estimated to equal the as raw sugar price (c.i.f. Europe) plus 90% of the excess of the price of fully refined sugar (fob Europe) over the raw sugar price.

Under the importable hypothesis, the reference price for sugar is derived as the world free market price of sugar ( fob European ports) plus freight to India, plus port (unloading etc) costs to give an ldf price at the three Indian port cities, minus domestic transport costs from the market centers in the producing areas to the port markets. Freight (European ports to Indian ports) and port costs were estimated to be USD 38 per MT for the year 1990 and Rs 8.39 per quintal for the year 1981, respectively. These costs have been used to project costs for the other years using the tramp and port cost index respectively ( see methodology notes ). The transport cost for each state is calculated by projecting the 1981 cost using a weighted average of the rail and road indices. The 1981 cost of transport was Rs 15.03, 4.74 and 4.74 per quintal for UP to Calcutta, Maharashtra to Bombay port and TN to Madras port, respectively. The weights are based on the study of transport costs by Sharma (1991) in which he estimated the shares of rail and road transport as a function of distance ( see methodology notes) According to his study, nearly all the sugar would be carried by road, even for as long a distance as the 1441 km between Kanpur in 29 The shares shipped be rail would be: Kanpur in UP to Cal (1441 km), UP and Calcutta. Th hrssipdb alwudb apri Pt acutta(14ki) 13.1 percent; producing areas in Maharashtra to Bombay (220 kms), 1.5 percent; producing areas in Tamil Nadu to Madras (280 kms), 2.8 percent. See Annex 8 for details.

Under the exportable hypothesis, to compute the f.o.b. export price of sugar, we again follow the Goldar and Gulati study. They add freight to Egypt from European ports to the estimated fob Europe price, and subtract the transport cost from India to Egypt to get the estimated fob price in India. This is further simplified by assuming that the freight from Europe to Egypt is the same as the freight from India to Egypt, so that fob prices in India are taken to be the same as fob prices in Europe. Port costs are then deducted from these estimated fob prices to give export prices delivered to the Indian ports. Finally, domestic transport costs to the ports from the producing areas are deducted to give the estimated export reference prices at the mills in the producing areas.

Results: NPC estimates for mill sugar The detailed estimates of nominal protection for sugar for the period 1965 to 1994 are given in Annexes 1 to 6. Fig 10 illustrates the weighted average NPC for mill sugar in the three states on both the importable and exportable hypotheses during this period. Fig 12 shows the weighted average domestic and reference prices (expressed in constant 1981 Rupees) which correspond to these NPCs, and Fig 11 shows the estimated free market world prices of plantation white sugar (fob Europe) expressed in constant 1981 US dollars. Since the export reference prices are lower than the import reference prices, the exportable hypothesis NPCs are higher than the importable hypothesis NPCs. During the period there was a downward trend ofjust under 0.6 percent a year in real domestic prices, but there was no statistically significant trend in world or in reference prices owing to the very large fluctuations that occurred ( Tables 6 and 7). On average over the whole period (Table 8) sugar had positive protection, but the NPCs fluctuated 29 **Apart** from the greater flexibility and reliability of road transport, the preference for road over long distances despite very poor road conditions, delays at octroi points etc, is related a variety of inefficiencies in the operations of Indian Railways and in particular to the preference it gives to bulk shipments of commodities such as wheat and coal shipped by parastatals.

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