PD = Domestic price of sugarcane RR = Sugar recovery rate per quintal of sugarcane

**PM** = Reference price of molasses

PD= Domestic price of molasses a = Molasses recovery per quintal of sugar = 0.48 in UP, 0.35 in Maharashtra, 0.43 in Tamil Nadu.

I= Cost of intermediate inputs in reference prices PR = Cost of intermediate inputs in domestic prices In order to estimate the cost of tradable inputs in sugar milling, Goldar and Gulati used state-wise cost data for sugar factories for the year 1983-84 published in the Annual Survey of Industries (ASI). They then estimated the weighted average nominal protection of twelve items that accounted for the dominant part of the intermediate input cost. These are: coal, coke, motor spirit, diesel oil, fuel oil, lubricating oil, lime, limestone, sulfur, and gunny bags. Price indices and other information were then used to separately estimate the cost of these tradeable inputs and their nominal protection in each of the three states for each of the years 1981 to 1989. However, the total cost of tradable inputs was only around 10 percent of the total processing margin in most years, and for the long term estimates we simply projected Goldar and Gulati's results for 1984 forwards and backwards using the wholesale price index and assuming the same NPC (1.22) in every year over the entire period as they estimated for 1984. This is clearly not accurate but the resulting errors in the reference processing margin are too small to justify more detailed research When Goldar and Gulati used the above formula to compute the reference prices of sugar cane, during the period of very low world prices between 1985 and 1987, under the exportable hypothesis they turned out to be very low or even negative. If the prices of sugarcane were to fall to these very low levels farmers would not grow it at all, and there would be no counterfactual price against which protection could be measured. To avoid this, Goldar and Gulati (p.83) calculated the paid out cost of intermediate inputs in cane growing in the three states during 1985, and assumed that processing margins would be squeezed sufficiently so that cane prices would not fall below these levels. The computed minimum prices in 1985 were Rs 3.58, Rs 6.52 and Rs 3.82 per quintal in UP, Maharashtra, and Tamil Nadu respectively. In the long term estimates of nominal protection for cane given in Annexes 11, 12 and 13, these minimum prices were projected backwards and forwards using the general wholesale price index., and for the calculation of NPCs replace the computed reference prices in years in which the latter are below these minimum levels or negative. The minimum prices rather than computed prices were used in particular during the periods of low international sugar prices between 1965 and 1971, and again between 1985 and 1987.

The details of the NPC estimates for mill cane in the three states are given in Annexes 11, 12 and 13. Weighted averages of the NPCs in the three states were than calculated on the importable and exportable hypotheses as shown in Annexes 14 and 15. The weights in each case are the quantities of cane crushed by sugar mills valued at reference prices. For each state, these tables also show the estimated domestic prices paid by the mills, and the estimated reference prices.

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