Regulatory Decontrol of Indian Sugar Companies: A Financial Perspective
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RESEARCH ARTICLE
Regulatory Decontrol of Indian Sugar Companies: A Financial Perspective Ashutosh Gupta1 • Gitika Nagrath1
Received: 21 March 2020 / Accepted: 28 June 2020 Ó Society for Sugar Research & Promotion 2020
Abstract The decontrol of the Indian sugar industry was initiated by the Indian government in the year 2013 to strengthen the sugar companies primarily from financial perspective. But the question regarding the efficacy of decontrol in remodeling the financial performance of the Indian sugar companies still remains unanswered. In this context, the current paper examines and compares the financial performance of Indian sugar companies before and after the period of decontrol. The sample of the study consists of almost 50 percent (sixteen) of the total Bombay Stock Exchange-listed sugar companies. The data have been extracted from the balance sheets of the selected sugar companies for a period of ten years (2008–2009 to 2012–2013 period before decontrol; 2013–2014 to 2017–2018 period after decontrol). Three vital measures of financial performance headed as solvency, profitability and liquidity have been interpreted by calculating Altman Z score values, financial ratios and t values (paired t test). The study concluded that decontrol has brought satisfactory results with regard to liquidity and solvency of the sugar companies. As suggestive measures, the government should frame the policies to enhance the profitability of the sugar companies as decontrol has already brought positive changes in the liquidity and solvency position up to a significant extent.
& Ashutosh Gupta [email protected] Gitika Nagrath [email protected] 1
Department of Commerce and Business Management, DAV University, Jalandhar, Punjab, India
Keywords Sugar industry Decontrol Financial performance India
Introduction Decontrol of the sugar industry remained the talk of the town since many decades (Bernhardt 1920). The rationale behind such decontrol has been the smooth functioning of the companies by incorporating required changes in the monthly release mechanism and levy sugar for the Indian sugar industry (Modi 2012). In the past, the percentage of levy sugar has been marginally decreased by the government from time to time (Gulabchand 1985; Damodaran and Singh 2007), but the Indian government was not able to decontrol the sugar industry exclusively from the monthly release mechanism and levy sugar at the national level (Lavanya 2019). However, in the year 2013, the government decided to decontrol the sugar industry from the monthly release mechanism and levy sugar on the recommendation of the Rangarajan Committee (Department of Food and Public Distribution 2015). This particular committee was formed in the year 2008 to suggest the changes in favor of the Indian sugar industry (Randhawa and Gupta 2014). Decontrolling from the monthly release mechanism ensures the sale of sugar by the companies completely at their own disposal. In addition, decontrolling of levy sugar represents the sale of sugar at the
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