Testing of technical efficiency catching-up in Indian sugar industry : a longitudinal analysis of sugar producing states

The study is an endeavor to test the validity of convergence hypothesis in Indian sugar Industry. For inferential purpose, data for 12 major sugar-producing states over the period 1974/75 to 2004/05 has been used. The technical efficiency and scale efficiency scores have been computed using the technique of full cumulative data envelopment analysis (DEA). From the empirical results, an average inefficiency to the tune of 35.55 percent has been observed in Indian sugar industry. The search for sources of technical inefficiency reveals that managerial inefficiency (i.e., pure technical inefficiency) is the dominant source and scale inefficiency is relatively scant source of it. The inference of the existence of catching-up (i.e., efficiency convergence) has been found valid during the pre-reforms period, which disappears during the post-reforms period. Moreover, the reforms process has been observed adversely affected the efficiency trends and thus, failed to exert any positive impact on the efficiency of Indian sugar industry at both national and state levels.