from October to September. This period straddles two Indian fiscal years, and in comparing the sugar NPCs with NPCs of other products, we have counted the "sugar years " as belonging to fiscal year which includes the first six months of the sugar year. For example, the sugar year beginning October 1986 and ending September 1987 has been assigned to the fiscal year 1986/87 (referred to as 1987) which ends on March 31, 1987. The domestic prices and the international prices are an average of the month-end average price for the twelve months. The Rupee/USD exchange rate is also an average of monthly rates for the same period. As indicated in the Annex Tables, the domestic prices for sugar are from various issues of the _Bulletin on Food Statistics,_ and world prices of raw and white sugar are from the International Sugar Organization (ISO) _Yearbook_ In our analysis for the importable hypothesis, we follow Goldar and Gulati and assume that sugar produced in Maharashtra would compete with imported sugar at Bombay, sugar produced in Tamil Nadu would compete with sugar imported at Madras, and sugar produced in Uttar Pradesh would compete with imported sugar at Calcutta, a major sugar deficit area. Again following Goldar and Gulati, under the exportable hypothesis, Indian sugar is assumed to compete with sugar from other major exporters in Egypt. Egypt was chosen in part because it actually imported Indian plantation white sugar for a number of years (see Table 5). Secondly, in the early 1990s about 60 percent of world exports of refined sugar went to Asia and Africa (Data S6) and Egypt was considered to be reasonably representative of freight costs to these markets.

The estimation of average domestic prices for sugar is shown in Annex 5. The price is for S-30 grade sugar,25 which during the period accounted for between half and two thirds of total production. The ex-factory realization (domestic price) for sugar mills is the weighted average of the adjusted free sale sugar price and the levy sugar price, where the weights reflect the proportion of production that is required to be supplied to FCI at the controlled low levy price. The levy prices are ex-factory and no adjustment for marketing expenses or excise or other taxes is needed. Usually there was just one announced levy price for each sugar year, but sometimes increased prices were announced during the year, in which case we have taken the simple average of the two prices. Levy prices vary between states, and in UP and Maharashtra they also vary by region. In UP we have taken the simple average of the levy prices of the western, central and eastern regions, and in Maharashtra the simple average of the prices in the southern and northern regions. In contrast to the levy prices, the reported free sale (i.e. free market) prices have to be adjusted by deducting marketing and traders' margins, excise taxes and a cess (in 1982 and after) to give the prices actually received by the mills. The marketing and traders' margins include a transport cost element to allow for transport from the sugar producing areas to the cities in which the wholesale prices are quoted i.e in the case of UP, to Kanpur; in the case of Maharashtra, to Bombay; and in the case of Tamil Nadu, to Madras. The major part of this adjustment, however, is for excise taxes, which are specific taxes per quintal of sugar. During the 1960s and 1970s the ad-valorem equivalents of these taxes were very high- about 30 percent of the free market price in the mid 1970s-but declined to much lower levels during the 1980s. By 1994 they were equivalent to about 6 percent of the free market price. In adjusting for excise 25 Since 1985 Indian sugar has been graded according to grain size(L, M or S = Large, Medium or Small) and color (29 or 30). S-30 grade corresponds to D-30 under the previous grading system. Free market wholesale prices are regularly reported for these grades. For details see the _Indian Sugar Year Book_ 30