar and Gur, and their utilisation and
demand in India at the present time, for assessing the possibilities of
further development in consumption and production thereof in the years
to come.

In India, more than 96 per cent of the total sugar of various kinds
is produced from sugarcane, and the balance of 4 per cent from the
juice of different kinds of palms.

It is noteworthy that Gur constitutes nearly 77 per cent of the
total sugar of various kinds produced in India. It is mainly prepared
from sugarcane and the juice of palm trees which respectively contri-
bute approximately 94 per cent and 5 per cent of the total Gur supplies,
and the balance consists of Gur prepared from Khandsari molasses.
The quantity of cane used for purpose of manufacture of Gur varies
from year to year. Approximately it works out to about 60 per cent
of the total cane production as can oe seen, from the table below, which
indicates the percentage of the crop used for manufacture of sugar in
factories, for manufacture of Gur, for non-industrial purposes, etc.

TABLE No. 1

i Tnfal

Percentages of the crop used for

Quantity

1 i. Uldl

Year.
(October to
September).

i cane
production
(Thousand

Non-
industrial

Far-

Sugar. used

i -, - for gur.

tons).

purpose?.

JT aC

tories.

Khand.

Gwr - neous. tons.)

1921-25 (1)

31,935

116

196

66.6

1.0

21,258

1926-30 (2)

33,106

13.1

2.4

15.9

67.6

1.0

22,394

1930-31

34,247

14.1

3.9

14.6

66.4

1.0

22,748

1931-32

42,185

14.6

4.2

12.4

67.8

28,678

1932-33

I 49,134

15.1

6.8

11.2

65.9

1.0

32,399

1933-34

54,432

15.6

9.4

66.7

1.0

36,305

1934-35

54,206

16.1

12.1

5.5

65.3

1.0 35,387

1935-36 *

61,316

165

16.0

62.8

0.7 38,460

1936-37 *

67.200

15.6

17.4

4.6

61.7

0.7 41,493

1937-38 *

55,970

15.5

17.7

4.8

61.2

0.8 ; 34,269

1938-39 *

1 36,527

17.9

19.2

4.6

57.3

1.0 20,924

(l)and(2) averages for the quinquennia 1920-21 to 1924-25 and 1925-26 to 1929-30
respectively.

* The figures include 880,000 tons of cane estimated to be grown in unreported tracts.
For figures of later years, vide "Sugar Industry at a Glance".

Due to increased cane production, however, the actual quantities of
cane which became available for making Gur during the last few years
has been practically twice as much as the average for the first quin-

224

quennium (1920-21 to 1924-25) omitting the case of 1938-39, which
was a year of unusually low production.

It is also of interest to note that the proportion of cane crop used
for manufacture of Gur, in different parts of India, varies due to
peculiar local conditions. The following table gives the estimated pro-
duction of different types of Gur during the period 1935-36 to 1938-39.
In order to indicate the relative importance of the Gur industry in each
area, the proportions of the local cane crop utilised for this purpose
in the various tracts have also been included.

TABLE No. 2

Production of cane gur in India. (Average 1935-36 to 1938-39 ).
( In thousand tons.)

Percentage

Gur produced.

Percentage

( of cane crop

- -, -

of total

used for
gur.

Lumps. Powder.

Semi-
liquid.

Total

gur
production.

[ ~
United Provinces* .. 55.5

1,483

1,637

48.2

Punjab*

69.3

267 20

287

8.5

Bihar ...

32.8

111

149

4.4

Bengal

..; 87.9

116

349

465

13.7

Madras

77.3

224

236

6.9

Bombay*

.- 60.6

163

15 |

178

5.2

North-West Frontier

Province

80.6

...

1.6

Assam

98.2

1.2

Central Provinces

866

l.l

Orissa

75.8

1.3

Sind ...

17.7

. . .

0.1

Mysore

62.3

1.9

Hyderabad

861

2.2

Others

72.7

103

24 i

127

3.7

India

! 61.1

2,744

130

524

3,398

100.0

* Including States.

=Negligible.

Owing to the concentration of the sugar factories in the United
Provinces, Bihar and Bombay, the proportion of the cane crop used for
preparing Gur in these provinces is comparatively less. The low figure
in the case of Sind is due to the fact that a large part of the crop is used
for edible purposes. On the other hand, in Bengal and Assam, where
the amount of cane required for seed and various edible purposes is
comparatively small, a much higher proportion of the crop is avail-
able for Gur, while in the Central Provinces and the North-West Fron-
tier Province there has been practically no demand for cane from
factories.

As stated elsewhere, Gur is mainly produced for the home market,
which in its turn depends entirely on the local supplies. As such, the
cost of production of Gur is chiefly by the trend of local demand, which
is discussed in a subsequent paragraph in this chapter. It may, however,
be observed that in recent years Gur production has fluctuated round
about 35,00,000 tons per annum.

The following table shows the estimated total production of different
types of cane and palm Gur in India as a whole for the four years
(October to September) from 1935-36 to 1938-39.

225

TABLE No. 3

Total estimated production of gnr.
( In thousand tons.)

Year.

1935-36. 1936-37. \ 1937-38. 1938-39.

Average.

Cane

Lumps

3,145 3,416

2,804

1,611

2,744

Powder

145 171

142

130

Semi-liquid*

579 579

490

449

524

Total ..

3,869 4,166

3,436

2,123

3,398

Palm

Lumps

94 98

94t

Semi-liquid

68 74

81t

Liquid

6 6

Total ...

168 178

167

182f

174

Molassein

50 42

Other kinds

1 1

Total ...

4,088 4,387

3,653

2,355

3,620

* Excluding approximately 10,000 tons of semi-liquid product estimated to be prepared
by re-melting lump gur.
\ Provisional.
For figures of later years, vide " Sugar Industry at a Glance ''.

Taking the average prices of Gur manufactured out of cane, palm
and molassein products at Rs. 3-8-0, Rs. 2-8-0 and Rs. 14-0 per maund,
respectively, for the period 1935-36 to 1938-39, the total value of Gur
produced works out at roughly 34 crores of rupees, as compared with
nearly 21 crores (at Rs. 8-4-0 per maund) for white factory sugar and
3 crores (at Rs. 7-12-0 per maund) for khand.

The above observations in regard to prices, which relate to the
period 1935-36 to 1938-39, made in the Report on the Marketing of
Sugar in India and Burma, (1943) have to be radically revised in
view of the considerable increase in prices of both Gur and sugar, since
1942.

The value of sugar and Gur produced in 1945 is, of course, much
higher, about Rs. 118 crores. (Sugar being Rs. 16-4-0 per maund, and
Gur being Rs. 9-6-0 per maund.)

Having considered the position of supply of Gur, we will see briefly
the production and supply of sugar. Approximately 85 per cent of
the white sugar produced in India is manufactured direct from cane
in vacuum pan factories. The following table shows the position of
the manufacture of sugar in vacuum pan factories in India since 1921-22
up to 1939-40 :

226

TABLE No. 4

Production of sugar and molasses from sugarcane in vacuum pan factories
in India. (Quantities in thousand tons.)

Year.

Total
Produc-
tion
of cane.

tage of
total cane
used by
vacuum
pan fac-

N - Of Pan*

factories ua ? e ,
worked. crushed

Sugar
made.

; Percent
I very

Molasses '
obtained.
, Sugar.

age reco-
of cane.

Molasses.

tories.

L . .

1921-22 ...

29,761

! 1.3

18 395

na 7.1

M/2

1922-23 ...

34,370

1 0.9

19 i 318

na 7.6 na

1923-24 ...

37,533

i * 1.4

23 514

na 7.5 na

1924-25 ...

29,195

i 1.5

23 434

21 7.8 ! 4.84

1925-26 ...

33,426

1 2.0

23 659

28 ! 8.1 4.25

1926-27 ...

36,489

1 2.0

"24

742

H3 8.5 4.45

1927-28 . 35,713

I 2.2

786

31 8.6 3.95

1928-29 . 29,809

i 2.7

2x3 791

32 ; 8.6 4.05

1929-30 . . 30,053

3.3

26 ! 990

35 9.1 , 3.54

1930-31 . . 34,247

; 39

28 ; 1,309

118

48 9.1 : 3.67

1931-32 . . 42,185

4.2 ;

31 1,763

156

68 8.9 3.86

1932-33 . . 49,134

i 6.8

3,323

286

130 8.7 > 3.92

1933-34 . 54,432

9.4

114

5,138

453

188 8.8 3.68

1934-35 .

54,206

12.1 !

128

6,569

571 !

228 i 8.7 i 3.*n

1935-36 . .

61,316

i 16.0 i

134

9,821

916

337 : 9.3

3 .43

1936-37 .

67,200

17.4 j

138

11,666

1,109

407 95 3 *n

1937-38 .

55,970

17.7 1

137

9,930

931

350 i 94

352

1938-39 .

36,527

19.2 i

139

7,017

651

242 i 9.3

3.46

1939-40* t

145

13,132

1,242

485 9.5

3.69

na = Not available. * Provisional.

fFor figures of later years, vide "Sugar Industry at

a Glance".

The total crushing capacity of the cane factories in India, in an
average season of about 120 days, is computed at roughly 13,500,000
tons and in terms of sugar it is equal to nearly 13,00,000 tons, and
under favourable conditions it can easily go up to 15,00,000 tons. Thus
India's sugar manufacturing capacity is substantially in excess of her
present production which is estimated at about 12,00,000 tons annually.
As the vacuum pan sugar factories consume only about 20 per cent
of the country's cane production and as the prices paid by the factories
for cane are as a rule more favourable than what the cultivator can
ordinarily obtain by converting his crop into Gur, the factories should
have, in theory at least, no difficulty in obtaining enough supplies of
cane. In practice, however, the position is not so simple and a number
of factories have to obtain a considerable part of their requirements
of cane from distant places (up to 150 miles) while many others may have
to go without adequate supplies, particularly in years of scanty pro-
duction. The main reason for this is that the majority oithe factories
grow only a negligible proportion of their requirements in their farms.
The concentration of many factories in limited areas is also respon-
sible to a certain extent for the difficulty. This is particularly so in
the case of factories operating in the U. P. and Bihar which crush

? e ? y ^ per C ? nt of the total cane hailed by the sugar mills in
India. The conditions are, however, different in parts of Southern
India, where factories are not congested in any particular tract anc}
where majority of the factories, particularly those in the Bombay Pro-
vince, grow a large portion of their requirements on their own farms

227

The position in this respect in the more important sugar factory
zones of India is shown by the data in the following table which gives,
inter alia, the estimated proportion of the total cane obtained from (a)
factories' own farms (own cane), (b) from the cultivators at the factory
gates (gate cane) and (c) what is to be obtained from distances by
rail or road commonly known as " rail cane ". The figures in the last
column are, however, not quite comparable as the average distances
from which cane can be obtained may vary from about 10 miles, as
in the case of the Mysore factory, to about 50 miles and more the
average lead for the U. P. and Bihar factories having been about 40 miles
in 1937-38.

TABLE No. 5

Approximate percentage of cane obtained from different sources to total

crushed.

Percentage of quantity

Number of

Percentage __ CIU _ shed '

vacuum pan 1 of local cane

factories. crop used. Own

Gate

Rail

j cane.

cane.

i |

United Provinces *

18.7

-32

North Western j

15.7

Rohilkhand

15.1

North Eastern f

52.9

Bihar

53.4

North t

! 28

78.9

South t

18.4

Bengal

4.4

Punjab *

4.1

Bombay *

19.3

Madras

8.5

* Including States. n = Negligible,

f Refer to tracts as shown in Appendix XVII of the Report on the Marketing of Sugar.

It may be noted that during recent years the quantity of cane
available at the factory gate is increasing due to the system of allot-
ment of zones in the U. P. and Bihar, under the Sugar Factories Con-
trol Acts, whereby the factories are placed under an obligation to
accept all the quantities offered (up to its sanctioned crushing capacity) .
This is a very welcome feature because ' gate cane ' which is generally
fresh cane and which is to be brought from distances by rail or road,
will not only deteriorate in quality to some extent but is responsible
for increased transport expenses which on an average amounts to as
much as 15 to 20 per cent of the value.

In a previous paragraph we estimated the total crushing capacity
of the cane factories on an average season of about 120
days. The length of the cane crushing season has a very im-
portant bearing both on the cost of sugar manufactured and carry-
overs the longer the season the lower the cost. Apart from the dura-
tion of the harvest period which depends upon the varieties of cane
cultivated and climatic conditions, the actual working season of sugar
factories has been influenced by several other factors, i.e., (1) position
of stocks, (2) variety of cane supplies, and (3) prices of cane, Gur

228

and sugar. Consequently, the working period in different parts of
the country varies considerably from year to year as will be seen from
the figures in the following table for the years 1934-35 to 1939-40.

TABLE No. 6
Average number of working days.

Punjab
United Provin
Bihar
Bengal
Madras
Bombay
Mysore

ces

1934-35

76
107
109
94
77
170
191

1935-36

93
134
124
141
104
159
264

1936-37

130
140
150
138
105
150
264

1937-38

128
124
99
92
88
119
na

\ 1938-39

1939-40

n
133
136
na
na
na \
na |

Average
1935-36 to
1938-39.

I 71
i 77
79
61
i 84
157
191

105
119
113
108
95
146
240

India

104

126

138

112

129

115

na = Not available. n = Negligible.

For figures of later years, vide " Sugar Industry at a Glance ".

Apart from special factors which may influence crushing in any
particular year, the length of the working season depends upon the
duration of the harvesting period. An idea of the average monthly
cane crushings in different parts of the country is given by the figures
in the following table, which are based on the quantities of cane crushed,
in typical factories, during the four years 1935-36 to 1938-39 :

TABLE No. 7
Percentages of cane crushed in different months.

Months.

Punjab.

United Provinces
Western Eastern.

Bihar.

2.8

19.4
22.2
21,0
20.9
8.2
5.5

Bengal.

1.6
23.5
26.2
21.6
16.8
8.7
1.6

Bombay.

6.8
12.8
15.9
15.4
14.6
15.1
12.3
6.8

Madras.

i
!

1.4
3.2
17.1
22.4
24.0
18.8
12.8

0.3

Mysore.

9.6
11.7
6.2
5.5
11.2
12.0
10.7
9.8

23.3

October
November
December
January
February
March
April
May
June to
September ...

Total ...

13.5
26.5
28.1
18.7
13.2

10.7
22.1
22.7
19.5
15.9
7.8
1.3

2.2
19.7
28.2
20.1
19.7
9.5
0.6

100.0

It may be observed that excepting Mysore and Bombay, the crushing
season mainly extends from November to May and that nearly 83 per
cent of the total cane handled by the Indian mills is crushed during
the four months from December to March.

Recovery

The recovery of sugar on cane for India as a whole has increased
from an average of nearly 8.6 per cent for the quinquennium ending
1929-30 to about 10 per cent during recent years. This is attributable
to the improvement both in the quality of cane and milling efficiency.

229

It must be stated, however, that the sugar recovery in India even yet
is much lower than in most of the other important sugar producing
countries as will be seen from the data given in the following table :

TABLE No. 8
Percentage recovery of sugar on cane.

Recovery

percentage. (1)

percentage.

United Provinces

9.4

Java

12.1 (2)

Bihar

9.2

Cuba

12.8 (3)

Madras

9.3

Formosa

12.6 (4)

Bombay

10.9

Australia

14.3 (5)

India

9.4

Mauritius

11.7 (4)

(1) Average 1935-36 to 1938-39, (2) Average 1935-36 to 1937-38, (3) 1937-38
(4) Average 1936-37 to 1937-38 and (5) 1936-37.

It may be observed that more than 90 per cent of the cane crushed
in India is of medium type grown under sub-tropical conditions and
its sugar content, is lower than that of the thick canes generally grown
in other parts. As such, there is a limit to the increase in recovery
which can be expected from improved cultivation and manuring, though
it is hoped that the intensive programme of cane development which
is being pursued in the factory areas, particularly those of the United
Provinces, will yield results. Some improvement in recovery could
perhaps also be secured by improving the milling efficiency. The fol-
lowing table gives relevant data regarding manufacturing efficiency
of mills in India as compared with other important cane-sugar
countries :

TABLE No. 9

Tract.

Period.

Milling
extraction.

Boiling

house

extraction.

Over all
extraction.

United Provinces-

Per cent *

Western

1936-37/1938-39

90.36

87.47

79.04

Eastern

1936-37/1938 39

91 18

88.90

81.06

Bihar ...

1937-38/1938-39

9161

87.75

80.39

Madras ...

1934-35/1936-37

92.93

83.45

77.56

Bombay

1934-35/1936-37

89.61

88.89

79.66

Java

1933

94.68

91.55

8623

Queensland

1933

94.48

92.81

87.35

Formosa

1936-37

97.89

93.81

9169

Cuba

1931

97.55

92.36

89.91

* Percentages refer to weight of cane crushed.

Quality of Sugar

The total production of sugar in India at the present time varies
between 10,00,000 tons and 12,00,000 tons annually, and more than 95%
of the total sugar produced in vacuum pan cane factories iri India is
estimated to be put on the market in the form of crystals the balance
is covered by the powder sugar which includes mill dust and also

230

a quantity of sugar prepared by crushing sugar lumps and dull coloured
crystals.

The quality of sugar is judged mainly by colour milk-white with
a shining appearance being considered the best. In the case of crystal
sugar, the size of the grain is also an important consideration, and as
a rule, the bolder the grain, the better the quality.

A general idea of the sugar produced in India direct from cane
in vacuum pan factories can 6e had from the following table which
gives the estimated proportions of different qualities of sugar in India :

TABLE No. 10
Estimated proportions of different qualities of sugar produced in India.

( Percentages refer to about 80 per cent of the total production which is
handled by the Indian Sugar Syndicate, Ltd. )

i White, i Dull white! * i Total

Crystals
Bold
Medium
Small

Total ...
Crushed

(Per cent)
14.0
35.8
8,1

(Per cent)

27*.8
i 5.2

(Per cent )
0.3
1.4
0.4

(Per cent)
21.3
65.0
13.7

57.9

40.1

2.0

100.0

21.8

! 66.3 i 11.9

i 1

100.0

Production of Sugar from Gur

The production of sugar from Gur in refineries has gone down
considerably during recent years. The javerage production for the
period from 1936-39 amounted to 26,500 tons, forming less than 2i
per cent of the total production of white sugar in India as a whole.

Production of Khandsari Sugar

The production of khandsari sugar, however, has been roughly
maintained at about 1,00,000 to 1,25,000 tons annually, including a small
quantity of about 4,000 tons prepared from palm juice. The produc-
tion of khand sugar is thus equivalent to roughly 13 per cent of the
total production of white sugar in India. Alhough the khand method
of production is less economic, its production in fairly large quantities
is due to the favourable location of the khand concerns who are able
generally to obtain their raw materials at comparatively cheaper rates,
and the fact that they have to pay a far lower excise duty as compared
with factory sugar, squares up the handicap arising out of low recovery
and the high manufacturing cost. Another reason is that there is
a special demand for khand sugar from a section of the orthodox people
who have a certain sentimental objection against the use of factory
sugar. This special demand is estimated at 40,000 tons per year. But
it is likely that this will disappear gradually.

231

The following table gives estimated costs of production of various
kinds of sugar per maund :

TABLE No. 11

Estimated costs of producing 1 maund of various kinds of sugar.
( Figures in brackets indicate percentage recoveries on cane. )

Factory sugar.

Khand.

From cane-ro.

From gur.

Prom cane.

From gur.

r f "

en n- Khanchi.

Rs. a. p.

Rs. a, p.

Ks. a. p.

Rs. a. p.

Cost of cane

2 10 2

428

489

5 10 9

693

(9.5) (6.0)

(5.5)

(4 A)

(3.8)

Transportation and assembling

charges

13 2

022

010

026

Manufacturing costs

1 10

280

2 7 3f

320

3 12 0*

Excise duty

233

5 10

...

Total cost ...

7 9 lit

9 12 11

780

8 13 9

10 7 9

Less value obtained for

005

066

049

069

076

molasses

(3.5) (3.3)

(4.5)

(5.0)

(4.5)

Net cost

796

965

733

870

10 3

Relative values on the basis of

quality taking factory

sugar as standard

,..

796

6 15

796

820

* Includes cost of making gur at 12 annas per maund.
f Includes cost of making rab at 13 annas per maund.

| Includes an allowance of 5 annas 4 pies for cane cess levied in the United Provinces
and Bihar.

We may now iurn to the question of the consumption of different
kinds of sugars, i.e., Gur and sugar. It may be noted that hitherto
practically no information was available regarding the use of different
kinds of sugar and the data given in. this chapter are primarily based
on the results of investigations carried out by the Central Agricultural
Marketing Department arid the Report on the Marketing of Sugar in
India and Burma, published in 1943.

Tables No. 12 and 13 on pages 232 and 233 give the estimated utili-
sation of Gur (cane and palm) for various periods in India, and the
estimated utilisation of sugar, including khand, in India.

The total quantity of different kinds of sugar consumed in India
for various periods during the years 1935-36 to 1938-39 average about
4,818,000 tons, Gur constituting about 36,15,000 tons. Thus Gur includ-
ing various unrefined sugars, forms nearly 75% of the total sugar
consumed in India. The corresponding figures for factory sugar and
khand are 21.5 per cent -and 2.8 per cent respectively, the total consump-
tion of factory sugar being 24.3 per cent.

232

c
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322

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233

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v

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Trade block

ns of leesa (icing sugar).
res. J Including Kashmir and

as sugar or as sweets.

ately ,00
ensus figure

same w

oxi
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921 and

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the

e either

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cts a

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ffer

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n = N
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asha as th

Rail and River-borne Trade of Indi
stant unitary rate of increase based
ately 2,000 tons of leesa ( icing sug
for preparing bura, candy, and bat

for the
t a c

at
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As adopte
Calculated
Including
Inclu
T Incl

234
Quality Characteristics Gur Considered, more Nutritive

The quality characteristics of different kinds of refined and unre-
fined sugars are quite distinct although they are all used for sweeten-
ing purposes. While the white sugars are generally colourless and
odourless, the different types of Gur have a marked flavour and a
colour which may range from light to dark brown. Further, the sugar
content of Gur is comparatively low and generally averages from 70 to
80 per cent of sucrose and 8 to 14 per cent of invert sugar as against
nearly 99 per cent of sucrose and a fraction of 1 per cent of inverts
in factory sugar. The moisture content of white sugar is very low
and seldom exceeds i per cent as compared with about 5 per cent
in the solid Gur and 8 to 12 per cent in semi-liquid types. Gur also
contains, in small proportions, a number of organic and inorganic
salts, which should have a certain nutritive value, but so far their
effect on the human system has not been fully studied. This pro-
duct is, however, considered to have a greater warming effect than
sugar. It is also a mild laxative and if taken in large quantities,
particularly during summers, it may act as a purgative. Gur is com-
monly believed to be more nutritive than white sugar, and that explains
its popularity and large consumption.

The different kinds of Gur prepared from the juice of various
palms are also said to possess special qualities of their own and cane
Gur or white sugar are not suitable for certain medicinal purposes
for which palm products are used.

In the case of white sugars also, the khand prepared by treating
rab with siwar (a water weed) is considered to be more cooling in
its effects than factory sugar or bura.

No scientific data are, however, available to show how far the
various widespread popular beliefs in regard to Gur, are based on
facts. The importance of research regarding the nutritive and dietetic
values of the various types of Gur, which account for more than three-
fourths of the sugar consumed in India, need to be emphasised.

It may also be noted that though the total sugar contents of various
unrefined sugars included under Gur are lower than factory sugars,
the quantity of Gur required to sweeten a particular preparation is
generally 20 to 30 per cent less than that of sugar. No definite scientific
data regarding the relative sweetness of different kinds of refined and
unrefined sugars are, however, available at present and the statement
made above is mainly based upon the information collected during the
survey from the various types of consumers using both Gur and sugar.
This view seems to be borne out also by the general practice of using
brown sugar in coffee, all over the country.

The following Table shows the methods of utilisation of Gur and
sugar for different purposes :

235

TABLE No. 14

Utilisation of gur and sugar.
( Figures in brackets indicate percentages to total gur or sugar used. )

I ( Thousand tons ).

Sugar.
( Thousand tons ).

For stock-feeding

For industrial purposes

For human consumption :
Drinks-
Tea and coffee
Milk
Sharbat, etc.

Total for drinks

Domestic uses
Confectionery
Candy and batasha

Miscellaneous products including murabbas
Total for human consumption

Grand Total

183 (5.1)
179 (4.9)

43 (1.2)

147 (4.1)

151 (4.2)

341 (9.5)

2,504 (69.2)

408 (11.3)

(n)

3,253 (90.0)

3,615 (100.0)

227 (19.4)

104 (8.8)

171 (14.6)

502 (42.8);

264 (22.5)

338 (28.9)

50 (4.3)

17 (1.5)

1,171 (100.0)

n = Negligible.

As will be observed, practically the entire quantity of white sugar
and nearly 90 per cent of Gur are used for human consumption.

It may be noted that though both Gur and sugar are utilised more
or less for similar purposes, the proportions of the two products used
for different objects differ widely. For example, while nearly 20 per
cent of the available sugar is consumed in tea and coffee, the quantity
of Gur so used forms only about 1 per cent of its total supply. The
fact is that the consumption of different kinds of sugar, as already
stated, is governed mostly by their relative price positions, though for
certain special preparations a particular type of sugar may be prefer-
red more than any other.

Broadly, the Gur, including the various unrefined products which
generally cost one-third to one-half of the price of factory sugar or
khand, is mostly consumed by the poorer classes, while the white sugar
is largely used by the well-to-do, particularly in the urban areas. There
are, however, certain tracts, e.g., Baluchistan, where due to the exis-
tence of some prejudice against the use of Gur, even the poorer classes
prefer to consume sugar to whatever extent they can afford.

It is interesting to note that the total quantity of different kinds
of sugar estimated to be used for human consumption in India during the
period 1935-36 to 1938-39 averaged about 4,456,000 tons including appro-
ximately 3,253,000 tons of Gur, 1,171,000 tons of white sugar and
31,000 tons of minja dana. These cover about 90 per cent of the avail-
able supplies of Gur and practically the entire quantity of sugar #nd
minja dana utilised in India.

The following Table shows the utilisation of Gur and sugar for
various drinks:

236

TABLE No. 15
Utilisation of gur and sugar for various drinks.

Gur.

Sugar.

Percentage
of gur
used for

Percentage consumption on

Percentage

Percentage consump-
tion on

Area.

drinks to

of sugar

total gur

used for

utilised for

Tea

Sharbat

drinks to

Tea

Sharbat

human

and

Milk

and other

total sugar.

and Milk.

land other

consump-

coffee.

drinks.

coffee.

drinks.

tion.

United

Province*

9.0

26.5

Punjab

27.3

54.2 20

Bihar

9.5

31.8 33

Bengal

2.9

34.9 52 22

Madras

4.6

69.2 76

Bombay

4.8

51.9 68 11

North-West

Frontier

Province

42.3

41.0 26

Mysore ...

10.0

70.0 i 85 5

Hyderabad

3.7

33.3 37 ! 13

Others ...

5.1

322 36 | 23

Total India

9.5

42.8 45 21

A glance at the above Table will show the utilisation of sugar and
Gur for different purposes, namely, tea and coffee, milk, other drinks,
the varying habits of the people in different provinces and the varying
per capita consumption of both Gur and sugar. It has been computed
that a large proportion of sugar is utilised in tea and coffee, while Gur
is chiefly consumed, excepting in the case of Madras and Mysore,
with milk or for preparing sharbats, etc.

Increase in Consumption of Sugar along with Tea and Coffee

The increase in the consumption of tea from 27.2 million Ibs. in
1933-34 to 101 million Ibs. in 1939-40 has also been responsible for
an increase in the consumption of sugar. Comparatively more tea is
consumed in Bombay, Bengal, Madras and the Punjab than in most
of the other tracts, while the largest consumption of coffee occurs in
parts of Madras, Travancore and Mysore. The quantities of Gur and
sugar estimated to be utilised for flavouring these two drinks are
roughly 1,95,000 tons of sugar and 27,000 tons of Gur for tea, and
32,500 tons of sugar and 16,100 tons of Gur for coffee. The
quantity of Gur and sugar consumed per Ib. of tea, from which
generally 150 to 200 pups of liquid drink are made, varies in different
tracts from 4 to 8 Ibs. Taking into account the conditions in the various
parts, the total sugar consumption for sweetening tea works out to
2,22,000 tons, i.e., about 5& Ibs. per Ib. of tea. The quantity of Gur
or sugar required to flavour the drink from 1 Ib. of coffee varies
from 2 to 5 Ibs. in different tracts a rough average for Northern and
Southern India being 3J Ibs. and 2\ Ibs. respectively.

Taking into account the quantities of coffee consumed in different
tracts and the demand for Gur and sugar; the total sugar required for

237

the purpose works out to about 48,600 tons including 32,500 tons of
sugar and 6,100 tons of palm Gut and nearly 10,000 tons of the cane
product.

The consumption of Gur and sugar utilised for domestic purposes
also varies considerably from tract to tract, depending chiefly upon
the financial position of the people and their habits regarding con-
sumption of various types of sweet preparations. A glance at the
following Table will indicate the utilisation of Gur and sugar for domes-
tic purposes :

TABLE No. 16
Utilisation of gur and sugar for domestic purposes.

Gur.

Sugar.

Tract.

Quantity
used.
(Thousand
tons).

Percentage
of total
quantity
consumed.

Consump-
tion per
head.
(Inlb.)

Quantity
used.
(Thousand
tons).

Percentage
of total
quantity
consumed.

Consump-
tion per
head.
(In Ib.)

United Provinces
Punjab
Bihar
Bengal
Madras
Bombay
North-West Fron
tier Province
Mysore
Hyderabad
Others

933.2
199.7
90.4
453.4
245.8
173.2

7.5
39.6
76.7
284.8

67.5
44.2
66.5
74.0
80.2
80.2

41.7
66.0
89.3
82.3

40.4
12.6
5.8
18.9
10.8
12.4

3.3
12.7
10.8
8.4

64.0
47.5
11.2
22.0
17.2
36.0

7.8
0.9
8.5
48.6

33.3
23.4
20.0
14.7
17.2
15.9

39.0
10.0
31.5
26.0

2.8
3.0
0.7
0.9
0.8
2.6

3.4
0.3
1.2
1.4

Total India ...

2,504.3

69.2

15.5

263.7

22.5

1.6

* A sweet preparation made by boiling rice in milk.

1 Crushed wheat or maize boiled in water and flavoured with ghee and sugar.

It will be observed that the consumption of Gur for domestic uses
excluding drinks varies from about 3 Ibs. per head in Mysore to 40 Ibs. in
the' United Provinces. The per capita utilisation in the case of sugar
is comparatively low and ranges from nearly i Ib. in Mysore to 3 Ibs.
in the Punjab and 3.4 Ibs. in the North-West Frontier Province.

Gur Consumption in Various Provinces

In the United Provinces, where the per capita consumption of Gur
is practically thrice as high as in any other tract, a large quantity
of Gur is eaten as such. In the producing villages it forms the com-
mon sweet particularly for children and quite often the only break-
fast for the cultivator, particularly in the winter season. Though Gur is
eaten as such in most of the other tracts, the practice is nowhere so
common as in the United Provinces and in certain parts of the Punjab,
in Gujerat, and in Bombay. It may be added that white sugar crystal
or crushed is not eaten as such but a considerable quantity of this
product is consumed in the form of candy and batashas.

The following Table gives a comparative idea of the utilisation
of Gur and Sugar for various purposes :

.238

TABLE No. 17
Utilisation of gur and sugar in Ib. per head.

Gur.

>ugar.

jtt
c

*Ui

Dome-
stic

Confec-
tionery
and other

Total.

Jtt
a
"C

Dome-
stic

Confec-
tionery
and other

Total.

uses.

products.

uses.

products.

United Provinces

5.4

40.4

8.1

53.9

2.2

2.8

3.3

8.3

Punjab

7.8

12.6

2.9

23.3

6.9

3.0

2.9

12.8

Bihar

0.8

5.8

1.3

7.9

1.1

0.7

3.7

Bengal

0.7

18,9

3.2

22.8

2.2

0.9

3.2

6.3

Madras

0.7

10.8

0.6

12.1

3.0

0.8

4.4

Bombay

0.7

12.4

1.3

14.4

8.4

2.6

5.2

16.3

North-West Frontier

Province

3.4

3.3

7.5

3.4

1.8

8.8

Mysore

3.1

12.7

2.9

18.7

2.0

0.3

2.9

Hyderabad

10.8

0.5

118

1.3

3.8

Others

0.5

8.4

9.7

2.3

5.5

India

2.1

15.5

2.5

20.1

3.1

1.6

7.2

Percentage to total gur

sugar consumed

10.5

77.1

12.4

100.0

43.1

22.2

34.7

100.0

More than 87 per cent of the total Gur including the quantities
consumed for drinks, is utilised at home. In the case of sugar, a large
quantity of which is used for preparation of sweets and drinks for
the market, the corresponding proportion may be between 35 and 40
per cent.

As has already been observed, due to varying financial conditions
of the people and their habit regarding the use of different kinds of
sugar, the quantities of Gur and white sugar utilised in different tracts
for various purposes vary considerably. Taking both Gur and sugar
together, the highest per capita utilisation of 62.2 Ibs. occurs in
the United Provinces, as compared with 36 Ibs. in the Punjab, 30 Ibs.
in Bombay, 29 Ibs. in Bengal, and only 11 Ibs. in Bihar.

Wide differences are also noticed in the per capita utilisation
of Gur and Sugar in the rural and urban areas of the different tracts
as will be observed from the figures in the following Table which shows
the consumption of these two products in certain provinces and their
important urban centres :

TABLE No. 18
Per capita consumption of gur and sugar in certain rural and urban areas.

ir.

Sui

?ar.

Urban
areas,
flb.)

Total
for the
province.
(Ib.)

Urban
areas.

(Ib.)

Total
for the
province.
(Ib.)

United Provinces

13.2 (1)

53.9

58.1 (2)

8.3

Punjab

18.0 (3)

23.3

504 (4)

12.8

Bengal

15 4 (5)

22.8

85.5 (5)

6.3

Madras

8.9 (6)

12.1

51.2 (6)

4.4

Bombay

12 4 (7)

14.4

81.4 (7)

16.3

Sind

6.0 (8)

7.2

82.1 (8)

17.8

(1) 22 markets.
(5) Calcutta.

(2) 29 markets.
(6) Madras.

(3) 6 markets.
(7) Bombay.

(4) Delhi.
(8) Karachi.

239

It will be noted from the figures in the above Table that a much
larger quantity of Gur is used in the rural areas than in towns. Just
the opposite and in a greater degree is the case with sugar. Further
the total consumption of Gur and sugar per head in towns is generally
2 to 4 times higher than in rural areas. It may be assumed that these
differences are mainly due to the relatively higher income and the
consequent higher standard of living of the town-dwellers.

The following figures show the consumption of sugar per head
in some of the more important countries of the world.

TABLE No. 19

Ib.

United Kingdom

106

France

United States of America

Netherland

Australia

116

Germany

Union of South Africa

Italy

Java

11*

Japan

India

271

Brazil

* Excluding unrefined sugars. Consumption of unrefined sugars in other countries.
( excepting India ) is comparatively negligible.
I Including 20 Ib. of gur.

It may be noted that though the per capita utilisation of sugar in
India as a whole makes a rather poor comparison with the figures for
most of the other countries, the consumption in large Indian towns,
particularly ports, is more or less of the same order as in some of
the most advanced industrial countries like the United Kingdom and
the United States of America.

Periodicity of Consumption of Sugar and Gur in India

From the above statistical data relating to consumption of sugar
and Gur for various purposes, it is possible to draw certain conclusions
of value in regard to the possibility of increasing the consumption
of sugar and Gur in India. Firstly it is noteworthy that Gur is con-
sumed in larger quantities during the winter season than in the summer
months. It is liked most for eating such when fresh, and as already
observed, its production is also chiefly concentrated during the winter
months from November to March. Roughly 65 to 75 per cent of the
total quantity of Gur consumed in different parts of Northern India
including the U. P., Punjab, Bengal, Bihar, Rajputana, etc., is esti-
mated to be used during the six months from October to March. Unlike
Gur, however, the demand for sugar is more or less fairly evenly distri-
buted throughout the year. Larger quantities are, however, consumed
on the occasion of festivals such as the Diwali and Id, and during
marriage seasons.

The annual consumption of the different kifids of sugar in India,
during the period 1935-36 to 1938-39, averaged about 4,818,000 tons
including nearly 3,647,000 tons of Gur and 1,171,000 tons of sugar. The
consumption has increased considerably during recent years,
particularly in the case of Gur. This is shown by the figures in the
following Table which gives among other things, five-year running
averages of the estimated net available supplies of Gur and sugar for

240

the period from 1920-21 to 1938-39. For comparison, the corresponding
price data have also been included. Further, with a view to studying
fluctuations in consumption in individual years, the position in respect
of the recent seven years has been shown separately in the Table.
It may be added that in calculating the net available supplies
of sugar for the recent years due allowance has been made for stocks
and carry-overs, particularly in respect of the major ports and mills.
These factors have, however, not been taken into account in the case
of Gur as the carry-overs of this product from year to year are compa-
ratively negligible. Nor was it considered necessary to do so in the
case of running averages.

TABLE No. 20

Trend of annual consumption and prices of gnr and sugar.

Estimated net available

Weighted average wholesale

supplies in thousand tons.

prices per standard maund.

Period.

Cane pur. f

Sugar.

Cane gnr I

Sugar. }

Ks. a.

Rs. a.

1921-25*

1,956

792

9 4

16 12

1922-26*

2,030

866

8 10

14 15

1923-27*

2,159

911

8 2

1924-28*

2,196

975

12 9

1925-29*

2,086

1,053

11 5

1926-30*

2,106

1,081

7 11

10 11

1927-31*

2,131

1,080

10 1

1928-32*

2,204

1,080

6 7

9 13

3929-33*

2,365

1,080

5- 12

9 10

1930-34*

2,700

1,045

5 2

9 10

1931-35*

3,019

1,026

4 10

9 9

1932-36*

3,352

1,060

4 5

9 9

1933-37*

3,626

1,126

4 2

8 13

1934-38*

3,685

1,139

4 6

8 11

1935-39*

3,405

1,147

4 14

9 2

1932-33

3,143

1,020

3 12

9 8

1933-34

3,521

1,011

4 14

9 7

1934-35

3,433

1,051

4 14

9 7

1935-36

3,869

1,253

3 12

8 8

1936-37

4,166

1.293

3 6

7 2

1937-38

. .

3,436

1,085

4 15

8 14

1938-39

...

2,123

1,052

7 6

11 10

* Quinquennial average based on statistics for crop years ( October September). For
example, 1921-25 refers to the period from 1920-21 to 1924-25.

t As the imports and exports in the case of gur are negligible they have not been taken
into account.

\ Based on Appendix XLIII of the Report on Marketing of Sugar.

The consumption of both Gur and sugar show considerable and
almost a steady increase during the period under review. The increase
in the consumption of both these products has been much more than
proportionate, compared with the increase in population. This is chiefly
attributable to the relatively low prices at which these products have
been available upto 1940. As will be observed the demand for
Gur and sugar is fairly elastic and there is a close relation between
the supplies of these products and their respective price positions. When

241

the prices rise the consumption is curtailed and vice versa. In the
case of Gur whose prices depend more or less entirely on home pro-
duction it would, however, perhaps be more correct to say that demand
is fairly steady and when supplies are short of demand the prices rise
and the consumption is curtailed. The position is reversed in years of
plentiful supplies.

The slight depression in sugar consumption noticeable between
1930-31 and 1934-35 was perhaps due mainly to the world-wide slump
in commodity prices and the consequent loss in the purchasing power
of the Indian agricultural producers. The consumption, however, appre-
ciably increased in 193536 duo 1o both the general recovery in the
commodity markets and the fall in the prices of Indian sugar as a
result of increased home production. This tendency continued in a
marked degree in 1936-37 when the consumption of sugar in India
reached a record high figure when the prices touched the lowest level.
In the two following years, 1937-38 and 1938-39, the sugar production
in India was appreciably reduced, mainly due to the low prices during
the former year and a poor crop in the latter. The fall in production
was followed by a sharp rise in the prices and in consequence the
consumption fell to a low figure of 1,085,000 tons in 1938-39 as com-
pared with 1,293,000 tons in 1936 37. It may, however, be noted that
in 1938-39 due 1o heavy imports there were ample supplies in the
market and the year closed with a substantial carry-over.

The consumption of Gur during the period under review has in-
creased by nearly 85 per cent as against an increase of about 17 per
cent in population and 45 per cent in the case of sugar consumption.
The fall in the prices of Gur was relatively greater than in the case
of sugar ; hence the greater increase in consumption. It may be pointed
out that the prices of both Gur and sugar were relatively very high
in the early years of 1he period chiefly on account of the general infla-
tion in the commodity markets which followed the War of 1914-18.

As in the case of sugar, the peak in Gur consumption was reached
in 1936-37 and the quantities used in the following two years parti-
cularly 1938-39 were substantially less mainly due to short production
and consequent high prices.

Considering the present low per capita consumption in the country,
particularly of white sugar, and the wide differences in the quantities
used per head in the urban and rural areas ; there would appear to
be ample scope for increasing consumption. The actual increase would,
however, depend largely upon the extent to which the cost of produc-
tion or the sale prices of Gur and sugar could be reduced and new
ways of promoting consumption of sugar in the country could be devised.
Any improvement in the purchasing power of Indian consumers who
are largely agriculturists is also sure to promote increased consump-
tion. This has been discussed in detail in the next Chapter.

It may be noted here that in recent years there has been a tendency
among the working classes in urban areas to substitute sugar for
Gur particularly in tea but as the quantities of Gur used for this pur-
pose are comparatively small, it is not likely to affect the position
materially in the near future.

242

As far as white sugar is concerned the position regarding Khand
only seems to require some comment. It is generally known that certain
orthodox members of the community have sentimental objections to
the use of factory sugar believing that bone-charcoal is used in its
manufacture. As, however, the knowledge regarding the methods of
cane sugar manufacture is becoming more common, the belief is gra-
dually disappearing and with it the special demand for Khand. In the
near future the demand for Khand would probably be guided purely
by economic and dietetic factors. These should, however, tend to favour
the factory product which can be produced at nearly two-thirds the
cost of Khand and having regard to the close relation between consump-
tion and prices, the lower the prices of white factory sugar the greater
is likely to bo its consumption.

A close study of the existing conditions in regard to the^ consump-
tion of Gur and sugar in different parts will also show that apart from
the question of a general reduction in sugar prices or the increased
purchasing power of the consumer, the demand for the different kinds
of sugar can also be substantially increased by improving the quality
and variety of the products prepared and through effective propaganda
regarding their dietetic values and by their more economical distri-
bution. The important points in this connection are as follows :

(a) At present Gur is generally matfe without properly clarifying
the juice and in bulky, inconvenient and unattractive shapes and sizes.
Further, during handling, storage, transport and retailing due regard
is not paid to sanitary conditions and it is not uncommon to see lumps
of Gur without any covering material lying exposed to the attention of
flies, pariah-dogs, etc. The product in such a condition, far from being
attractive, becomes rather repulsive to the consumer. Gur made in
attractive forms and properly packed in convenient sizes from well cla-
rified juice can, therefore, be expected to command an increased sale,
particularly in the urban areas. The possibilities of putting on the
market spiced and flavoured Gur, commonly made by the cultivators
in many tracts for their own consumption, might also be explored. It
may be noted in this connection that the experience of some of the large
producers and the Gur Development Staff in the United Provinces has
been that the Gur made after properly clarifying the juice and distri-
buted in neat and handy containers (e.g., paper envelopes) more than
repays for the extra expenditure incurred on it.

(b) The consumption of Gur can also be encouraged by using it
in the preparation of a variety of cheap fruit products such as chut nix
and murabbas for eating with chapatis, rice, etc., and as sweets. Such
products are not marketed at present while similar preparations from
white sugar are sold at fancy prices and are generally out of the reach
of the ordinary Indian consumer. In many areas fruits, e.g., mangoes
and guavas, are available at very cheap prices during their season.
In such tracts, the Gur fruit products can probably be made and sold
at a price not higher than that of Gur alone. This would also provide
a good outlet for fruits and make them available for consumption
throughout the year. The value of such products in the dietary of the
people is obvious.

(c) The consumption of date palm Gur which is chiefly produced
in Bengal and is much relished for its flavour and aroma is mostly con-

243

fined to the producing months from November to March as the product
does not keep well in summer. The producers are, therefore, not able
to get the full benefit of the consumers' preference for the article. Pro-
vision of cheap storage facilities and the use of suitable preservatives
(e.g., sodium benzotte) which would not impair the flavour of the
product might be tried with a view to making it available for con-
sumption throughout the year.

(d) Palm Gur improves the flavour of coffee. Its production after
properly clarifying the juice in handy and attractive form, say cubes,
would promote its use for sweetening this beverage.

(e) A good outlet for refined sugars might be found in the increased
consumption of fruit sugar products like syrups, murabbas, squashes,
ice-creams, etc. At present these products are generally highly priced
and are used for medicinal purposes only. In the case of syrups, essences
are mostly used in their preparation instead of fruit juices. In the ab-
sence of guaranteed quality the demand suffers. By proper organisation
most of these products could be placed on the market at probably less
than half the present cost. With relatively low prices, the consump-
ion of these products and with them that of sugar would considerably
increase.

(/) The use of saccharine, which is commonly used for sweetening
various drinks particularly aerated waters requires to be discouraged.
This chemical has no food value and in most of the advanced countries
its use in various edibles and drinks has to be declared on the label
of the products concerned. No such provisions are, however, in existence
in this country * at present and the various products sweetened with
sacc'harine are generally sold as products of sugar.

The annual imports of saccharine during the period 1934-35 to
1938-39 varied from 18,000 to 82,000 Ibs. and averaged about 40,000
Ibs. Taking the sweetening capacity of this chemical as 500 times
that of sugar, the sugar required to replace it represent somewhere
about 10,000 ions. There is, however, reported to be some smuggling
in this article and the quantities actually used may be much more.
Besides increasing the consumption of sugar, checking the use of .saccha-
rine would immensely improve the quality of drinks put on the market.
It may be added that the use of sugar instead of saccharine would not
affect the consumers' price to any appreciable extent.

(g) Well organised propaganda directed towards educating the
consumers regarding the dietetic values of the different kinds of sugar
and their products is likely to help in promoting consumption. Proper
measures should also be taken to dispel superstitions regarding the
harmful nature of Gur or sugar such as are current in certain tracts,
e.g., parts of Sind and Baluchistan.

(7i) In certain areas different kinds of sugar, particularly unrefined
are available only at abnormally high prices due either to the high
transportation costs or high trade margins. The result has been that
the taste for sugar has not fully developed in such tracts, e.g., Dar-

* Excepting in certain towns of Bombay and Sind where the use of saccharine
is either prohibited or is required to be specially declared.

244

jeeling area in Bengal. Arrangements should, therefore, be made to
make the sugar products available at economical prices in such tracts
by making special arrangements for distribution. The process could
perhaps be expedited by making sugar available at relatively low prices
in the first instance.

Above all, it has been found that there is a great world deficiency
of energising foods like potatoes, sugar and cereals and inasmuch
as sugar contains 100 per cent carbohydrate and is one of the cheapest,
most universally used and palatable sweetening agent of proved high
calorific value, unique for quick conversion into energy, its value
as a prime and vital food is greatly enhanced. Besides sugar satisfies
a craving that is well nigh universal among mankind. As consumed,
it is chemically pure and practically sterile of bacteria. It is an impor-
tant preserver of other foods. It supplies a large percentage of the
total caloric intake* of a large number of people, and its produc-
tion should be encouraged for meeting the shortage of carbohydrates
and energising foods all over the world, as was revealed at the Hot-
springs Conference in 1941.

Having referred to the present production and utilisation of sugar
and Gur in India, we will now turn our attention in the next chapter
to the scope of optimum production and consumption of sugar and
Gur in India in the years to come.

CHAPTER XVI

SCOPE OF OPTIMUM PRODUCTION AND CONSUMPTION OF

SUGAR IN INDIA

THROUGHOUT this work, up to this stage, the position and problems
of the sugar industry have been considered from a special standpoint.
It has been assumed that no indigenous industry is sound or economic,
unless the cost to the consumer can be demonstrated to be no more
than what it would have been in conditions of free imports. Due
emphasis was, however, laid on the fact that, once an industry is estab-
lished and is able to market its output, the question of the price at
which imports would have been obtainable in the absence of such an
indigenous industry and in conditions of free imports is too hypothetical
to be of practical value. It has been contended, therefore, that in judging
whether a protected industry has been economic or not, less reliance
should be placed on the prevalent prices of the imported product
than on other available methods of judging whether the price paid
for an essential commodity like sugar is or is not, from the broad
social point of view, a just price. These methods have been specified ;
and it has been shown that, judged by these tests, protection to sugar
must be considered to have justified itself. That these tests do not
satisfy the free trader or other opponents of protection cannot be
gainsaid ; and it can only be observed in this regard that it is unfair
and unscientific to a protected industry to compare the prices of its
product with the prices of its foreign competitors, without regard
to the fact that the latter would have been at much higher levels but
for the establishment of the protected industry. A more valid cri-
terion of judgment can be had only from a comprehensive view of
the resources and possibilities, immediate and remote, of the national
economy as a whole. For, only in such a view does it become possi-
ble to recognise that the cost of production of a particular industry
is not a function only of the efficiency of the capital and labour engaged
in that industry, but that it must necessarily reflect the efficiency of
production of the raw material and of the extent to which the general
social and environmental factors are helpful or otherwise to the
increase of productive efficiency*

General Toning up of Entire Economic Organisation
Necessary for Progress

The case of the sugar industry is almost unique among India's
protected industries as it serves to bring out the differences, in the
ultimate conclusions, between the two standpoints. By far the most
important of the conclusions arrived at in this thesis is that for indus-
trial development in India, in the sense of a progressive reduction
of the cost of manufactured products, we have to look, not alone to
industry, but to a general toning up of the whole of our national

economic life and the entire economic organisation. This is brought
about by the fact that during the last fourteen years since the grant
of protection, the sugar industry in India has achieved more than
what the Tariff Board expected of it and that for further progress in
the reduction of the cost of production of sugar, we have to look to
agriculture, far more than industry. Efficiency of industrial produc-
tion is not attained by pillorying protected industries any more than
by pampering them. And if a backward, though civilised, country
is to attain industrial efficiency, it has to advance all along on the
line instead of goading industry at some points. The importance of
the sugar industry lies in bringing out this aspect of our national
economy more clearly than any other.

Need for Synoptic Outlook on Economic Problems

The logic of this thesis has been fully borne out by the logic
of events. In the first place, the sugar industry is the first instance
of a protected industry in which the Tariff Board virtually repudiated
one of the fundamental conditions of the Fiscal Commission and refused
to consider the date at which protection can be withdrawn. Secondly,
the experience of the sugar industry has led to a general demand for
the revision of the policy of discriminating protection and a liberal-
ising of the terms on which protection is to be granted. Thirdly, thanks
to the outbreak of the war and the change in men's attitude to economic
problems, the need for a synoptic outlook on economic problems has
been recognised and expressed in the most challenging terms in " Tjie
Bombay Plan * " and in the acceptance of planned economic develop-
ment as the official policy of the Government in this country. The
acceptance of planning alike by the Government and by the public
as the established policy for the country means in effect that the rea-
soning adopted in this thesis, which formerly might have appeared to
some as a kind of special pleading for one protected industry, is now
seen to constitute the only rational approach to all our economic pro-
blems. No longer will the question be one of either reducing some-
how the price of Indian sugar to that of Java and Cuba or of scrap-
ping the Indian industry and leaving a large part of the country's
natural resources to run to waste. While economic planning will not
be indifferent to disparity in costs of production between India and
Java, the standpoint is different from the old orthodox one in that
it will ensure a reduction in the cost of production by securing the
utmost improvement in all the factors that determine such cost of
production. In concrete terms, planning will secure improvement in
all the three spheres, industry, agriculture and the general instrumental
factors.

In view of the fact that planning has been unanimously accepted
as the policy for the future, the old standpoint becomes altogether

* A 15 years' plan for the Economic Development of India, put forward by
eight distinguished industrialists and businessmen in 1944, is known as the Bombay
Plan. This is a comprehensive plan, which has arrested the attention of the
thinking public and the Government of India.

247

invalid, so far as the future of the sugar industry is concerned. The
lines of development have no longer to be considered as within the
rigid and cramping framework of a policy of discriminating protec-
tion. Optimum production and consumption of sugar need no longer
be considered as the resultant of the prices in a comparatively free and
unregulated economic life. Optimum production will be determined
on the one hand by the resources available and on the other by the
requirements as fixed by other than the old economic considerations.
It is not, of course, to be supposed that optimum production and con-
sumption can be fixed at the sweet will of the planning authorities.
Economic forces will, no doubt, be operative, but not in the form of free
prices which they take in an economy of laissez faire and free trade.
The forces that will operate will be economic in the broader and truer
sense that thdy spring from the necessity of distributing scarce means
among alternative ends. Nevertheless, these forces are so substantially
different from the forces that operate in a free economy, that the ques-
tion of optimum production and consumption has to be considered
now from the standpoint of a planned rather than a free economic
system.

The starting point of economic planning, unscientific and impractical
as it may seem, is an estimate of needs rather than means. The plan-
ning authority proceeds from an estimate of the total production of
each commodity needed to ensure the standard of life it has in mind,
though with the full consciousness that this estimate may have to be
considerably altered in consideration, of the actual resources at its
disposal. In the case of India, the various plans published by non-
official agencies have not, strangely enough, endeavoured to fix targets
for the production of sugar. The Bombay Plan, which enjoys the
greatest prestige and support, while it mentions a minimum for per
capita consumption of cotton cloth and for housing accommodation, does
not make any special reference to sugar. Sugar being an article of food,
it is naturally included in food requirements which are estimated in
terms of calories required to sustain the health and efficiency of the
average individual. How this estimate of calories is to be distributed
among the various articles of food is a question which may seem to
offer a bewildering scope for variety of opinion and of choice. But,
for all practical purposes, this scope may be deemed to be considerably
narrowed by the fact that the primacy of sugar is ensured as much
by the universal love of its -taste as by its indispensability for the
growth of the adolescent and the health of the grown-ups. The exact
amount of white sugar which each individual needs may vary according
to the consumption of other foods which can provide carbohydrates
for the physical system. But to fix the minimum per capita consumption
of sugar for the purposes of economic planning, it is permissible to
look to the consumption of other countries of the world and arrive
at a figure which will meet with general approval. The following
Table gives the per capita consumption of sugar for a number of foreign
countries :

248

TABLE No. 1
Per capita consumption of Sugar in various cotmtries

United Kingdom ... 106 Ibs. per head Cuba ... 88 Ihs. per head

U.S.A. ... 97 Java ... 11

Brazil ... 34 Japan ... 33

France ... 52 Union of South Africa 47

Australia ... 116 Netherland ... 64

Germany ... 52 India ... 27 (including 20 Ibs. Cur)

It will be seen that the figure ranges from 116 Ibs. in the case of
Australia to 11 Ibs. in the case of Java and works out to an average
of about 80 Ibs. for the advanced countries.

We may now turn to consider the per capita consumption of sugar
in India. With our total supplies in the vicinity of about one million
tons of sugar for a population of 400 million, the per , capita consump-
tion of sugar may seem an incredibly low figure. It is necessary in
our case, however, to take into account the large and more important
factor of the consumption "of Gur, estimated at about 3 million tons.
The total production and consumption of sugar and Gur in India is
given in the Table below for a period of more than one decade, together
with the per capita consumption in each year.

TABLE No. 2
Total, and per capita consumption of Sugar and Gur in India*

Year
(November-
October)

(Consumption
of Sugar in
| tons

Official
Estimate

Consumption
of Gur in
tons ,

Per Cai
Sugar

>i/<2 Consumption Ibs.

Total of
Gur Sugar and

Gur

Ibs. per

Ibs. per Ibs. per

head

1931-32

982,000

2,758,000

6.2

i 17.2

23.4

1932-33

1,006,000 i

3,240,000

6.3

20.2

26.5

1933-34

996,000

3,486,000

6.1

21.5

276

1934-35

1,059,000

3,701,000

6.5

22.6

29.1

1935-36

1,074,000

4,101,000

6.5

24.8

31.3

1936-37

1,167,000

4.268,000

7.3

26.7

34.0

1937-38

1,159,000 i

3,364,000

7.2

20.9

28.1

1938-39

1,073,000 i

2,131,000

6.6

13.1 ! 19.7

1939-40

1,019,000

i 2,441.000 ;

6.4

18.0 ! 24.4

1940-41

1,100,000

( Our Est. )

3,410,000 !

6.7

20.6

27.3

1941-42

] ,050,000

2,829,000

6.0

18.5

24.5

1942~43t

966,000

3,567,000

5.9

20.1

26.0

1943-44t

1,086.300

3,989.500

6.5

23.8 i 30.3

Total value of sugar, including gur, produced in the year 1943-44 may be estimated at
about Rs. 118.33 crores.

Price calculated at the rate of Rs. 15-4-0 per maund of sugar and Rs. 9-6-0 per maund
of gur as the standard of average for the whole season.

Maund 82.2/7 Ibs. Sugar 15J Gur 9.1/6

Tons Rs. Price

f Sugar 10,86,300 49,09,65,375
1 GUI 39,89,500 69,23,44,479

1943-44

t Our estimates.

Total Value Rs. 1,18,33,09,854

Rs. 118.33 Crores.

(Includes the excise duty)

It will be seen that if our per capita consumption * is about 26 Ibs.
(6 Ibs. of sugar and 20 Ibs. of Gur) , as against the average of 80 Ibs.

249

for the advanced countries listed in the foregoing Table and if this
average may be taken as the index of what is necessary in the case
of India, our production of sugar requires almost to be trebled, at an
early date. About the desirability of a triple increase in the pro-
duction of sugar there can be no question. Even at about 80 Ibs., the
figure will be substantially less than the consumption of such countries
as Britain, U. S. A., Denmark, Australia and New Zealand. As the
world's biggest producer of sugar (including Gur), India may not
unreasonably look forward to a level of consumption which, if it
is not among the highest in the world, will, at any rate, not be lower
than the average.

The question which now arises for our serious consideration is :
what is the minimum target which we should place before us for the
immediate future, and for the distant future ? In fixing such a target
we should assure ourselves on the one hand that the agricultural
economy of the country is not upset to any degree and on the other
hand that the maximum quantity of this energising food, sugar, is
made available to the people with a view to meet their demand for
improving their standard of living and nutrition which, now, is at
a low ebb, to the level of International Standards of Nutrition.

Prima facie, a triple increase in the production of sugar would
require a similar increase in the acreage of the sugarcane. If so ( ,
would it be economic and would it be possible to devote three times
the present acreage to the production of sugar, to increase the fixed
capital of the sugar industry to a like extent, and secure the increase
in sugar production ? Have we got sufficient cultivable land to devote
to sugarcane without prejudice to equally important or perhaps even
more important other food crops like wheat and rice, of which there
is a shortage in the country. Are there no other avenues for utilisation
of our savings and capital?

Obvious and pressing as these questions may seem, they do not
reflect the true nature of the problem we have on hand. A triple increase
in sugar production does not call for a similar increase in the area under
sugarcane. Economies in the utilization of the resources that are now
devoted to the production of sugar will by themselves be able to
solve by far the greater part of the problem on hand. It stands to reason
that in attaining the target that we have provisionally set before our-
selves, we should distinguish between such economies and the new
developments that may be required. The position at present is that
only four million acres of land (less than two per cent of the
area under cultivation in India) are devoted to the production of 60
million tons of sugarcane of which about l|5th or 12 million tons are
utilised in modern factories for manufacture of white sugar, about 36
million tons (roughly 60 per cent) are utilized for the production of
Gur, and the balance is used for Khandsari sugar manufacture, sets
and chewing purposes. It is no exaggeration to say that there is a waste
of resources at every point, in the yield of sugarcane per acre, in
extraction of sugar from sugarcane (1) in the Khandsaris, (2) in
the making of Gur, and even, though to a far smaller extent, (3) in
the modern vacuum pan factories. The scope for economies which
the present conditions suggest, needs therefore to be examined, step by
step.

250
Considerable Increase in Yield per Acre Possible

Taking first the land under sugarcane, it is well known that the
average yield of cane in India per acre at the present time is about
15 tons and that this yield has increased to its present figure from a
bare 9 tons in 1913-14. This is due to the fact that during the last
30 years, 80 per cent of the cultivated area of the sugar has been put
progressively under the improved varieties of cane bred at the Imperial
Sugarcane Station, Coimbatore. Within the last 30 years, the yield
per acre has increased by about 61 per cent due particularly to the
improvements in cultivation and the new varieties. Again it is hearten-
ing to state that this improvement both in yield arid quality of cane
shows promise of further increase. The present yield of 15 tons of
cane represents of course only a fraction of the yields in other tropical
countries like Java and Cuba where yields as high as 50 or 60 tons
of cane per acre are common. It is doubtful if the yield of cane in
India will ever be as high as, for instance, in Java or Cuba, due to
the disadvantage of climate, cane in this country being -grown mainly
in sub-tropical areas. What is more, the benefits of large-scale pro-
duction of cane are denied to the Indian growers, but it is pleasing
to find that yields as high as in Java or Cuba have been achieved in
some sugar factory estates, and in the experimental farms in Bombay,
Deccan, Madras and other parts of tropical India. There is the arresting
fact that already an increase in the yield per acre has been secured
from 10 to 15 tons within the last 2 decades. There are still poten-
tialities of further increase. It has been proved by the work of the
Indian Research Stations * that quite astounding results can be achieved.
The Ravalgaon Sugar Factory in Nasik District in Bombay has been able
to raise 50.5 tons and 41.4 tons of cane per acre with CO.360 and
POJ 2878. In 1941 it raised 52.9 tons. Yields of 80 tons and 100
tons per acre have also been raised in a competition organised by the
Maharashtra Chamber of Commerce in 1934.f Mysore has obtained
yields of 36.86 tons, 51.88 tons and 50.40 tons with H.M. 320, H.M. 606
and H.M. 607 varieties of cane. Sugarcane research has just reached
the stage of adolescence ; and it is not undue optimism to suggest that
the best results are yet to come.

The increase in sugarcane output which we can secure with the
present area of 4 million acres on the sugarcane has been estimated
by an experienced Agricultural Officer Dr. W. Burns in his Report
on "The Technological Possibilities of Agricultural Development in
India ", published in 1944. After a very careful survey of the position
of cane cultivation in each Province he has set out the increase in
the yield which it should not be difficult to obtain by scientific culti-
vation. The following Table indicates the possible yield in tons of
sugarcane in various Provinces, according to this expert authority :

* Vide M. P. Gandhi's Sugar Industry Annuals, 1939, 1940, 1941, 1942, 1943 and
1944.

fVide Walchand Diamond Jubilee Commemoration Volume published in 1942,
p. 149, wherein it is observed " when the Maharashtra Chamber of Commerce
organised a competition in 1934 for * Prize Plots * with record yield of cane, the
Walchandnagar Farm at Kalamb on the Nira Canal area in the Poona District
came out the best with a yield of 104 tons of cane per acre, the highest figure
yet attained in India".

251

TABLE No. 3
Possible Yield in Tons of Sugarcane

North-West Frontier . . 30 to 35

The Punjab . . .. 40 to 45

United Provinces . . .. 27 to 35

Bihar . . . . .. 25 to 35

Bengal . . . . .. 35 to 40

Madras . . . . .. 45 to 55

Bombay . . . . .. 45 to 55 for plant

cane

Mysore . . . . .. 70 to 80 for Adsali.

From the above, and as soon as the remaining 20 per cent of the
cane-crop which is not under improved varieties at present is also
put under improved varieties, it will be possible to expect, if not all
too suddenly, at least in course of ,a few years, an increase in the
present average yield of 15 tons to 40 tons an acre, and consequently
an increase in the total output of cane to over 160 million tons of
cane from the same acreage.* As far, therefore, as the provision of the
raw material for the manufacture of sugar is concerned, we can safely
assert that there will be no difficulty in producing the requisite quantity
of cane for trebling, in course of a few years, the production of sugar
and Gur, without increasing the area under cane. It is true that all
this large increase will take time but if the process starts right now
as a result of careful research work, there will be no difficulty whatever
in doubling, at any rate, the production of sugarcane during, say, the
next 6 or 7 years, and of trebling it within the subsequent decade. We
are allowing ten years for the evolution of <a triple yield due to the
assumption that increases in the yield from 30 to 40 tons would be
more difficult than the first increase from 15 to 30 tons. Relying
on the past progress, and the future possibilities as envisaged by
expert authorities and our own achievements, we can safely conclude
that we can produce double the quantity of sugarcane within the next
6 or 7 years and treble it within the next 10 years from the same
acreage. Indeed, if our recommendation for the utilisation of palms
and Date trees, which India has in abundance (as discussed in Appen-
dix No. Ill) is explored and implemented for manufacturing of Gur
and sugar, it may even be possible to release some land from cane ior
purposes of growing food crops also.

The next source of economy lies in the improvement of Gur making,
on the ground of its being a more wasteful method of sugar manu-
facture. The Indian Gur makers recover only 52.4 per cent of the
sugar content of cane as against the recovery percentage of 82.6 per
cent in the case of modern factories. True it will not be possible to
save at once all this 34 per cent of sugar contents in 3|5th of the
total output of cane, thus making a substantial addition to the total
Gur production, but we can hope that with the universalization of
the establishment of more efficient methods of extracting the juice,
e.g., by introducing power in place of bullocks for crushing the cane,

* It is assumed that in trying to achieve the above goal, necessary help will
.be accorded by the State, e.g., in preventing fragmentation of holdings, in securing
suitable manure, rotation of crops, irrigation facilities, control and prevention of
diseases and pests, etc.

252

improved methods of boiling the juice, etc., an improvement of 15 per
cent can easily be made and the addition of 15 per cent will mean
no small addition in improving the present supply position of Gur.

Likewise in the case of Khandsari sugar the annual production of
which varies between one lakh and two lakh tons, the present recovery
of sugar from cane is only 5.5 per cent as against the 9.5 or 10 per
cent in a modern vacuum pan sugar factory. Although we have grave
doubts about the success of this form of manufacture, which is very
wasteful and uneconomic, the importance of such improvement as can
be made in the transitional stage of the industry cannot be minimised.

The position in the case of modern vacuum pan factories is such that
any large increase in recoveries and in costs may not be expected for
a long time, unless the twin problem of improvement of quality of
cane and of provision of an uninterrupted supply of early ripening
and late ripening varieties of cane is solved suitably, with a view to
ensure that maximum sucrose is extracted from the cane throughout
the entire season.

The establishment of modern sugar millsQg) sufficient for the utilisa-
tion of the increased output (or a bulk thereof) of cane for the manu-
facture of white sugar will, no doubt, also form a formidable problem
in regard to organisation, location, capital and savings, but it is neces-
sary in this context to note that since 1920, the utilisation of cane
in factories has grown up from 1 per cent to 6 per cent in 1932, and
a little over 20 per cent in 1944, and this process can be easily con-
tinued uninterrupted to further extent with the provision of more
mills, and without disturbing unduly the present ratio between the
manufacture of white sugar and Gur. The production of Gur as
compared with the production of sugar in the country has also fluctuated
very greatly. In 1931-32, for instance, while India produced 478,000
tons of sugar, the Gur production was 274 lakhs tons, over 6 times
the production of sugar. The total consumption of sugar .was, how-
ever, much higher, the balance of the requirements being imported
from abroad. During the last 15 years, however, it must be stated
that the consumption of Gur has been roughly equivalent to 3 or 3J
times the consumption of sugar, the indigenous production of white
sugar being supplemented to the required extent by imported sugar
till very recent times. Since 1940, there have been practically no
imports of sugar from abroad, and during the last 5 years, the pro
duction of Gur has varied between 2 to 3 times the total production
of sugar, (including Khandsari sugar) the variation being due to
various factors like prices of cane, of sugar, of Gur, control over trans-
port of cane, Gur, etc. We do not contemplate that during the next
few years this ratio between the consumption of sugar and the con-
sumption of Gur in this country will be radically altered for reasons
explained in an earlier chapter, but we do feel that with the improve-
ment in the standard of living of people, a preference for white sugar
which is cleaner in appearance, which is easily dissolved and which
lends itself more easily for use in sweetening cups of tea, 'coffee,
other drinks, and sharbats, the consumption of sugar will certainly
increase. Besides the growth in the population of India at the rate of
1 per cent per annum will also mean a continually increasing demand
for sugar.

253

We also feel that sugar which is now considered a luxury pro-
duct will enter into the consumption of a larger number of people
than at present due to improvement in economic conditions and the
migration of people in towns, increase in the tea drinking habit, and
this will certainly lead to an increased use and consumption of sugar
in the country. We would not, therefore, be surprised if during the
next 15 or 20 years the ratio between the consumption of sugar and
Gur would be altered to some extent in favour of sugar, and while
having no desire to prophesy in the matter we feel that it would not
be incorrect to assume that while the consumption of sugar might be
raised to about two and a half times the present consumption of about
a million tons, the consumption of Gur may increase to about 5 million
tons, i.e., may be about double, instead of 2& times or three times the
present consumption of sugar, within the next 15 or 20 years.

More Mills Necessary

In this view of the matter, we would be required to plan for an
early establishment of a few more mills in the country. To the extent
that Provincial plans for industrial development must include plans
for expansion of sugar industry and the improvement of sugarcane
cultivation as well, a very large part of the problem on hand will
be solved by Provincial Plans. It is well, therefore, to note at this
stage that the expansion of the sugar production thus necessary to
ensure a comfortable standard of living for all is only in accord with
Provincial or Regional planning.

And from the point of view of development, it is noteworthy that
the expansion of factory production is called for in the Provinces
(other than U. P. and Bihar) which are yet to have their proper share
in the indigenous production of sugar. The following Table brings
out the salient features of the present position in regard to the pro-
portion of cane crushed in factories to the total cane crop in various
Provinces.

TABLE No, 4

Percentage of Cane crushed in factories to the total Cane crop
in various Provinces*

; |

Season U. P.*

Bihar*

Bombay

Bengal ! Madras j India

1934-35

13.6

30.9

27 50

12.3

1935-36

17.1

40.4

8 i 5

16.0

1936-37

17.1

49.3

2 6

17.6

1937-38 ( O

rEst )

18.6

62.3

17.8

1938-39

14.5

44.5

19.5

1939-40

25.5

48.4

27.7

1940-41

13.9

29.3

. i

19.1

1941-42

I 14.6

...

21.2

1942-43

! 21.9

...

25.0

1943-44

22.3

...

;

250.

* Figures based on Cane Development Department ( U. P. ) statement showing disposal
of cane crop in the U. P. during 1934 to 1942 and on letters from Cane Commissioner, Bihar
to Chairman, Sugar Commission, U. P. and Bihar.

254

These figures will show in a correct perspective the importance
of the cane-crushing factories in agricultural economy particularly in
Bihar and U. P. So far this fact has not been fully appreciated owing
to these statistics not being brought to the notice of all concerned
prominently. We have worked out these figures with the help of the
Sugar Commission and Directors of Agriculture in the U. P, and Bihar.
This will show that the factories are of preponderating importance in
the U. P. and Bihar. It must further be noted that in some districts
where there is a congestion of factories, 60 per cent to 70 per cent,
or even 80 per cent of the cane crop is crushed by the factories, both in
the U. P. and Bihar.

The foregoing Table also shows clearly that the scope for economy
in the utilisation of the present acreage under cane and for the exist-
ing cane crop is far greater in other provinces than in the U. P. and Bihar.
Obviously, and prima facie, mill consumption of cane is the most eco-
nomic method of utilising the cane, and governments of the other pro-
vinces are not likely to give up the idea merely out of consideration
for the mills in the U. P. and Bihar. Avoidance of the wastage of sugar-
cane involved in Gur manufacture will no doubt be attempted by
increasing the number of mills.

For our present purpose, what is important is that the drive for
spreading improved varieties and for economies in Gur manufacture
will have to be more vigorous in the " backward provinces ", e.g.,
Bombay, Madras, Bengal, where the total consumption is far greater
than their production. The whole programme of work for increasing
the production of sugar will have to be on a regional basis though
this does not necessarily militate against understandings of a tenta-
tive kind among the various provinces.

Table No. 2 in the Sugar Industry at Glance shows the number
of factories established in the various Provinces, and the Appendix
at the end of the volume gives details regarding their capacity, etc.

Estimate of Capital needed /or Expansion

Considering that the total investment for machinery imported since
1931-32 for this industry is estimated at about Rs. 12 crores and assuming
that the machinery in the 32 factories which existed in the pre-war
period was of the order of about 2 crores, we find that the total inves-
ment in machinery for the establishment of the 150 mills
in the country is about Rs. 14 crores. And the total capa-
city of the industry is for a crushing of about 150 lakhs tons
of cane sufficient for the production of 15 lakhs tons of sugar every
year. The maximum, factory production of sugar has been 12 lakhis
and 41 thousand tons in the year 193940. If, therefore, we wish to
increase our sugar production from its present potential of 15 lakhs
tons to 25 lakhs tons it will be necessary to spend on machinery roughly
about Rs. 9 crores, and on the assumption that the price of machinery
will be about 50 per cent over the prices of the machinery in the
pre-war period, the cost will be about Rs. 13 crores. The capital cost
of a factory of about 800 tons capacity, which, today, is the average,
was in the pre-war period about 16 lakhs of rupees, Rs. 12 lakhs being
the price and erection charges of machinery and Rs. 4 lakhs being the

255

cost of land and buildings. As stated before, for the establishment
of a further capacity of about 10 lakhs tons of sugar, the amount of
external capital required to be spent will be only Rs. 13 crores. Roughly
this will mean the establishment of about 70 to 80 factories of an
average cane-crushing capacity of 800 tons. Leaving the two Provinces
of Bihar and U. P. aside, the other Provinces, namely, Bombay, Madras,
Bengal, the Punjab, and suitable Indian States will have to establish these
factories and there can be no doubt that with a liberal credit policy
and financial system of the future, this capital will be found without
much difficulty, particularly as the expansion visualised is gradual,
and spread over a period of years.

Export Possibilities of Sugar

Up to this stage, we have assumed that the increase in produc-
tion capacity is required for meeting only our internal needs of sugar
in which we have estimated a large increase depending on an im-
provement in the economic conditions of the people as a result of
the State implementing the salient features of some of the well con-
sidered economic plans, both official and non-official, and have also
allowed some preference being shown to sugar over Gur, and have
also included utilisation of sugar for other industrial purposes like
manufacture of confectioneries, biscuits, etc. At the same time we
cannot leave out of account possibilities of development of export trade,
and particularly because of the severe damage to the sugar industry
in Java and the great reduction in the production of sugar in various
parts of the world from a total quantity of 30 crores tons in the pre-
war period to only about 19 crores tons in 1944-45, India will have
a good scope and opportunity for capturing a part of the world's
demand particularly in countries adjacent to India, e.g., Afghanistan,
Persia, Middle East, Ceylon, Burma, Nepal. While, therefore, we
cannot plan for any large sized increase in our capacity depending
upon export markets only due to the apprehension that the Java
industry may be rehabilitated before long, it is reasonable to hope
that we will be able to develop and retain some of the adjacent mar-
kets. In view of this possibility it will not be imprudent to plan
for some increased production for catering for such outside demand,
say, about 2 lakhs tons, and thus provide for additional employment
and utilisation of the Country's natural resources.

Nutritional Survey Undertaken in 1945

We are happy to note that Dr. V. K. R. V. Rao, Director of Statis-
tics in the Food Department, who was appointed by the Government
of India to collate data from Central and Provincial sources for for-
mulating proposals for food planning, was directed in August, 1945,
to undertake a country- wide investigation of nutritional conditions,
resources and possibilities. We fervently hope that he will conduct
an assiduous enquiry and appropriately assess the importance of sugar
as a vital energising food,* rich in carbohydrates, and make recommen-

* It would be interesting to note that about 16 per cent of the total food energy
requirements of the people of the United States during pre-war years was sup-
plied directly by cane and beet sugar. In addition sucrose (cane and beet sugar)
is an essential ingredient or an integral component part of many major processed
food items. (Vide Report of Food Industry War Committee, Washington, of
December 1944, a summary of which was published by Lamborn & Co., New York.)

256

dations for its utilisation in increasing quantities for improving the
nutrition of the people of India, which is at a low ebb today, parti-
cularly as there is an enormous potentiality of further development of
this industry, with the present set-up and equipment.

Increased Expenditure on Research Recommended

It is also necessary to emphasise at once the need of a well-planned
reorganisation of the industry in its various aspects from a broad point
of view, in order to ensure that the industry is reconstructed with
a far-sightedness that will enable the country before long to produce
such quantity of sugar and at such prices as would make it possible
to supply the population with sugar and Gur in quantities considered
necessary according to International Standards of Nutrition,* and
which will be considerably higher than the present per capita con-
sumption. <

To achieve this, expenditure on sugar research has to be greatly
increased as in other celebrated sugar producing countries like Java,
Cuba, Philippines, etc. It is useful to remember in this connection
that the Tariff Board of 1938 made strong recommendations for a vigo-
rous development of research work, e.g., an increase in the number
of testing stations in the various provinces, an improved system of
trial in experimental plots, expansion of the famous Coimbatore
Research Station, particularly for combating insect pests and diseases
like red rot, pyrilla, which do appreciable damage to the sugarcane
crop. The Tariff Board also suggested to this end that the grant from
excise duty for the purpose of research work should be raised from
one anna per cwt. to 3 annas per cwt. and they also made an observa-
tion, with which we are in full agreement, that " they were convinced
that the only hope of the industry ever being able to combat on equal
terms with other countries is a reduction in the cost of raw material."

We would also like to emphasize with all the stress at our command
that a sum of not less than Rs. 40 lakhs per annum should be ear-
marked by the Government of India for expenditure in applied and
fundamental research work. We also feel that the industry should
be associated actively with the research work being carried on at the
various research stations and laboratories. Expenditure on research
work should not be considered as fruitless and it should be treated
as a profitable investment which will pay itself several times over,
and a larger amount should be earmarked by the Government from
its present excise revenue of well over Rs. 6| crores for this purpose,
in order to ensure the stabilisation of the industry at an early date.
We also suggest that this amount should be placed at the disposal of
the Indian Central Sugarcane Committee, established in 1944. (Vide
pages xxx to xxxii in the Sugar Industry at a Glance.)

* Vide the observation made by Sir George Schuster, K.C.S.I., K.C.M.G.. M.P.,
Ex-Finance Member of the Government of India in his book India and Democracy
(1941), where he states that there is a common agreement that the masses of
the Indian people are undernourished, and that an improvement of nutrition must
therefore, be the first step in any general plan for increasing the productive power
and improved standards of living. He also observes that one of the main causes
for the present low production is the physical condition of the people resulting
from permanent malnutrition. (Pages 258 to 268).

Referring to the advantages which have flown from the research
work undertaken even on the present meagre scale, the Imperial Council
of Agricultural Research assessed in 1939 the total increase in the
output of the cultivators due to the improvement of sugarcane crop at
2J crores of rupees per annum. *

In this connection It will be of interest to observe that, while
Hawaii spends on research Rs. 12 per acre, Java Rs. 3, Japan Rs. 3,
India spends only 1/3 of a rupee.f

An annual expenditure of Rs. 40 lakhs on research, as suggested,
will work out to only one rupee per acre o/ cane, while the cultivator
and the industry will receive multiple benefits.

One word more. When it is remembered that in the Steel
Industry iron ore costs less than 10 per cent of the value of the finished
product, (as compared with about 52 per cent in the case of sugarcane)
it will be realised how vast is the difference between sugar and
other industries as regards the conditions on which further progress
depends.

Cane Cost and Sugar Prices must be Reduced for Attaining

Optimum Consumption

As we have observed before, cane represents about 52 per cent
of the cost of production of sugar direct from cane, and a higher pro-
portion still in the case of Gur. We entirely endorse the remarks of
the Tariff Board of 1931 when they state (vide page 27) that the future
of the sugar industry depends mostly on the cost of producing the
primary material, i.e., cane. And for attaining optimum consumption,
the price of sugar and Gur will have to be lowered, and this can be
done effectively if the cost of cane is reduced, by comprehensive
research, to about 0-4-0 per maund of cane, in the post-war period.

Intensive Sugar Research in United States

In this connection, it would be an eye-opener to see the interest taken
and expenditure incurred in the United States in establishing a Research
Foundation in New York in June, 1943, by companies that produce or
refine cane sugar or process sugar beets, as a non-profit corporation.
According to the Charter, this research is to relate " to sugar and any
or all uses, or possible uses, of sugar in any form whatsoever, and whe-
ther as a food or an ingredient of foods and beverages, or in industry
or otherwise."

The Sugar Research Foundation is an organisation of growers and
processors of cane and beet sugar in the continental United States, Hawaii,
Puerto Rico, Cuba and Canada. The purpose is to increase the con-
sumption of sugar through the development of new industrial uses
and establishment of the proper place of sugar in the diet. The Founda-
tion will transmit to the consuming public, the scientific and medical

* Vide also a Press Note of the Bihar Government issued in July 1939. stating
that as a result of the measures taken for improvement of sugarcane cultivation
it is computed that the growers realised approximately Rs. 2,45,37,250 during the
1938-39 cane-crushing season. A larger amount still may have been realised
by the cane growers in the U. P. Vide Indian Sugar Industry Annual, 1939, by
Mr. M. P. Gandhi. Also Annuals for 1940, 1941, 1942, 1943 and 1944.

fVidc Tariff Board Report, 1931, page 94. Also vide the Philippines Sugar
Industry A plea for Research for the Healthy Development of the Indian Sugar
Industry, by Mr. Chandra Prasad Gupta, with a foreword by Mr. M. P. Gandhi, 1937.

professions, home economists, nutritionists and manufacturers infor-
mation concerning sugar, its food value, its relative economy and its
chemical characteristics in manufacturing process.

To obtain this information, the Foundation has initiated extensive
research into carbohydrate chemistry, bio-chemistry and nutrition. In
furtherance of the programme, it is supporting authoritative studies at
Universities and other research institutions under the direction of lead-
ing scientists.

The first and most ambitious of these studies is being conducted
in the Sugar Research Foundation Laboratories established in December,
1943, at the Massachusetts Institute of Technology. Here, new industrial
uses of sugar and its derivatives are being determined by means of a
systematic study of sugar considered solely as an organic compound.
The five-year project operates under a grant of 12,500 dollars from
the Foundation.

On June 6, 1944, five additional grants-in-aid of research were
announced by Dr. Robert C. Hockett, Scientific Director of the Founda-
tion. Dr. Hockett is on a five-year leave-of-absence from the Massa-
chusetts Institute of Technology, where he is associate professor of
inorganic chemistry. The grants are as follows:

(1) 36,000 dollars to Professor Ancel Keys, Laboratory of Physio-
logical Hygiene, University of Minnesota, Minneapolis, for a study of
the relation between the vitamins of the B group especially thiamin
(B-l), and the utilisation of sugar in the body.

(2) 21,500 dollars to Professor Julian D. Boyd, Department of
Pediatrics, University Hospital, State University of Iowa, Iowa City,
for a study of the relation between sugar intake and tooth decay,
with children as subjects.

(3) 25,000 to Professor F. J. Stare, School of Medicine and Public
Health, Harvard University, and Dean A. Leroy Johnson, School of
Dental Medicine, Harvard University, for a study of the relation between
sugar intake and tooth decay, with animals as subjects.

(4) 24,000 to Professor Melville L. Wolfrom, Department of Che-
mistry, Ohio State University, Columbia, for a study of the non-ferment-
able (non-sugar) components of molasses.

The result of this and similar research will be the acquisition of
a vast body of knowledge concerning carbohydrates in general and
sugar in particular. In the period of readjustment after the war this
increased knowledge will be immensely valuable. Research demons-
trating " the proper balance between carbohydrates and other food
elements in the diet will do much to aid the public in utilizing intelli-
gently low-cost energy foods, such as sugar ", according to Joseph
F. Abbott, President of the Foundation. " In the current period of
world-wide food shortages, which will continue long after the cessa-
tion of hostilities, it is obvious that populations v/ill have to be fed
diets containing a high proportion of sugars and other carbohydrates,
since these types of foods supply the maximum amount of energy per
acre of land required for their production and at a minimum cost."

Even more valuable will be the increased knowledge of industrial
uses of sugar. " Many of us know that plastics, synthetic rubber, anaes-
thetics and numerous other products have been made from petroleum,"

259

says Dr. Hockett. " The era that has produced these wondrous pro-
ducts has been known as the petroleum age. Over three-quarters
of the dry weight of the total plant material on the surface of the earth
is carbohydrate. The three great carbohydrates are starch, cellulose,
and sucrose. We are reading daily that coal and petroleum supplies
must eventually dwindle, but carbohydrates such as sugar can be
produced perpetually from the soil. The inevitable trend must be to-
ward increasing the utilization of carbohydrates. It is, therefore, very
proper that sugar producers have taken their place besides other indus-
tries in contributing research toward realization of the coming Carbohy-
drate Age for agriculture and industry.

In March, 1945, Dr. R. C. Hockett, President of the Foundation
also announced at a dinner given by Dr. Karl T. Compton, President
of the Massachusetts Institute of Technology, prizes totalling 45,000
dollars to. be awarded to scientists for the discovery of new uses of
sugar in medicine, and in every art, industry or technology.

The present knowledge about sugar even in the food field is far
from complete. As a staple product, universally liked, universally
available, and universally used, it has been expected largely to sell
itself by its appeal to the appetite. Physiologists and bio-chemists have
made many more studies involving the function and behaviour of dex-
trose in the body than with sucrose. One suspects that because animal
experimentation is so immensely complicated these scientists have been
tempted to simplify at least their carbohydrate. The result is that
we actually know more about the bio-chemistry of a carbohydrate which
is consumed as such in relatively minor quantities than we know about
the one which provides fifteen per cent of the calories in the American
diets.

The Diet Reformers

In the food field also, there has always been small fraternity of diet-
reformers who have accused refined sugar of producing many evils
including appendicitis, stomach ulcers, high blood pressure, sinus trou-
ble, rheumatism, flatulence and diabetes. As a rule, such nature food
promoters have not received very serious attention from Americans
who have been inclined to view them as philosophical relatives of Cal-
vin who reasoned that anything pleasant must necessarily be wicked.
Nevertheless, such matters are hardly in the realm of philosophy.
Those accusations which are not upheld by experimental evidence, and
most of them are not, should be eliminated for once and all.

The discovery of vitamins has raised new problems concerning
the relation of sugar to the dietary as a whole. Though sugar contains
no vitamins itself, it plays a considerable role in inducing consumption
of the protective foods. To appreciate this function, we need only
picture what would happen if sugar were eliminated. The use of grape-
fruit, cooked and canned fruits, breakfast cereals, cereals in baked foods,
and dairy products in ice-cream, custards and milkshakes would certainly
fall to a very low position. Sugar certainly requires vitamins for its
own proper combustion and it may have some influence on the produc-
tion of vitamins by bacteria in the intestinal tract. Therefore, a re-assay
of the total role of sugar in the diet becomes necessary as a part of
the general programme to give the people the best possible nutritional

250

status and at the same time to give them appetizing *and palatable
food.

The problems to be undertaken by the Sugar Research Foundation
are, therefore, numerous and cover a very broad field. They include
studies in :

1. Nutrition.

2. Bio-chemistry.

3. Physiology.

4. Medicine.

5. Dentistry.

6. Metallurgy.

7. Microbiology.

8. Organic Chemistry, both fundamental and applied.

9. Beet and Cane byproducts.*

Important as sugar is as a food, however, it is equally important
in the form of industrial alcohol. The April 1944, issue of Consumers'
Guide, a publication of the War Food Administration of America, states
that " the combined military and direct civilian needs for sugar, as a
food, still represent only a part of its total war uses. Sugar flows into
the roaring plants of industry. There is hardly a war commodity of
which sugar is not a necessary part."

" Normally ", according to the Consumers' Guide, " blackstrap
molasses, a by-product of sugar, is the chief source of industrial alcohol,
and alcohol goes into the making of an endless variety of products."
One of these products, synthetic rubber has, as we all know, contri-
buted an enormous share to victory. Others are contributing just as
much. Explosives, for example. The bombs and shells and hand gre-
nades which were tearing the guts out of the Axis to adopt a recent
phrase of Prime Minister ChurchilPs were almost all made with the
help of sugar, via industrial alcohol. By means of alcohol, too, we
were able to make a variety of plastics, such as those that went into
the so-called " green-houses " of fighter planes and into the more
familiar celluloid and cello-glass.

All told, sugar has more than 70 known distinct industrial uses. In
addition to those already mentioned, sugar is a strategic material in
the production of cement, motor fuel, penicillin, paper, soap, fabrics,
and welding rods, without which no Liberty Ship would slip down the
ways ! !

The war has taught us much about the value of sugar as a vital
food and as an aid to industry. It has taught us an even more precious
lesson, namely, that we are still vastly ignorant of the potential uses
of sugar. It is this lesson that the Sugar Research Foundation of Ame-
rica, has taken to heart and determined to master.

We hope and trust that as a result of more extensive and intensive
researches, referred to above, the importance of sugar will be properly
assessed in various spheres, and that production of sugar will receive
the encouragement it merits in due course.

* Vide an article on Sugar the Unknown, by Dr. Robert C. Hockett, Scientific
Director of the Sugar Research Foundation, New York, published in Indian Sugar,
Cawnpore in July 1945 ; and also Lamborn's various Weekly Reports in 1944 and
1945.

CHAPTER XVII
CONCLUSION

AN inquiry into the position, problems and prospects of the sugar industry
in India is in some ways different from a similar inquiry into the problems
of our other protected industries. The concluding chapter of this thesis
can be devoted to a recapitulation of the main results of this inquiry and
to relate them to the standpoint appropriate to the period of planning that
lies ahead. We showed in the first chapter that the history of the world's
sugar industry reveals the tendency of sugar production to be distributed
over the widest areas of the world and that in so far as this was helped
by the development of the beet-root which was not in its original state a
raw material for sugar, developments in the sugar industry may be
deemed to give the world a foretaste of the changes which may overtake
world economy when substitutes become more common than they are
now. So far as India was concerned, this tendency towards the diftusion
of sugar production was strengthened both by reason of India's fitness
for growing cane and by the special stresses and strains of the period of
the great depression. The view was urged that as the grant ot protec-
tion to the sugar industry came in the wake of the ponderous historical
forces reierred to above, a new orientation was inevitable in regard
to the claims and the duties alike ot the new industry. It would be idle
to expect the growth of the sugar industry as the result of a prolonged
tug-ot-war between the indigenous producer and the foreign importers,
a tug of war in which the relative strength is carefully determined by
nice and hair-splitting calculations ot the tair selling price. Such a pro-
longed fight with its natural vicissitudes is a familiar story to the
students of the policy of discriminating protection. The Cotton Mill
Industry and the iron and Steel Industry both had more than their just
share ot such tribulation. It is unnecessary here to go in detail into
the details of the cause of the departure in the case ot the sugar industry.
But the link between the sugar industry and agriculture, a link for which
there is no exact parallel in the case ot other protected industries, must
be considered to be the reason which weighed most with the Tariff Board.
Most of the local governments stressed the importance of fcane cultiva-
tion in India, not only from the point of view ot the agricultural classes,
but also in connection with the Provincial Governments' financial com-
mitments. A very large sum of government money (9 crores) has been
sunk in the construction of the Deccan Irrigation Canals. The revenue
derived by way of irrigation dues, observes the Tariff Board of 1931,
(vide page 41 of their Report) is about Rs. 26 lacs of which sugarcane
pays over Rs. 10 lacs. In fact the development of this industry has
enabled a large number of cultivators to pay their land revenue and
other dues, and this has benefited the provincial revenues considerably. 1

1 Also vide representation of the Imperial Council to the Government of India,
dated 5th February 1930 in Vol. I of the Tariff Board's Report, 1931, p. 18.

262

Protection Fully Justified Rapid Development

However that may be, the fact remains that the sugar industry had
such a phenomenally liberal measure of protection, that its link with agri-
culture was not only lost sight of but exaggerated, that the industry
expanded beyond the most sanguine expectations of its protagonists, and
also gave rise to problems such as other protected industries had never
been confronted with. (Vide the following extract from Mr. M. P.
Gandhi's speech in the Bombay Rotary Club on " Sugar Problems and
Prospects/' in October, 1942, wherein he expressed the view that pro-
tection to the Indian sugar industry has been fully justified 1 ):

" Up to 1932, the industry was of a very modest size, but since
the grant of protection to it in that year, the magnificent pro-
gress made by the industry is a matter of pride to the country.
It is interesting to note that the sugar industry is the second
largest industry second only to the Cotton Textiles and
represents an investment of Rs. 32 crores, finds employment for
3,000 University men and one lac unskilled workers, and helps
in keeping within the country a sum of not less than 16 crores
of rupees per year, and the interests of not less than 20 million
cultivators are indissolubly connected with it. Let economists
say what they like about the costs of protection or the price to
the consumer. An unbiassed study will, however, indicate that
protection to the industry has been fully justified, that the con-
sumer has been benefited, and that the country has been assured
of supply of sugar in an emergency like the present and at a
reasonable price. Indeed the protection has revolutionised this
industry, which is a bright example of what the people of this
country can do when the necessary help is forthcoming."

In a special article contributed to " Indian Farming " in December,
1941, on " Indian Sugar during the last decade," Mr. M. P. Gandhi also
observed :

" The amount of money paid to cane-growers by the factories
alone has increased from about Rs. 1,77,50,000 in 1931-32
to Rs, 18,00,00,000 in 1939-40.- The income of the cane culti-
vators has been augmented considerably by the development of
sugarcane crop on account of the comprehensive research
undertaken at various places by the Imperial Council of Agri-
cultural Research, and this increase in their income has been
assessed at about Rs. 2,50,00,000 per year.

" Transport agencies like railways, motor buses and village carts
have also derived large benefits from it. The consumers have
benefited due to the availability of sugar at rates cheaper as
compared with the pre-protection period, except in the last two
years due to the high price of cane and shortage of production
of sugar. But this feature cannot be permanent and the con-
sumer may again look forward to an era of cheap sugar."

" Further, this industry has been responsible for the develop-
ment of the village industry of gur manufacture.

1 Vide also Mr. M. P. Gandhi's speech before the Rotary Club of Ahmedabad on
3rd December 1943, printed in Appendix I of the Indian Sugar Industry Annual,
1943.

2 This amount increased to nearly Es. 26,00,00,000 in 1944-45.

263

" An idea of the importance of the sugar industry can be had
when it is remembered that the value of the production of gur
and sugar works out roughly to about Rs. 75,00,00,000 per year/ 71

The sugar industry, thus, is unique in every way. To overlook this
uniqueness is to spoil the perspective in which alone it can be viewed
with any clarity and sense of reality and of realism. Nevertheless, those
who have taken unkindly to the protectionist policy have regarded the
sugar industry in the same light as other protected industries. And the
enquiry into its problems has been conducted on the narrow lines of cost
to the consumer, cost of production and the like. But if it is remembered
that the distinctive characteristic of economic opinion and policy in the
post-depression period is the shift from mere protection to regulation
under the shelter of high tariff walls, then the inappropriateness of the
old approach would be readily recognised. The tests that the old method
applies to the soundness of a policy towards an industry are, 110 doubt,
valid. But the Tariff Board, when it recommended protection to the
sugar industry, did so realising that the expansion of the industry was
an indispensable adjunct to agricultural development, and also expected
to see the cultivation of cane sheltered and enabled to expand and
prosper. 2 (Vide page 39 of the Tariff Board's Report for 1931.)

Another important aspect of cane cultivation is in connection with
the supply of cattle fodder. The reaping of cane commencing in Novem-
ber and extending up to the middle of March also serves to afford employ-
ment to the agriculturist and his cattle when other employment is scarce.

It will thus be seen that sugarcane occupies a definite place in the
crop rotation of this country and the number of people who depend on
cane cultivation at present may be safely estimated at 20 million, assum-
ing that one acre of cane occupies on the average the area grown by a
family which is taken as comprising of from 4 to 5 members.

Likewise it may be said that after a decade of liberal protection to
the sugar industry, we have problems not of mere computation of costs
and prices, but of strengthening every link in a whole chain of produc-
tive activities from the cultivation ot cane to the disposal of molasses,
bagasse and press mud. The policy in respect of the sugar industry
is not a matter of lowering the import duties, a simple enough
operation, when by means of an unrealistically simple logic, one

1 The Imperial Council of Agricultural Research valued in 1930 the sugar-
cane products in India at Rs. 42 crores, the value paid for imports of sugar being
Rs. 21 crores. The Tariff Board of 1931 (vide p. 30) estimated the value of the total
consumption of sugar and gur in India in 1930 at Rs. 42 crores. For the year
1943-44, the value is estimated by us at Rs. 118 crores. (Vide Table 4 in the
Sugar Industry at a Glance.)

-Indeed, the Tariff Board of 1931 also expected a general increase in agricul-
tural productivity, for it is established that the yield of crops grown after sugar-
cane is, generally speaking, considerably higher than that after other rotation
crops. The Tariff Board was informed that in the UP. improved types of wheat
grown after sugarcane give a yield of *4Mh~raaunds as against 20 maunds when
the same type is grown after other crops. This improvement is not merely a
question of the utilisation of the manurial residue left in the soil after cane
cultivation, but is a result of the general stirring up of the soil and deeper
cultivation required for cane growing, particularly where intensive methods , are
followed. It is also useful to remember that cane is an important crop on which
the cultivator relies for his requirements of cash and payment of rent, and
generally speaking, over a period of years, the return from cane has been con-
sistently greater than from various other alternative crops.

264

comes to the conclusion that the growth of an industry adds
or must add to the national income. It is rather a matter of
directing the efforts of private producers as well as public autho-
rity towards the improvement of efficiency in production and
the realisation of economies in the various productive processes.
This standpoint emerged for the first time in the history of discriminating
protection in the case of the sugar industry. Formerly the cost of pro-
duction was regarded as a determinant of the fair selling price and
the import duty as deciding the question whether protection should be
granted or withheld, or continued or cancelled. The cost of production
in the case of Cotton Textiles or Iron and Steel depended predominantly
on the efficiency of manufacture. Only in the case of the sugar industry
it can be said that agriculturist, too, held the key to the progress of the
industry. The history of the sugar industry then must be deemed to
have provided a welcome corrective to the most serious of economic
misconceptions in India, that economic progress can be achieved by
attending to industry or agriculture without regard to the links between
the two. This tendency to look at one divorced from the other is respon-
sible for the alignment of economic opinion in favour of or against
protection to industry. And the merits of the protectionist policy in
the case of any one industry are discussed on the age old lines which
have been found to be so inconclusive by the unbiassed.

The problem of economic development as a whole and the problem
of industrialisation as a part thereof, both alike tend to be viewed from
a narrow standpoint. Prof. H. L. Dey goes so far in overlooking the
importance of the economic and broadly social forces which make for
industrialisation and economic progress that he regards the cost of pro-
tection to the nation in the same light as an individual should look at
the distribution of his personal income among the various competing items
of expenditure. 1 This erroneous premise naturally drives him to suggest
that India's national income being what it is, the first charge on it must
be public health and then education and so on, as if the Government of
India would have agreed to divert the revenue from sugar imports, which
they have now had to forego, to public health, or that the consumers
of white sugar could be prevailed on to pay a cess on sugar for the benefit
of education, and public health ! Social progress never moves along
lines chalked out by individual preferences. Nor will the population of
India find the problem of industrialisation to be lightened ,by the im-
provement in the statistics of public health and literacy.

The function of a policy of protection is therefore understood to be
one of increasing the technical efficiency of the manufacturing process.
This is, no doubt, in accordance with the theory of protection in its
classical form. But protection thus granted or thus viewed can
achieve nothing in a country ilke India. Efficiency in industrial pro-
duction is not an isolated phenomenon. It cannot appear all of a sudden
like an oasis in a wide desert of productive inefficiency. So long as pro-
tection was granted with the old ideas in the mind of the Tariff Board or
of other authorities, it would in a sense be legitimate to criticise the
policy with the general stock-in-trade of free trade arguments. But the

i Vide The Problems of Protection, by H L. Dey, in " Economic Problems of
Modern India" edited by Radhakamal Mukerjee, 1939 (page 358). Also H. L,
Dey, "The Indian Tariff Problem", pp. 40, 41.

265

obvious difference between sugar and other protected industries is wholly
forgotten, and the usual argument about protection failing to create em-
ployment and the outlay on protection being more urgently required in
other spheres is trotted out.

The aim of this thesis is to bring out the fact that just as the grant
of protection to sugar was a result not so much of the avowed fiscal
policy of the Government as of the stresses and strains of the period, in
the same way, the function of this policy lies not merely in the increasing
efficiency of manufacture, but in the co-related development of agricul-
ture and industry and the ancillary activities that intervene between
them. Likewise, the success of the policy is to be sought in the accom-
plishment of the requisite progress both in agriculture and industry and
not the least in the development of industries for the utilisation of by-pro-
ducts. It is not as well known as it should be that one of the unique
features of the protectionist policy in regard to sugar is that the Tariff
Board recommended protection for a period of 15 years the longest
period l and at the same time did not attempt to foresee the time when
the need for protection would be obviated.

Far from being guilty of lowering the tests of a sound protectionist
policy, the Tariff Board has only shown a keener grasp of the special
requirements of the country. That the sugar industry has achieved
during these years more than was expected of it should suffice to answer
the carping criticisms of anti-protectionists. 2

From the point of view of close governmental watch and vigilance,
it is indeed fortunate that the sugar industry has become the major con-
cern of two governments, those of the U. P. and Bihar. It is fortu-
nate, too, that a thorough-going form of control and regulation was
attempted by the Congress Governments during the period of their
regime from 1937-40. The various minor problems like zoning, licensing
and the like are being constantly tackled, while the industry is being
sheltered from the violent gusts of over-production. It was left to the
U. P. and Bihar Governments among the Governments of the British
Indian provinces to initiate the efforts to establish a Power Alcohol
Industry. After twelve years of the working of the sugar industry, there
is every reason for confidence that protection to sugar will be completely
justified not only by the reduction of costs, but also, as we have shown
in the last chapter, by maximising the production and consumption of
sugar in the country, before long.

1 Prof. H. L. Dey in u Indian Tariff Problem, and Report of the Tariff Board
on the Sugar Industry/' 1931, pp. 65-77.

- Vide Tariff Board Report on the Indian Sugar Industry, 1937, which expresses
'its satisfaction at the progress in efficiency achieved by the industry within a period
of 6 years, and the pessimistic (as also incorrect) observation of Prof. H. L. Dey
in 1939, when he observed that in cases where protection was given for long
periods, as in the case of sugar, tk it would be idle to expect that those who are
responsible for the industry concerned would make any great effort to achieve
a rapid progress in efficiency." To our mind, no unbiassed and open minded
observer could make such a statement regarding the Sugar Industry, unless he
had some preconceived notion or theory to support. Vide " Problem of Protection ",
by Prof. H. L. Dey in " Economic Problems of Modern India ", p. 358, etc. Also
vide Review of the Sugar Industry in India, for 1936, 1937, 1938, 1939 and 1940, by
Mr. R. C. Srivastava, Director, Institute of Sugar Technology, Cawnpore.

266

It is not speculative to suggest that it is through the sugar industry
that India will learn her first lesson in the rationalisation of her agri-
culture. For it is only in sugarcane that she is called upon to bring
down costs and raise quality to +he level of the most economic producers
of the world. And it has been aptly observed by the Indian Fiscal
Commission that without industrialisation there can be no building of
character, of alertness or of the qualities which make for progress. A
quarter of a century of protection of the old kind in India still leaves us
in the positipn which so careful an observer as Vfcra Anstey described
in the following words in 1929 :

" In the third place, it can be said that, whilst success has been
achieved in particular instances in organising both certain long
established and some new industries on a large scale, and
although here are undoubtedly great potentialities in this
direction, so far nothing worthy of the name of an " Industrial
Revolution " appears to be taking place. The fact is that India
still suffers from certain grave deficiencies with regard to the
prerequisites of successful industrial production." 1

For such a revolution, we have to attend to industry and agriculture
at the same time, and for this no industry in this country lends itself
better than sugar.

The implication of this is that even if economic policy in Indie
were to continue on the same old lines in the post-war period, the
position of the sugar industry is such that it will compel efforts for a cor-
related improvement of agriculture and industry. Fortunately, this
recognition of the importance of allround development has been so
keen in recent times, that the country as a whole is now committed
to the policy of a planned economic development allround. The effect
of this policy on the future of the sugar industry in India will be that
the doctrine of graduation in the expansion of sugar production will
be virtually abandoned, that the bogey of inadequate consumption
or inadequate production will be got rid of, and the country can look
forward to an enhanced per capita consumption of sugar, such as will
help the maintenance of a high standard of health and energy - in the
country's population.

1 " Economic Development of India " by Dr. Vera Anstey, p. 227. Also vide ,
pp. 236-283.

2 Vide the following observations of the Indian Famine Inquiry Committee
in their Final Report, 1945, pp. 122 and 123, (to hand when the last page was
under print).

" While sugar is a carbohydrate food, containing no protein or vitamins,

it supplies calories, and since there is much under nutrition, calories are

needed"

"The present per capita intake of sugar in all forms in India is much

lower than peacetime intake in most western countries and we believe

that its production and consumption can with advantage be considerably

increased/'

APPENDIX NO. I

GLOSSARY AND EXPLANATION OF SOME INDIAN TERMS
APPERTAINING TO SUGAR

Gur or Jaggery. Contains anything from 60 to 85 per cent of
sucrose. It may most nearly be described as hard-boiled massecuite.
It is prepared by evaporating cane or palm juice in open pans. It is
prepared in three forms, lumps, powder, and semi-liquid. Gur making
constitutes an important cottage industry. It is unrefined brown sugar.

About 36,00,000 tons of gur are produced from cane annually in
India for direct consumption, i.e. about 3 times the quantity of sugar
manufactured at present in India in factories. A small quantity of
gur is also produced from Palmyra, and Date-Palm. There is no carry-
over of gur to the next season. Gur constitutes nearly 76 per cent
of the total sugar of various kinds produced in India, factory sugar consti-
tuting about 21 per cent.

Khandsari Sugar. Khandsari sugar, generally known as Khand,
is powder sugar of white to light brown colour. Its sucrose contents
generally vary from 96 to 98 per cent on weight as compared with 98
to 99 per cent for factory sugar. It is produced in small factories which
generally crush with oil engines and employ an open train followed
by a centrifugal. Khandsari is concentrated in Rohilkhand (U. P.)
which is the main centre of this industry. The annual estimated pro-
duction is 125,000 tons, or roughly 2 per cent of all kinds of sugar.

Adsali. Literally one and a half years' refers to the sugarcane
crop in the Bombay Province which is sown from June to August,
and harvested from October to December in the following year.

Desi. An indigenous variety of cane. This variety occupies today
(1943) approximately 17 per cent of the total crop area.

Co. This prefix when appended to a variety of cane shows that
the cane was bred at Coimbatore, e.g. Co. 213, Co. 281, Co. 290.

Ff.M. This prefix, when appended to a variety of cane, shows
that the cane was bred at Hebbal (Mysore), e.g. H.M. 320.

P.O.J. 2878, E.K. 28, are some of the exotic varieties of cane of
Java now under cultivation in India.,

P undid. This is thd chief variety of cane in the Deccan Canal tracts
and Karnatak. It has a soft rind and is preferred for chewing purposes.

Pyrilla. Steam borers, Top borers, Root borers are insect pests
which do great damage to the cane crop by reducing the yield, the
percentage of saleable cane, and its milling value.

Rupee. Rupee Is. 6d. or 29.85 cents.

Lakh or Lac. One hundred thousand, i.e. l/10th of a million, i.e.
1,00,000. Crore. 10 millions, i.e. 1,00,00,000.

Ton. One ton is equal to 20 cwts. of 112 Ibs. avoirdupois or 27.2
maunds of 82-2/7 Ibs. avoirdupois.

APPENDIX NO. II

COMMENTS ON LEVY OF IMPORT DUTY AND EXCISE DUTY
ON SUGAR FROM 1932 TO 1946

(1) Too early and frequent impositions of heavy Excise Duty on
the Sugar Industry.

(2) A plea for effecting changes, in duty, whenever necessary, in
November instead of March.

(3) No further Tariff Board Enquiry during the war period
desirable.

(4) Removal of suspense to industry by Government extending
protection straightaway for the remaining years of the period
of protection, i.e. till 31st March, 1946.

A protective duty of Rs, 7-4-0 per cwt. was imposed on sugar with
effect from 1st April 1932, by the Sugar Industry (Protection) Act,
1932, for a period of 7 years, ending on the 31st March, 1938. A
revenue surcharge of Rs. 1-13-0 per cwt. (equivalent to 25 per cent of the
protective duty) was also imposed. The total duty was Rs. 9-1-0 per
cwt.

On the 1st April, 1934, the Government of India imposed an excise
duty of Rs. 1-5-0 per cwt. (roughly equivalent to Rs. 0-15-4 per maund)
on factory sugar produced in British India by the Vacuum Pan process
(modern system) and Rs. 0-10-0 on sugar produced by the Open Pan
process (indigenous or Khandsari system) in spite of unanimous and
strong protests from all quarters. No excise duty was imposed on
Palmyra sugar (sugar obtained from boiling juice of Palmyra, produced
largely in Madras). It must be admitted that the first excise duty
imposed in 1934 doubtless pressed heavily on the newly started factories
and was a measure taken too early after the grant of protection, but
according to the Tariff Board of 1937, it had a steadying influence on
the industry in so far as it put a check on the floatation of inefficient
concerns. 1

The protective import duty was increased from Rs. 7-4-0 to
Rs. 7-12-0 per cwt. (0-8-0 being additional margin) from 1st April, 1934
to 27th February, 1937, and along with the equivalent excise duty, the
total duty was Rs. 9-4-0 per cwt. from 1st April, 1934.

It was a matter of considerable surprise, however, that this excise
duty was again increased on 28th Feb., 1937,- by 11 annas to Rs. 2 per
cwt. (roughly equivalent to Rs. 1-7-6 per maund) and to Re. 1 per cwl.
on Khandsari sugar. This increase was effected when the Tariff Board
enquiry was in progress, and the Government did not await its report
also. This imposition* was made by the Government without any notice

Tariff Board Report, p. 156.
-From 28th February 1937, the protective duty was reduced to Rs. 7-4-0 and
along with equivalent excise duty of Rs. 2 per cwt. the total duty was Rs. 9-4-0
per cwt,

Ill

being given to the trade or the industry and there was considerable
opposition to this policy of the Government, and after very heated
debates in the Indian Legislative Assembly and the Council of State in
1937, the Finance Bill incorporating the Government's proposal for the
increase of the excise duty on sugar was thrown out. Notwithstanding
this, the Finance Bill was later certified by the Governor-General-in-
Council and was passed into an Act, in 'utter disregard of and in direct
opposition to the wishes of the Indian Legislative Assembly, with the
ostensible object of increasing the revenues from the manufacture of
sugar on the ground that the development of the industry was respon-
sible for a reduction in Government revenue from import duty, forget-
ting or ignoring that this was a foregone conclusion, if protection to the
industry was to be successful, the only fault of the industrialists being
that they developed the industry far more rapidly than was anticipated
or imagined by the Government.

The Tariff Board submitted its report during December, 1937, but
its publication was withheld pending examination of its recommenda-
tions by the Government of India, and the report was published only
on the 30th March, 1939. During the year 1938, the Government of
India continued the protection to the industry for a period of one year,
by the Sugar Industry Protection (Temporary Extension) Act, 1938,
up to 30th March, 1939. On the 30th March, 1939, the Government of
India published the report of the Tariff Board, and along with it they
also published a Resolution examining the various recommendations of
the Tariff Board. They proposed introduction of legislation for fixing
the amount of protection to the industry for a period of two years, from
April 1st, 1939, to 31st March, 1941, at the rate of Rs. 8-12-0 per cwt.

(i.e. at a rate lower by 8 annas than the then existing rate of Rs. 9-4-0
per cwt.). The Government also observed in the course of the Resolu-
tion, that a further investigation would be held in 1940 to enable a
decision to be made as to the quantum of protection to be granted to
the industry for the remaining 5 years from April 1st, 1941. The
Government also criticised adversely the recommendations of the Tariff
Board in respect of the necessity of lowering the excise duty and in
respect of the detailed calculation by which the Board arrived at its
estimate of a " fair selling price " of sugar and the " orthodox " line
on which the Board proceeded in taking the difference between the
estimated " fair selling price " of indigenous sugar and the landed price
of imported sugar, as a measure of protection required for the industry.

(A full text of the resolution -is published in " The Sugar Industry at
a Glance " in the 1939 Indian Sugar Industry Annual) . It is a matter
of surprise that the Government could not find time to consider the
Tariff Board's proposals although no less than 15 months had elapsed
between the submission of the report by the Tariff Board and the
publication of their Resolution on the subject.

We feel firstly that the argument advanced by the Government
that the question of excise duty does not fall within the purview of the
Tariff Board enquiry, and is outside the scope of their review, is
untenable, and we cannot help feeling that such remarks by the Govern-
ment of India on such a body as the Tariff Board are very undesirable
and unwarranted. The effect of the excise duty on the industry is
certainly a matter which falls within the scope of the enquiry, and we
are tempted to think that such remarks against the Tariff Board should

have originated due to anger at the inconvenience of their recommenda-
tions which the Government found very difficult to turn down. The
Government took the view that the imposition of excise duty was the
best method to remedy over-production, and collect revenue for the
state, but completely ignored the effects on the industry which would
very nearly have sunk, had it not been for the world recovery of the
sugar trade that took place later,

The imposition of this duty of Rs. 2 per cwt., the incidence of which
per maund of sugar works out to about 25 per cent was opposed princi-
pally by the sugar manufacturers, inter alia on the grounds 1 that it was
premature in view of the Tariff Board enquiry in progress, that its
burden would fall not on the consumer but on the factories and the
cane-growers, and that the duty was likely to drive the industry from
British India to Indian States which gave various facilities lor the
development of the industry, like loans of money without interest,
provision of free godown accommodation, and exemption from income-
tax, import duty on sugar entering the States, etc. It is true that the
Indian States were asked by the Government of India to impose an
equivalent excise duty, but the effect thereof was counteracted by other
facilities given in the various Indian States.

A study of the prices of sugar immediately after the imposition of
the duty in 1937 will show that the price of sugar, instead of rising to
the full extent of the duty or thereabouts, actually fell and it had to be
borne by the manufacturer. The Tariff Board also pointed out that in
the U. P. and Bihar the duty fell largely on the cane-grower, and in
other provinces on the manufacturer. The Tariff Board also suggested
on the analogy of the practice followed in the United Kingdom that
" previous investigation by a statutory body of changes in the excise
duty is desirable."

While the excise duty may perhaps be justified after the industry
has fully developed, there can be little justification for imposing such
a heavy burden on an industry during the currency of the protection
as it is bound to restrict consumption and injure the growth of the
industry. In fact, such a step is contradictory to a policy of protection
of industries. We would refer the reader to our 1938 and 1939 Annuals
for a detailed discussion on the effects of the imposition of such a heavy
duty on the industry by the Government of India. We also feel that
the Tariff Board were fully justified in discussing the question of the
effects of the excise duty on the industry, and apart from other reasons,
the Fiscal Commission also observed that one of the ordinary functions
of the Tariff Board should be " to consider the effects of excise duty
on the Indian industries."

A minor change in the excise duty on Khandsari sugar was made
with effect from 28th February, 1939, when the duty was decreased to
Rs. 0-8-0 per cwt. by an amendment made in clause 3 (b) of the Indian
Finance Act, 1939, but the definition of " factory " was so altered as to
make a larger number of Khandsaris liable to pay duty.

A further high increase was made in excise duty with effect from
1st March, 1940, by increasing the duty to Rs. 3 per cwt. (roughly

l .Vide Tariff Board's Report, p. 158,

equivalent to Rs. 2-3-3 per maund) , the excise duty on Khandsari sugar
being kept at the same level, i.e. 8 annas per cwt. This further increase
was effected by an amendment to Clause 3 of the Indian Finance Act,
1940. One cannot help feeling that in their zeal for getting more
revenue from the sugar industry, the Government have overlooked the
commonly accepted economic principles, and imposed such a heavy duty
on a growing industry, the effects of which have been very harmful to
the industry. It has led to higher prices and has had the effect of reducing
consumption which should have increased with the availability of sugar
manufactured within the country at lower prices. The next three tables
given below show the changes in the excise duty and import duty from
1932 to 1944 and the revenue received by the Government from the
excise duty and import duty from 1931-32 to 1943-44 :

TABLE NO, 1

Excise Duty and Import Duty on Sugar, Sugar Candy 1 and Molasses in India

On sugar per cwt.

Protective
Import Duty
per cwt.

Additional Revenue
Duty

Total Import
Duty per cwt.

Rs. a. p.

Rs.

a. p.

From April 1st 1932 to 31st
March 1934

740

Revenue surcharge
@ 25% of Protec-
tive Duty Rs. 1-13-0

From 1st April, 1934 to 27th
February 1937 (Rs. 1-5-0 Ex-
cise Duty on domestic produc-
tion of factory sugar)

7 12
(0-8-0 being ad-
ditional margin)

Equivalent Excise
Duty Rs. 1-5-0

From 28th February 1937
(Rs. 2-0-0 Excise Duty on do-
mestic production of factory
sugar)

740

Equivalent Excise
Duty Rs. 2-0-0

From 1st April, 1939 (Rs. 2-0-0
Excise Duty on domestic pro-
duction of factory sugar)

6 12

Equivalent Excise
Duty Rs. 2-0-0

From 1st March, 1940 (Rs. 3-0-0
Excise Duty on domestic pro-
duction of factory sugar) .

6 12

Equivalent Excise
Duty Rs. 3-0-0

12 Oi

From 1st April, 1942 (Rs. 3-0-0
Excise Duty on domestic pro-
duction of factory sugar)

8 1 7-1/5

Equivalent Excise
Duty Rs. 3-0-0

1 7-1/5H

(i) The import duty of Rs. 9-12-0 per cwt. works out at Rs. 7-2-9 per maund
and Rs. 3 Excise Duty per cwt. works out at Rs. 2-3-3 per maund. This
import duty has been continued till 31st March 1946.

(ii) Includes surcharge of 20 per cent as from April 1942.

The next table shows the yield of revenue from import duty on
sugar in India from 1931-32 up to 1943-44.

1 From 20th February 1934, a revenue duty of Rs. 10-8-0 per cwt. was imposed
on sugar candy in place of Rs. 9-1-0 per cwt. The rate of import duty on molasses
is 31J per cent ad valorem since April, 1932. r

TABLE NO. 2

Yield of Revenue jrom Import Diitij on Sugar in India (Burma excluded

jrom 1937-38)

Year

Yield of Revenue

Year

Yield of Revenue

(April-March)

Rs.

(April-March)

Rs.

1931-32

7,97,63,000

1937-38

25,33,000

1932-33

6,84,79,000

1938-39

45,22,000

1933-34

4,72,04,000

1939-40

3,96,08,000

1934-35

3,81,35,040

1940-41

18,24,000

1935-36

3,24,16,000

1941-42

1,94,000

1936-37

50,52,000

1942-43

56,000

1943-44

4,14,000*

* It is difficult to reconcile this figure as imports of sugar were reported to
be negligible. It transpires, however, that some sugar imported previously was
taken out of bond during the period and duty was paid during this period.

The next table shows the revenue derived from excise duty on
sugar from 1934-35 to 1943-44 :

TABLE NO. 3
Revenue derived from Excise Duty on Sugar from 1934-35 to 1943-44

Year (April -March)

Amount
Rs.

1934-35

97,22,000

1935-36

1,58,84,000

1936-37

2,52,49,000

1937-38

3,31,48,000

1938-39

4,23,03,000

1939-40

2,49,06,000

1940-41

3,92,97,000

1941-42

6,68,27,000

1942-43

4,81,84,000

1943-44

6,79,00,000!

Alterations in the Level of the Duty on Sugar in the middle
of the Season Undesirable

Another point. The Government have made alterations in the level
of the excise duty and import duty on sugar with effect from March,
i.e., along with the presentation of the proposals for the budget of the
Government of India. While this policy may be suitable for other
industries, it is definitely unsuitable for the sugar industry, as any
change in the duty coming in the middle of the season is bound to
cause serious complications and result in harmful consequences. There
is a strong reason for deviating from the usual practice in the case of
the sugar industry, which is a seasonal industry. As is well known,
the manufacture of sugar in India commences about the month of
November and continues usually till May or June. Minimum prices
of cane are fixed by the Provincial Governments of the U. P. and Bihar
and also in certain other parts of the country, e.g. Madras and Mysore,
and the quantity of sugar thus affected represents about 80 per cent
of the total sugar production of India. These minimum prices are fixed,
at the beginning of the crushing season in November, relying on the
continuance of the then existing arrangements in respect of Import
Tariff and Excise Duty. If any change is made during the middle of

1 Includes Collections of Sugar (Temporary Excise Duty) Ordinance of Nov-
ember 1943, of As. 13 per maund of sugar. Vide Indian Sugar Industry Annual, 1943,

the season either by an increase or decrease in the excise duty, or an
increase or decrease in the import duty, one or other of the interests
concerned, i.e. the cultivator or the manufacturer, is bound to be
adversely affected, and in addition a serious dislocation is also caused
in the trade. If, for instance, the import duty on sugar is reduced, say,
with effect from 1st March, it would bring about a fall in the price of
sugar and the manufacturer stands to lose on his unsold stocks of sugar,
for the production of which he has paid cane prices at a higher rate than
would have ordinarily been fixed by the Government concerned, in the
event of the possibility of lowering the import duty. Similarly, if the
import duty is increased in the middle of the season, say, from 1st March,
the manufacturer stands to gain on his unsold stocks of sugar, but the
cultivator can complain that he has suffered inasmuch as he would have
been entitled to a higher rate for his cane, if the import duty was
increased and consequently the manufacturer was enabled to get a
higher price for his sugar. All things considered, we feel that if any
changes in the duty on sugar, whether excise or import, are necessary,
they should be made with effect from 1st November, as it would not
cause any undue disturbance either to the industrialist or the agricul-
turist or the trade. Our suggestion for making changes in duty from
November instead of April, in the case of sugar, has found support also
from the Indian Sugar Mills Association and the Indian Sugar Svndi-
cate, who have both addressed the Government of India on the subject.

In this connection, we also give below the Resolution by the writer
(Mr. M. P. Gandhi) when he was a Director of the Indian Sugar Syndi-
cate, which was accepted bv the Indian Sugar Svndicate in January,
1940, and forwarded to the Sugar Control Board of the U. P. and Bihar
in February, 1940. On the recommendation of the Sugar Control Board
the U. P. and Bihar Governments also represented to the Government
of India that any changes in the import or excise duty should not be
made in the middle of the season in view of their undesirable repercus-
sions :

" Whereas the Sugar industry is a seasonal industry, which
produces within a period of four or five months the quantity of
sugar required for the country's consumption during the period of
12 months, and

" Whereas the United Provinces and Bihar, which produce about
80 per cent of the total sugar manufactured in the country, fix the
minimum price of cane to be bought by the factories, and

" Whereas the effects of any changes in the import duty on sugar
or in the excise duty on sugar made during the month of March or
April, which fall in the middle of the season, are bound to be
serious, either on the manufacturers or on the cane cultivators ;
The Sugar Control Board recommends to the Government of the
United Provinces and Bihar that they should represent to the
Government of India the " necessity of making any changes in the
import duty on sugar, or in the excise duty on sugar with effect
from the month of November, that is, at the beginning of the cane
crushing season, and not from the month of March or April, as
has been done hitherto, with a view to avoiding undesirable effects
either on the producers of the cane or the manufacturers of sugar
or the merchants dealing in sugar,"

vnt

It is a matter of regret to find, however, that no attention had been
paid to this matter by the Government of India when the excise duty
was increased from its high level of Rs. 2 to Rs. 3 per cwt. in March,
1940. The increase was made effective from 1st March, 1940, i.e. in
the middle of the season.

The consequences of this duty were so serious in the U. P. and
Bihar that the U. P. and Bihar Government decided to assist the sugar
industry of these provinces by assuming immediate responsibility for
payment to the Government of India of Re. 1 of the excise duty payable
on each maund of sugar manufactured during the 1939-40 season and
then lying unsold with the factories, with effect from the 25th August,
1940. 1

This excise payment (described loosely as rebate) of Re. 1 per
maund was recovered by the industry in accordance with a scheme
framed in consultation with the Sugar Syndicate by increasing the cane
cess in the subsequent season. The Government amended the Suar
Control Act in 1940 and provided for the realisation of the subsidy from
the industry by means of advance from the Government of India
through the imposition of a special cess of six pies per maund of cane
in subsequent seasons.

For this purpose the Provincial Governments of the U. P. and Bihar
borrowed from the Central Government at 3 per cent per annum
approximately Rs. 150 lacs and passed this sum on to the -factories
temporarily.- This was recovered slowly from factories and the
amount was repaid to the Government of India by 1944.

When the announcement was made for the imposition of additional
excise duty with effect from 1st March, 1940, the industry represented
that all sugar produced on or before the 29th of February should be
exempted from the increased duty. 3 Later, the Government accepted
this suggestion and made an amendment to their original proposal
exempting sugar produced on or before the 29th February from the
additional excise duty of Re. 1 per cwt. Even this small relief which
created a saving of about Rs. 70 lacs to the industry, was greatly appre-
ciated by the industry. 4

1 Vide U.P. and Bihar Government comprehensive communique issued on the
21st August 1940, in " Sugar Industry at a Glance," 1940, p. 75 of the 1940 Annual.

2 Vide speech of the President of the Indian Sugar Mills Association at the
Annual Meeting in Cawnpore, on the 14th September 1940.

* It will be interesting to observe that in order to avoid sugar produced before
28th February having to pay a higher excise duty in the event of the Government
increasing the excise duty along with their budget proposals, the various factories
took out their quantities of sugar from the godowns and despatched them to up-
country centres. To prevent such possibility and complications, the Government
of India had to go to the length of issuing a notification whereby it was laid down
that "no sugar shall be issued out of a factory or used within a factory in the
manufacture of any commodity other than sugar, after 5 p.m. on the day appointed
for the presentation of the annual or supplementary budget of the Central Govern-
ment to the Chambers of the Indian Legislature. (Vide notification of the Gov-
ernment of India Finance Department of the 28th December 1940.)

4 Vide Sugar Industry Annual, 1940, p. 132.

Declaration of Policy oj giving Protection for long time necessary

Another point which calls for some comment is the action of the
Government of India in not passing an Act for assuring Tariff protection
to the industry for the entire period ending 31st March, 1946, as was
recommended by the Tariff Board of 1937. In 1938, the Government
of India extended protection for one year. In 1939, they extended it
for another 2 years up to 1941. In 1941, it was again extended by one
year, by the Protective Duties Continuation Act, and again in 1942 it
was continued for up to -31st March 1944, by the Protective Duties
Continuation Act, 1942, and again up to 31st March 1946.

The industry was thus kept constantly in suspense as to the action
the Government of India might take in regard to the tariff on suga
during the future.

As a matter of fact, when the Government decided in 1939, to
extend the then existing tariff on sugar for another 2 years up to 31st
March, 1941, they observed that a further enquiry would be undertaken
to determine the quantum of protection necessary. 1 A further Tariff
Board enquiry within 2 years of the last enquiry hardly seemed to be
necessary. We definitely held the view that if such an enquiry should
be held, it would only distract the attention of the industry. In this
connection we give below a copy of the Resolution forwarded by the
writer (Mr. M. P. Gandhi) who was one of the Directors of the Indian
Sugar Syndicate to the Indian Sugar Syndicate, in January, 1940. The
Resolution was accepted by the Indian Sugar Syndicate and forwarded
to the Government of the U. P. and Bihar in February, 1940:

" As a result of the outbreak of war and the prevalence of
abnormal conditions in the Sugar Industry and various other indus-
tries in the country, the Sugar Control Board recommends to the
Governments of the United Provinces and Bihar to urge upon the
Government of India the futility of conducting a further Tariff
Board enquiry for determining the measure of protection reauired
for the Sugar Industry, as observed in the statement of objects
and reasons appended to the Sugar Industry Protection Bill, 1939.
The Sugar Control Board feels that the Tariff Board is not likely
to be able to obtain any reliable information either in "regard to
(1) the cost of production of cane, or (2) the approximate cost
of manufacture, which depends upon various factors, or (3) in
regard to the price at which sugar can be imported in India, owing
to abnormal conditions due to the war. The Control Board, there-
fore, feels that the attention of the industry should not be distracted
in the direction of preparing a case for the consideration of the
Tariff Board, and suggests that the Government of India should take
suitable action themselves for giving the industry such adequate
measure of protection as is required by it, during the next six years
ending 31st March, 1946, and further that they should make an
announcement in November, 1940, in regard to the protection to
be given to the industry during the entire remaining period, so as
to remove the uncertainty in this respect."

1 Vide statement of objects and reasons appended to the Sugar Industry (Pro-
tection) Bill, 1939, introduced in the Legislative Assembly. The text of the Sugar
Industry (Protection) Act, 1939, is given in the Sugar Industry Annual, 1939, p. 6,

It is a matter for gratification to note that the Government of India
announced in October, 1940, that owing to the prevalence of abnormal
and unsettled conditions of the industry as a result of the war, it would
bo difficult for the Tariff Board to obtain proper data, and that in these
circumstances they considered that any Tariff Board enquiries would
be of very little value, and accordingly decided not to set up a Tariff
Board in connection with the sugar industry and also other industries
if the present unsettled conditions continued.

As observed before, the Government of India have extended pro-
tection to the industry year by year. We feel, however, that even now
the Government should pass an Act assuring protection to the industry
for the remainder of the period of protection i.e. up to the 31st March,
1946, instead of keeping the industry in suspense in regard to such
matter by extending the duties from year to year. 1

As a result of the general increase in the import duties by 20 per
cent with effect from 1st March, 1942, the total import duty on sugar
has been increased to Rs. 11-1-7 per cwt. (the excise duty is maintained
at the same old level of Rs. 3 per cwt.), and will remain at that level
till 31st March 1946.

1 This was done in March 1944, by the Protective Duties Continuation Act,
1944, for a period of 2 years, whereby status quo is maintained up to 31st March 1946.

APPENDIX NO. Ill

SUBSTITUTION OF GUR BY SUGAR, AND POSSIBILITIES OF
DEVELOPMENT OF PALM GUR INDUSTRY

Necessity of Exploring Possibility of Development of

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