Does competition help co‐operation?

This article was downloaded by: [McGill University Library]On: 26 March 2015, At: 06:52Publisher: RoutledgeInforma Ltd Registered in England and Wales Registered Number:1072954 Registered office: Mortimer House, 37-41 Mortimer Street,London W1T 3JH, UK

The Journal of DevelopmentStudiesPublication details, including instructions forauthors and subscription information:http://www.tandfonline.com/loi/fjds20

Does competition helpco‐operation?Donald W. Attwood aa Associate Professor of Anthropology , McGillUniversity ,Published online: 23 Nov 2007.

To cite this article: Donald W. Attwood (1989) Does competition helpco‐operation?, The Journal of Development Studies, 26:1, 5-27, DOI:10.1080/00220388908422137

To link to this article: http://dx.doi.org/10.1080/00220388908422137

PLEASE SCROLL DOWN FOR ARTICLE

Taylor & Francis makes every effort to ensure the accuracy of allthe information (the “Content”) contained in the publications on ourplatform. However, Taylor & Francis, our agents, and our licensorsmake no representations or warranties whatsoever as to the accuracy,completeness, or suitability for any purpose of the Content. Any opinionsand views expressed in this publication are the opinions and views ofthe authors, and are not the views of or endorsed by Taylor & Francis.The accuracy of the Content should not be relied upon and should beindependently verified with primary sources of information. Taylor andFrancis shall not be liable for any losses, actions, claims, proceedings,demands, costs, expenses, damages, and other liabilities whatsoever

http://www.tandfonline.com/loi/fjds20

http://www.tandfonline.com/action/showCitFormats?doi=10.1080/00220388908422137

http://dx.doi.org/10.1080/00220388908422137

or howsoever caused arising directly or indirectly in connection with, inrelation to or arising out of the use of the Content.

This article may be used for research, teaching, and private studypurposes. Any substantial or systematic reproduction, redistribution,reselling, loan, sub-licensing, systematic supply, or distribution in anyform to anyone is expressly forbidden. Terms & Conditions of accessand use can be found at http://www.tandfonline.com/page/terms-and-conditions

Dow

nloa

ded

by [

McG

ill U

nive

rsity

Lib

rary

] at

06:

52 2

6 M

arch

201

5

http://www.tandfonline.com/page/terms-and-conditions

http://www.tandfonline.com/page/terms-and-conditions

Does Competition Help Co-operation?

by Donald W. Attwood*

Co-operative sugar factories in western India are economicallysuccessful even though rife with factional politics. Since they are notheavily subsidised, what makes them operate efficiently? Politicalcompetition between elected leaders of neighbouring factoriesdrives them to compete economically. This in turn drives them toexpand, innovate and diversify production. Nothing in the standardrhetoric of co-operation explains this tendency toward competitiverisk-taking. Likewise, standard economic theories of competitionoverlook the political forces which drive these industrial leaders.

INTRODUCTION

Throughout the world, governments and other agencies have tried to pro-mote co-operatives to solve problems of rural development. Co-operativesare expected to mobilise scarce resources, contribute to economic growth,and promote more equitable production and distribution. Every conceiv-able type of co-operative has been tried somewhere: credit, irrigation,farming, processing, marketing, etc. Unfortunately, they often fail to liveup to expectations. Some are empty shells, ignored by their supposedbeneficiaries; others are simply arms of government bureaucracy; othersare plundered by local elites, giving few if any benefits to those who mostneed them [Worsley, 1971; Widstrand, 1972; Nash, et al, 1976; Esman andUphoff, 1984; Baviskar and Attwood, 1984; Attwood and Baviskar, 1988].

Since successful co-operatives are rare, it can be argued that they deserveattention. The co-operative sugar factories in Maharashtra state, westernIndia, have been remarkably successful - economically, socially and politi-cally. Some have serious problems, but on average they outperform mostother co-operatives and are more efficient than private sugar factories.They have become centres of agro-industrial growth and have promoted

* Associate Professor of Anthropology, McGill University. Many thanks are due the Inter-national Development Research Centre (Ottawa), les Fonds pour la Formation de Chercheurset l'Aide à la Recherche (Quebec), and McGill University for supporting this research.Thanks also to M. Moore, J. and M. Sharma, J. Tendier, and especially D.P. Apte,B.S. Baviskar, M.S. Marathe and C.S. Mujgule for their information and comments onearlier versions of this article. Likewise, thanks to participants in the conference on 'Coopera-tive Enterprises and Rural Development in India' and to seminar participants at the Centerfor International Studies, MIT, and the East-West Center, University of Hawaii.

Dow

nloa

ded

by [

McG

ill U

nive

rsity

Lib

rary

] at

06:

52 2

6 M

arch

201

5

6 THE JOURNAL OF DEVELOPMENT STUDIES

a variety of social services in the countryside, particularly education andhealth care.

These co-operatives were first studied intensively by B.S. Baviskar, asociologist at the University of Delhi. I have followed in his footsteps. Weagree that some of their most obvious features are also the most puzzling.Let us review these briefly.

First, unlike most co-operatives in most parts of the developing world,these are economically successful. From one unit in 1950, their numbershave expanded to 84 operating in 1988. Not all are technically efficient,but on average they have been as efficient as nearby private factoriesand considerably more so than the private sugar industry in northernIndia [Attwood and Baviskar, 1987]. India's sugar industry is now thelargest in the world. Maharashtra's co-operatives have made a substantialcontribution to that growth. Between the early 1950s and the 1980s theshare of India's white sugar output produced in Maharashtra's co-operativefactories increased from less than one per cent to about one-third (Table 1).

TABLE 1PRODUCTION IN INDIAN SUGAR FACTORIES

(IN THOUSAND METRIC TONS)

State & Sector

MaharashtraCo-OpTotal

Uttar PradeshCo-opTotal

All IndiaCo-opTotal

5113

58<4

51100

1960-61

264523

28

4503021

7731055

711299

126237tO

1980-81

18772085

170122t

29035118

1985-86

22102389

315I6t9

<U137015

Source: Cooperative Sugar Directory and Year Book, 1985-86, pp. 632-5, New Delhi:National Federation of Cooperative Sugar Factories.

Dow

nloa

ded

by [

McG

ill U

nive

rsity

Lib

rary

] at

06:

52 2

6 M

arch

201

5

DOES COMPETITION HELP CO-OPERATION? 7

These factories are big enterprises, with an average annual turnover on theorder of Rs 150 to 200 million each (US $10 to 13 million).

Second, these co-operatives are founded and managed by village sugar-cane growers. Unlike many 'co-operatives' in other parts of India, theywere not planned by government agencies and are not managed bygovernment bureaucrats. They employ skilled managers and technicians,but the basic management decisions are taken by their chairmen and boardsof directors, who are farmer-shareholders elected by their peers.

Third, these co-operatives have benefited from favourable policies of thestate and central governments: the former, for example, contributes someshare capital, while the latter helps in providing credit for capital equip-ment, especially for units in industrially backward areas. However, muchof the investment capital comes from the Industrial Finance Corporationand other agencies, which lend to private industry on the same terms; andmany loans taken for establishment or expansion have been repaid early.While a number of units are economically weak or 'sick,' in part due tothe recent three years of severe drought, quite a few are economicallyindependent and have bought back their own shares originally purchasedby the state government.

Fourth, rather than being perpetually subsidised, these co-operatives areactually penalised for their efficiency, receiving lower sugar prices from thecentral government than the less efficient private sugar factories of north-ern India. Each factory is required to sell 45 per cent of its output to thegovernment as 'levy sugar', at below-market prices. The scale of this pricedifferential is huge: it currently entails an annual loss by Maharashtra'sco-operatives of something in the order of Rs 300 to Rs 1,000 million(US $20 to 67 million) [ibid.: A44-45). Far from being heavily subsidised,the co-operatives are actually paying a subsidy to help the private sugarfactories survive in the north.

Fifth, all the co-operative factories, including those with the best techni-cal and financial performance, are rife with political competition andfactionalism. Moreover, the elected chairmen and directors use factorypolitics as a base for competing in district and state politics [Baviskar,1980]. This is contrary to standard co-operative ideals, which stress politi-cal neutrality, the absence of factionalism, and the primacy of co-operationover competition. The combination of economic efficiency and politicalcompetition seems paradoxical.

Why are the co-operative sugar factories so successful? And how can anylarge enterprise be technically well-managed while at the same time servingas an arena for factional politics?

Twenty years ago, Baviskar [1968] raised the latter question and offeredsome answers. He pointed out that political competition inside the factoriesactually seems to restrain corruption and despotism. Elected leaders knowthey will be judged by the economic performance of their factory. If perfor-mance declines, they may be voted out in favour of eager competitors.

Dow

nloa

ded

by [

McG

ill U

nive

rsity

Lib

rary

] at

06:

52 2

6 M

arch

201

5


(Elections occur every five years.) Also, because a factory is owned bythousands of shareholders in many villages, it usually includes many bigfarmers with business expertise, who need not tolerate mismanagementby their peers. As a result, leaders must be sensitive to the well-being ofthe factory, not merely to opportunities for personal enrichment. Contraryto standard expectations, internal political competition keeps the leaders'attention on economic performance.

However, there are some problems with this explanation. As Baviskarhimself [1988] has recently pointed out, many factories have been led bychairmen solidly entrenched over long periods of time. This suggests thatsome leaders may be able to use their command of resources to partiallyinsulate themselves from internal competition. Another problem, as weshall see, is that leaders are sometimes far more competent and innovativethan one would expect simply on the basis of internal checks and balances.Such leaders expand and diversify their factories, adopt new technologies,and experiment with innovations. What leads them to take such risks?There is more to be explained here than restraints on mismanagement.There appear to be positive factors promoting good management.

During the last few years, Baviskar and I have considered a number ofeconomic and social factors which help to explain why many of these sugarco-operatives work successfully [Baviskar and Attwood, 1984; Attwoodand Baviskar, 1987; and Attwood, 1988a and 1990]. We have pointedout two sets of factors, internal and external, which contribute to acommunity of interests among the farmer-shareholders and thus helpmaintain cohesion in factory operations. Among the external factors areagrarian relations (relations of caste and class), political history, cultureand ideology. Among the internal factors are the technical requirementsof sugar processing and their impact on the interests of large and smallcane growers. Here I shall briefly review our current understanding ofthese factors, noting contrasts with other regions and other types of co-operatives, before returning to the theme of political competition.

SOURCES OF COMMON INTERESTS

The structure of agrarian relations in Maharashtra is relatively open andflexible as compared, say, with northern India. The dominant caste (Mara-tha in most villages) includes the majority of the rural population andowns most of the land. Large and small landholders belong to the samecaste and are linked by patrilineal descent, marriage connections, and bygeographic and economic mobility. Most Maratha farmers rely primarilyon family labour (including female labour) to cultivate their lands, andthere is no disdain for doing heavy labour when required. Other castesare small in population, and when labourers are hired by big bagaitdars(operators of irrigated holdings), the labourers come from various middleand lower castes, the majority being Marathas or similar farming castes.

Dow

nloa

ded

by [

McG

ill U

nive

rsity

Lib

rary

] at

06:

52 2

6 M

arch

201

5


Thus differences of caste status are, to some extent, weakened by sharedeconomic roles; and class differences within the majority caste are softenedby connections of kinship, marriage, political patronage, and cultural iden-tity, including a work ethic which does not stress contempt for those wholabour in the fields.

All this stands in contrast to northern India, specifically the classic sugar-producing region of Bihar and eastern Uttar Pradesh, where dominantcastes such as Rajputs and Bhumihar Brahmans are often minorities intheir own villages, refuse to touch the plough, and have contempt forthose who work in the fields. Here much of the heavy work is done bydependent scheduled-caste labourers, who are at least as numerous as thedominant-caste landowners [e.g., Schwartzberg, 1968; Sharma, 1978]. Allthis makes for a more rigid and polarised stratification system, with a strongcultural divide between those who are political masters of the village andthose who do much of the actual farm work.

In semi-arid regions like Maharasthra, the main political and cultural di-vide has often been between the dominant farming castes and the educatedhigher castes who dominate urban sectors of commerce and administration[Ludden, 1988; Attwood, 1988b]. This was manifested in the history of thenon-Brahman movement in Maharashtra, and in the continuing antago-nism between rising Maratha politicians and old urban elites. However, inhumid regions of dense population like Bihar and eastern Uttar Pradesh,urban lifestyles and values have long been absorbed by the village elites,creating a class and cultural divide which is centred more within the villagesthan between rural and urban interests.

Another factor affecting economic mobility and the rigidity of classdifferences is what I have called the 'irrigation frontier' in Maharashtra.Over the last century a series of large-scale canal systems have beenconstructed in western Maharashtra. Each new canal created a frontier,along which land and irrigation were temporarily cheap relative to theirproductive potential, since the local villagers at first lacked experience andresources to grow cash crops under irrigation. The frontier thus encouragedimmigration and innovation by market gardeners (in particular by a casteknown as Saswad Malis) at an intensity which was otherwise impossiblein this drought-ridden countryside [Attwood, 1985]. Another region whichexperienced the same effect was the northwest (Punjab, Haryana and west-ern Uttar Pradesh), where an even larger irrigation frontier, dating backto the mid-nineteenth century, contributed to a boom unprecedented inIndia's agrarian history.1 By encouraging economic mobility in Maharash-tra, the frontier created a sense of optimism and innovation among farmersin the irrigated villages. Many big bagaitdars are known to have come fromhumble backgrounds, which reinforces a sense of common identity amonglarge and small cane growers [Attwood, n.d.: Chs. 6-7].

These are reasons why one might expect more co-operation betweenlarge and small cane growers in Maharashtra than in regions like the

Dow

nloa

ded

by [

McG

ill U

nive

rsity

Lib

rary

] at

06:

52 2

6 M

arch

201

5


north. This is not to suggest that class differences or potential conflictsare unimportant in Maharashtra, only that they are less extreme thanin other parts of the country. This conclusion derives from asking howmuch of the rural population owns how much of the land, who suppliesmost of the labour on this land, what are the opportunities for innovationand economic mobility, whether caste divisions reinforce class differences,and whether village elites adhere to urban values which set them apart fromthose who work the land.

Turning to factors internal to the co-operatives themselves, we haveargued that they operate on the basis of an alliance between large and smallcane growers - the former providing the leadership and the latter mostof the membership [Baviskar and Attwood, 1984; Attwood and Baviskar,1987], This alliance works not only because of favourable external factorsbut also because it is demanded by the specific technology and organisationof sugar production. Two technical factors are of prime importance: theperishability of cane and the need for high rates of capacity utilisation ofequipment.

Because cane is perishable, it must be processed soon after harvesting.This means that factory and farm must be tightly coordinated, so thatcane is cut when it is ripe and the factory has a steady supply. Withoutcentral coordination, the cane growers will all try to harvest and delivertheir crop at about the same time. This leads to a loss of sucrose, as thecane dries while waiting to be processed, and a loss of capacity utilisationfor the factory in other periods. Capacity utilisation is critical for economicperformance, since sugar is processed more efficiently by heavy machinery,representing heavy investments. When machinery is idle, capital is wasted,and interest charges weigh heavily on the enterprise. Consequently, it is ofutmost importance that the factory receive a steady supply of fresh cane.

Cane supply has always been the weak link in north India's private sugarindustry, since the private mills usually depend on a host of independentgrowers for their cane [Indian Sugar Committee, 1921]. In other parts ofthe world, sugar factories often manage their own plantations or directlycontrol the cane-growing process [Shlomowitz, 1984; Attwood, 1985]. Itis far more difficult to coordinate with thousands of independent smallgrowers, scattered over wide areas, particularly since there are conflictsof interest over cane prices and delivery schedules and growers have theoption of processing the crop themselves in small-scale units to make gul(or gur), a crude brown sugar.

The co-operative factories have solved this problem by reversing thecommon international pattern: instead of the factory owning the farm,the farmers own the factory. Thus the factory management aims topay higher instead of lower cane prices, which encourages mem-bers' loyalty and willingness to submit to a centrally-planned harvestschedule. The co-operatives in Maharashtra hire and supervise theirown teams of harvest and transport workers, bringing cane from

Dow

nloa

ded

by [

McG

ill U

nive

rsity

Lib

rary

] at

06:

52 2

6 M

arch

201

5


field to factory according to a schedule laid down months in ad-vance.

Most of the factory leaders, their competitors, and first-rank supportersare big bagaitdars. The economic well-being of these big growers dependson the cane price paid by the co-operatives. The price, in turn, depends ontwo key factors: efficiency of cane supply and capacity utilisation.2 In orderto maintain high capacity utilisation,3 the factories depend on the middleand small growers who make up the vast majority of their membership.The big bagaitdars might prefer a cane supply system which favours them,but they require instead a system which maintains the loyalty of the smallergrowers. Without the latter, cane supplies would diminish significantly,capacity utilisation would decline, net factory income would fall, and caneprices would collapse. Thus the powerful big farmers need an alliancewith smaller farmers in order to benefit from co-operative factories. Thisresults from the importance of cane prices to their prosperity, from theirinvestment in heavy equipment, from their managerial control over how itis used, and from their accountability to the shareholders.

These propositions concerning common interests, while relevant tounderstanding cohesion and efficiency in the sugar co-operatives, donot adequately explain the innovative and enterprising leadership whichis found in the best cases. For this purpose, we must return to the subjectof competition.

POLITICAL AND ECONOMIC COMPETITION

Baviskar [1950] has argued that internal political competition is not a fa-tal obstacle to efficiency, that in fact, it curtails mismanagement. At thispoint, I want to carry the question a step further and ask whether politicalcompetition, particularly external competition, may actually be an incentiveto improve technical and financial performance.

Few city dwellers know much about the economics of sugar production,but most in Maharashtra are aware of the rampant factionalism in theco-operative sugar factories. For many people, this competitive atmos-phere seems incongruous or improper: after all, a co-operative presumablyshould function on a basis of co-operation, not conflict or competition.Factional competition carries the threat of favouritism, corruption, andinstitutional paralysis - ills which undermine many organisations in otherregions and sectors. Some sugar factories also succumb to these ills, butmost do not.

Sugar politics in Maharashtra has been studied in depth over a longperiod [Baviskar, 1968, 1971a, 1971b, 1980; and Attwood, 1974, 1979and n.d.: Ch.8]. Not only is there intense competition within each fac-tory for election to the board, but the leaders are deeply involved indistrict and state politics. My case study of the Malegaon Co-operativeSugar Factory in Pune district confirms the following points made

Dow

nloa

ded

by [

McG

ill U

nive

rsity

Lib

rary

] at

06:

52 2

6 M

arch

201

5


by Baviskar and others [e.g., Carter, 1974; Rosenthal, 1977; Lele,1981].

First, the factory leaders and their competitors form among themselvesa set of shifting coalitions. Successful coalition partners are often, but notalways, members of dominant Maratha lineages in the larger villages. A fewfactory chairmen have come from other castes. Coalitions are assembledto include those who command vote blocs in Maratha lineages; but othercastes, lineages and villages are also represented, roughly in proportion totheir numerical strength. Each member has one vote, regardless of howmany shares he owns.

Second, leaders retain the loyalty of their supporters by providing fa-vours. Particularly esteemed is the favour of a job in the factory, and manyshareholders or their kinsmen hold such jobs. Such favours cannot be pro-vided for all, so the leaders also project an image of general benevolenceby supporting religious and cultural events, irrigation projects, droughtrelief, educational and medical institutions [Attwood and Baviskar, 1987:A53-A55].

Third, local leaders are also judged by their access to higher patrons: tostate party leaders, cabinet ministers and the like. In return for politicalsupport, the latter can encourage development projects, such as schools,roads, banks, clinics and irrigation projects. Thus the interaction betweenlocal and regional leaders consists of intense bargaining over the exchangeof votes for patronage.

Fourth, the most effective factory leaders are those who can both secureaccess to powerful state leaders and maintain the support of a solid votebloc, despite competition from other leaders within the same communities.Since state politics is highly competitive and non-ideological, patronagealliances sometimes change with bewildering rapidity. They tend to crystal-lise during important elections, shifting as competitors adjust to the resultsof one election and prepare for the next.

Fifth, in some situations (the Malegaon factory has been an example),power shifts back and forth between coalitions, so that chairmen and boardmembers are likely to change from one election to the next. In other cases(two factories near Malegaon provide examples), a dominant coalition,centred on one powerful leader or family, tends to be more stable. Onemight expect such leaders to be more arbitrary and irresponsible. How-ever, the technical performance of factories managed by long-establishedchairmen is often as good or better than those with more internal competi-tion.3

Why this should be the case will be better understood when we ana-lyse political and economic competition between factories. To do this,we need to view the factories not as separate cases but in interactionwith each other. It must be admitted that I came to this approachlate in my research. The tendency in anthropological fieldwork is tofollow the village-study model, to study a particular unit and possibly

Dow

nloa

ded

by [

McG

ill U

nive

rsity

Lib

rary

] at

06:

52 2

6 M

arch

201

5


its relations with larger units (such as district and state politics, forexample). Anthropologists do not usually look at competition betweencomparable units, in part because they are not economists and have nostandard theory of how such competition should work, but also becausethey lean toward a community-centred view of the world. However,participation in a team research project on co-operatives nudged metoward new questions on the comparative performance of the sugarfactories.4

One noteworthy aspect of the sugar co-operatives in Maharashtra is thatthe better-run factories are improving their performance in ways that wouldbe familiar in private industry: buying new and larger-scale equipment,installing more fuel-efficient technologies, expanding production, andeven diversifying into new product lines. Most of these strategies areinherently risky, demanding substantial investments and experimentationwith new technologies and production processes. Consequently, the resultsare somewhat unpredictable, at least in terms of short-term profitability.What drives the factory leaders to take such risks?

It has long been evident that the factories are competing politically. Thedominant faction in one is always allied with its counterparts elsewhereand opposed to the dominant faction in still others. There is constantmanoeuvering and realignment as coalitions compete for control not onlyof nearby sugar factories but also seats in the state assembly, directorshipsof district co-operative banks, etc [Baviskar, 1980], As a result, there isalways at least one nearby factory whose current leaders are in directcompetition with your own and who are ready to support dissident factionsin yours.

However, this is merely the political side of the competition - the sidewhich attracts most attention in the press. There is also an economic sidewhich is, in some ways, more fundamental. Regardless of whether twonearby factories are political allies at a given moment, they will alwaysbe economic competitors. This competition has several sides. In the firstplace, the factories compete more or less openly for their supplies ofsugarcane (and thus also for irrigation water and contract labour teamsfor harvesting the crop). Second, they compete in terms of technicalperformance. Third and most important, they compete in terms of caneprice. All these competitions are intertwined, and factory leaders whocan consistently offer higher cane prices are more likely to carry politicalweight.

Competition for Cane

Factories compete to expand their membership and cane supply. Withincertain limits, more members enhance the political clout of their leadersand more tons of cane reduce the average cost of production. Hungry forcane, the co-operatives sometimes encroach on each other's territories.

Dow

nloa

ded

by [

McG

ill U

nive

rsity

Lib

rary

] at

06:

52 2

6 M

arch

201

5


The state government has tried to regulate this competition by passing a'Zonal Order' act in 1984 (amended in 1988), reserving certain areas ofoperation for each factory. However, non-members are allowed to selltheir cane to any factory; and the bidding for non-members' cane hasbeen fierce recently due to three years of continuous drought, whichreduced overall cane supplies. As a result, many factories have beensending their trucks and harvest teams over long distances (often morethan a hundred miles and sometimes into neighbouring states) to obtainnon-members' cane in huge quantities and in direct competition not onlywith adjacent factories but also those in other districts.

Many factories have also engaged in irrigation development as analternative to territorial encroachment, while others have enticed theState Farming Corporation to sell them cane which was formerly intendedfor private factories.

Competition over Technical Performance

The leaders and members of one factory are constantly aware of how theirtechnical performance compares with their neighbours. This concern isoften summed up in terms of the recovery rate: that is, how much sugar isproduced from a ton of cane. If costs of equipment, labour, and transportare similar, the factory with the higher recovery rate will earn a highernet income, to be passed on to the shareholders. Comparisons are alsocommonly made in terms of the number of days when a factory shuts downfor repairs during the crushing reason. If this number is much higher in onefactory than its neighbours, the members become concerned and angry.Every factory arranges a boiler puja (a ritual by a Brahman priest) at thestart of the crushing season, in order to avert breakdowns. If breakdownsoccur anyway, the members are likely to say that the leaders of anotherfactory picked a more auspicious date for the ritual - thus implying superiormanagement in general.

Competition over Cane Prices

The ultimate comparative yardstick is the price paid per ton of sugarcane.Co-operative sugar factories usually do not pay dividends to their share-holders; instead, net income is distributed in the form of higher caneprices. The popularity of chairmen and directors is directly related tothe cane prices which their shareholders receive. Intense competition forelection to the board thus translates into intense competition to offer highercane prices: higher than before in the same factory and higher than othersnearby.

A state-appointed cane-price committee serves to regulate this competi-tion to some extent. For it might otherwise spiral out of control and inducesome leaders to run down their corporate assets in pursuit of short-term

Dow

nloa

ded

by [

McG

ill U

nive

rsity

Lib

rary

] at

06:

52 2

6 M

arch

201

5


political gains. The committee consists of several cabinet ministers, assistedby the state's Director of Sugar, plus the chairman of the Maharashtra StateCooperative Sugar Factory Federation. This committee inspects the annualaccounts of each factory after the close of the crushing season and decidesthe cane price it should pay, given its current financial situation and itsfuture maintenance and investment needs. However, not all factories aresubject to regulation. Those which have repaid all capital loans and repur-chased shares originally owned by the state government can make their ownpricing decisions.

Directors and shareholders are keenly aware of which nearby factoriespay more and which pay less. For example, when I re-visited the Malegaonfactory in 1989, a former chairman expressed his misgivings about the cur-rent board by pointing out that, in the last two years, a nearby factory hadpaid Rs 30 to 40 more than the Malegaon price, as compared with a normaldifferential of Rs 5 to 10.

Cane price differentials affect the supply of cane, particularly from non-members outside a factory's area of operation, but over the long run evenfrom members. Price differences are a major factor used by shareholdersto evaluate the performance of their elected leaders. As a result, leadersare usually careful not to waste their corporate resources, at least not in aflagrant manner, since the reckoning will come after the state auditors havechecked their books and the cane-price committee has made its decisions.Only well-managed factories can expect to go on raising their cane pricesyear after year, and leaders must keep pace with their rivals in other facto-ries. Thus political competition is a spur to economic performance, whilethe demands of economic competition serve to keep political misbehaviorwithin reasonable limits.

COMPETITION AND INNOVATION

Competition not only serves to maintain standards of performance, it alsoprods directors into making big investments with uncertain consequences.When nearby factories are adopting new technologies, expanding capacity,seeking out more distant sources of sugarcane, and diversifying into by-products, many boards will feel pressure to do likewise. As in privateindustry, competition stimulates imitation and innovation, and somechanges prove more profitable than others. A case in point is providedby the Malegaon factory, which expanded in 1973-74 and then foundthe local cane supply inadequate, due to droughts and new restrictionson canal irrigation for sugarcane. As a result, Malegaon had to buy morecane from distant suppliers, which meant greater transport costs and lowersugar recovery rates due to longer transit times.

Despite such risks, there are strong motives for expansion. Directorsseek to expand their constituencies and thus their chances of election toother offices. They also seek to impress their allies and rivals in other

Dow

nloa

ded

by [

McG

ill U

nive

rsity

Lib

rary

] at

06:

52 2

6 M

arch

201

5


factories. Most of all, they seek to reduce the average cost of production(exclusive of the cost of cane) so that they can afford to raise cane prices.Higher prices not only make shareholders happy, they also protect the canesupply.

A dramatic object lesson in this regard is provided by the recent fateof the private sugar factories in Maharashtra. These factories, startedmostly in the 1930s, created their own cane estates on land bought andrented along the newer canals, along the irrigation frontier. However,they lost control of these estates under post-independence land reforms,which turned the land over to the Maharashtra State Farming Corporation(MSFC). The MSFC was created to grow and sell cane to the privatefactories, but the co-operatives eventually undermined this arrangement.Driven by the expansionist logic just outlined, they began buying cane fromthe MSFC at higher prices than the private factories were willing to pay.5

The latter protested that they had an exclusive right to the cane, but theMSFC decided to sell to the highest bidders. Thus several private factorieshave recently shut down, and others are converting into co-operatives.

This was not a fair fight, since the political cards were stacked againstthe private factories. The state government, which ultimately controlsthe MSFC, is influenced by a 'sugar lobby' led by co-operative factorychairmen. The point is that private factories faced fierce competition forsugarcane, competition which the co-operatives also face from each other.Since the private shareholders expect to be paid dividends, their managerscould not distribute net income in the form of ever-higher cane prices.But the co-operatives do precisely that. Their members neither expect norreceive dividends, so long as they get higher prices.

An even more dramatic example is derived from the recent shut-down ofthe Ganesh co-operative factory in Ahmednagar district. Ganesh happensto be located near two other co-operatives which have been aggressivelyinnovative. Moreover, like other factories in the region, Ganesh was hurtby the recent three-year drought and could not survive this crisis along withcompetition from its neighbours. Although not supposed to do so, Ganeshshareholders began selling cane to other factories when the differences inefficiency and cane price became too great for too long.

There are two lessons in this story. First, the competition is real: itmatters not only in terms of votes but even in terms of survival. Second,Ganesh was allowed to fail: it was not automatically propped up by thepolitical system. This reinforces a point made earlier: that the factorieshave managerial autonomy, that they are not wards of the state withaccess to unlimited subsidies. As we shall see below, there are government-managed 'co-operatives' in northern India which are not allowed to fail andare the worse for it.

A closer look at Ganesh's neighbours will illustrate some points aboutcompetition and innovation. The Kopargaon and Sanjivani factories areparticularly relevant here because they have overlapping areas of operation

Dow

nloa

ded

by [

McG

ill U

nive

rsity

Lib

rary

] at

06:

52 2

6 M

arch

201

5


and are intimate rivals in terms of efficiency, innovation, and cane price.This makes them convenient examples, though the same general pointswould apply, albeit with less intensity, to other neighbouring factories.6

The Kopargaon Cooperative Sugar Factory was established in 1955, thesecond in Maharashtra [Baviskar, 1980]. It was financed partly by shares,worth Rs 1 million, which were purchased by the state government; butby 1964 the factory had bought back all these shares. It also started witha capital loan of Rs 4 million from the Industrial Finance Corporation,which was fully repaid by 1964. Subsequently, the installed capacity wasincreased in two phases from 750 to 2200 metric tons of cane crushed daily.The loans used for expansion were repaid early, and by 1986 the factoryhad no long-term liabilities to financial institutions or to the government.

In 1976, Kopargaon started a distillery producing alcohol from molasses,which is a by-product of sugar. This was a joint venture with its rival,Sanjivani factory. By 1986, at the time of my first visit, Kopargaon alsohad a paper plant which was nearly ready to come on line. Paper is pro-duced from bagasse, the fibre remaining after the juice is extracted fromsugarcane. The factory had also donated Rs 200,000 as share capital to aco-operative milk chilling plant - another joint venture with Sanjivani - andhad given substantial donations to establish a variety of local institutions,including colleges, high schools, and an English-medium boarding school.These donations are raised by occasional deductions from the cane price of,say, one or two rupees per ton. They must be approved at annual generalbody meetings, which are well attended and open to lively debate [Attwoodand Baviskar, 1987: A53-A55].

A former managing director was particularly proud that during his ten-ure, Kopargaon achieved its highest recovery rate and for two years hadlost less operating time because of shutdowns than any other factory in thestate. In addition, Kopargaon received an award for outstanding technicalperformance from the National Federation of Cooperative Sugar Facto-ries. These awards are based on criteria covering all aspects of a factory'soperation, including sugar losses, labour productivity, fuel efficiency, andcapacity utilisation. In discussing these achievements, the former manag-ing director went out of his way to compare Kopargaon with its rival,Sanjivani. It was clear that, in his mind and the minds of his employers,high performance was verified by comparison with neighbouring factories.This makes sense, since technical and economic performance is affected bymany site-specific factors, such as rainfall, type of irrigation and access totransportation. Thus it is realistic to draw comparisons with factories whichshare the same local conditions, though leaders and managers also keeptrack of how well they are doing in comparison with other units acrossthe state.

Kopargaon's nearest rival, Sanjivani, was started in 1963, when it facedtwo serious problems. First, there were already five sugar factories (threeprivate units, plus Kopargaon and Ganesh) in the immediate area. Second,

Dow

nloa

ded

by [

McG

ill U

nive

rsity

Lib

rary

] at

06:

52 2

6 M

arch

201

5


there was no more canal irrigation available, so 85 per cent of Sanjivani'scane had to be grown with well water. This meant that the factory and itsmembers had to develop their own irrigation sources, which took time. Forboth reasons, Sanjivani had trouble getting an adequate cane supply in itsearly years. After 1972, however, accumulated losses were wiped out.

Sanjivani was established with the help of Rs 2.5 million in sharespurchased by the state government, of which Rs 2 million were boughtback by 1986. It also borrowed Rs 9 million from the Industrial FinanceCorporation and later took capital loans for expansion. The initial loan wasrepaid on time, and the second was repaid two years early.

From 1974 on, the management paid particular attention to new technol-ogies for saving energy and increasing sugar recovery. By 1985 the factoryachieved a recovery rate of 11.98 per cent, the highest ever in the districtand third highest in the state. A wide variety of new equipment madethis possible, including electronic monitoring and control equipment toimprove the uniformity of crystallisation, plus automated pH controlfor juice sulphitation and automated centrifuge controls. In 1986, theystarted to instal a huge new sugar cooling column and were planning topurchase high-pressure boilers at Rs 25 to 30 million apiece. They were alsoinstalling a custom-designed bagasse drier.7 Their long-term campaign foreconomizing on bagasse and energy consumption enabled them to produceenough steam and electricity to run the sugar factory plus six new chemicalplants and sell surplus bagasse to other factories.

We need to ask ourselves why we find here a bunch of farmers andtheir employees messing around with a lot of complicated new equip-ment, especially when the factory was already functioning adequately. Thequestion becomes even more urgent when we look at the latest projects:diversification into industrial chemicals and paper.

Why diversify at all? The managing director of Sanjivani, who has toexplain such things to his employers (the shareholders), had no troubleoutlining the rationale to a visiting anthropologist. Sugar profits areinherently unstable for several reasons: the weather fluctuates (as doirrigation supplies), and the entire sugar economy goes through boomand bust cycles [Attwood and Baviskar, 1987: A41; Rajagopalan, n.d.].On top of this, the central government keeps changing its policy on sugarprices, which have been partly controlled for most of the time. The prices ofsome by-products (molasses and alcohol, for example) are also controlled,but industrial and pharmaceutical chemicals, which can be produced frommolasses and alcohol, are not controlled. Thus Sanjivani is hoping thatprofits from chemicals will smooth out fluctuations in sugar profits. (I usethe term 'profits' loosely, since net income is either held in reserve fundsor distributed in the form of higher cane prices.)

Lest anyone think this was an easy gamble to take, I should point out thatSanjivani borrowed Rs 28.5 million for its new chemical plants - more thanthe total borrowed to build and expand the original sugar factory - and that

Dow

nloa

ded

by [

McG

ill U

nive

rsity

Lib

rary

] at

06:

52 2

6 M

arch

201

5


there were few, if any, other co-operatives whose experience could guidethem in the choice of products and technologies. In addition to alcohol,Sanjivani is now producing oxalic acid, diethyl oxalate, acetic acid, ethyl ac-etate and butyl acetate. Some of these are corrosive and dangerous. Partlyfor this reason, the first year of chemical production resulted in equipmentfailures and cost overruns. However, by 1986 the major difficulties seemedto have been ironed out. The next step would be to create a methane-gasplant which would consume effluents from the chemical plants and reducepollution.

Expensive and risky are the words which spring to mind in contemplatingthis strategy of diversification. Yet many of the sugar factories acrossMaharashtra have already established distilleries, paper plants, and otherby-product industries, as well as dairy and poultry co-operatives, banks,department stores, irrigation projects, schools, colleges and hospitals.Sanjivani is simply carrying this trend a step or two further.

Sanjivani and Kopargaon have worked jointly on some projects whilecompeting overall. Their first alcohol distillery was a joint venture, andthey have jointly financed local colleges and other projects, such as a co-operative milk-chilling plant. Their areas of operation overlap and manyfanners are members of both factories, so joint ventures make sense. Inaddition, their chairmen have often been allies in regional politics.

With regard to cane prices, however, the two factories are intenselycompetitive. Every technical advance by one is carefully watched by theother. Both, for example, were striving in 1986 to improve the qual-ity and off-peak availability of their cane supplies. In the late 1970sand early 1980s, their cane prices moved up and down with perfectconsistency, within a few rupees of each other. In 1984, however, thechairman of Kopargaon lost his bid for re-election, it was said, becausehis factory paid seven rupees less than Sanjivani that year. (This was adifference of only three per cent.) Political rivalries and alliances betweenthe two factories have been complex [Baviskar, 1980], and the electionresult cannot be reduced to one issue. Nevertheless, it is clear that pricedifferences are considered important in sugar politics, as subsequent eventsalso showed.

In 1985-86, thanks to its new profits from chemicals, Sanjivani paid anunprecedented premium of Rs 28 per ton over the cane price at Kopargaon.What was the effect of this remarkable gap? Kopargaon's chairman wasalready committed to his strategy for meeting the challenge: he had apaper plant almost ready to roll. Unfortunately, paper plants have notyet proven profitable for the sugar industry: capital costs have been higherthan expected and other problems have arisen, so that some of the ablestfactory chairmen think paper may have been a mistake.

In its first year of operation, Kopargaon's paper plant ran at a big loss;in its second year, losses were lower; and in the current year (1988-89),they hope to get out of the red. The chairman accomplished this by

Dow

nloa

ded

by [

McG

ill U

nive

rsity

Lib

rary

] at

06:

52 2

6 M

arch

201

5


hiring a top-flight manager at an unprecedented salary and giving him afree hand. If the strategy works, Kopargaon may soon have profits frompaper to match Sanjivani's profits from chemicals. Meanwhile, Kopargaonhas been on the defensive. As the chairman himself stated, the cane-pricedifferential had to be reduced to a maximum of Rs 10 to 15 per ton. Iheard from another source that, in order to match Sanjivani's prices forthe time being, Kopargaon has been running at a loss. I also heard that theSanjivani chairman has been building up his reserves as far as possible, tobe drawn down in future price wars if the Kopargaon paper plant starts toturn a profit.

COMPARISONS

Kopargaon and Sanjivani are not presented here as typical cases. Whilethere are quite a few factories which can match them, they rank amongthe best in Maharashtra. Moreover, their rivalry may be more intensethan most, since their areas of operation overlap to an unusual degree.They illustrate precisely what happens on the cutting edge of competition.It is assumed that other factories respond to similar pressures, thoughoften with less dramatic results. Kopargaon and Sanjivani are certainlynot unique in their experiments with diversification.

What happens to sugar co-operatives outside this competitive environ-ment? For comparison we turn to northern India, where the Indian sugarindustry started. At independence, in 1947, Uttar Pradesh produced moresugar than all other states combined. By 1985-86, it was running a dis-tant second to Maharashtra (see Table 1). The private sector, whichstill predominates in Uttar Pradesh, did not expand after 1960, and co-operative factories have grown very slowly. Why has co-operative sugarnot flourished in north India? We are fortunate in having two case studiesof co-operative sugar factories from this region [Batra, 1988a and 1988b].Both factories are located near Delhi, one in Haryana state and the otherin western Uttar Pradesh. In both cases, there seem to be three seriousproblems which account for their poor performance.

First, the northern factories do not have centrally-organised harvest andtransport systems. Instead, they rely on farmers to harvest and deliver theircane, which means the cane supply depends on local availability of labourand bullock carts. Local labour, however, is only available before the wheatharvest, which overlaps with the crushing season. The same problem arisesin Maharashtra if a factory relies on local labourers and carts for harvestand transport, as at least one has tried to do. Most factories in Maharashtraavoid this problem by hiring contract teams from other districts, where therabi (winter) season is less busy for dryland farmers. Partly as a result ofintermittent labour and cart shortages, then, the co-operative factoriesin Haryana and Uttar Pradesh have weak cane supply systems and poortechnical and financial performance.

Dow

nloa

ded

by [

McG

ill U

nive

rsity

Lib

rary

] at

06:

52 2

6 M

arch

201

5


The situation is even worse in Uttar Pradesh, because there are two sepa-rate co-operatives, one governing cane supply and one managing the sugarfactory. The co-operative cane supply union issues slips to the farmersauthorising them to deliver cane to the factory; but there is massive corrup-tion among employees of the union, since there is no central planning of theharvest and since the farmers are all bidding to have their cane purchased atabout the same time.8 This problem is avoided in Maharashtra because thefactories plan their harvest schedule according to the sequence of plantingdates and hire contract labour teams to do the harvesting. Since the fannersknow who planted first among their neighbours, they could easily complainif the schedule were distorted by bribery. There is no parallel, then, inMaharashtra, to the pervasive corruption among employees of the canesupply unions in Uttar Pradesh.9

A second defect in the northern co-operatives helps to explain thistradition of corruption. In the north, elected leaders do not manage theirfactories, nor their cane supply unions. Instead, these 'co-operatives' aremanaged by government officers, who may not even be specialists insugar and are often burdened with other official responsibilities. Thusthe elected leaders are not responsible for economic performance, andthe officials who run the factories are not directly accountable to theshareholders. (They answer, of course, to more senior officials.) Sincethere is no economic responsibility for the elected leaders, corruptionand negligence are unchecked by competition and accountability. Leadersare free to pursue their personal interests, which often run counter to thecollective interest of the co-operative. For example, many big cane growersin Uttar Pradesh are also gur (crude sugar) producers. They organise an-nual cane-growers' strikes against the factory in order to divert cane to theirgur-making units. In Maharashtra, the idea of a shareholders' strike againsta co-operative sugar factory would be ludicrous, like shooting oneself in thefoot. In the north, lack of economic responsibility among elected leadersencourages further lack of responsibility. It is also interesting to note thatfactory elections are not vigorously contested. Likewise, responsibility bystate officials means virtually no responsibility, rather unchecked corrup-tion and negligence, particularly in the cane supply unions.

The third defect is that the northern co-operatives operate in a climateof heavy protection and official regulation. Private sugar factories, whichpredominate in the north, have always been small and inefficient by worldstandards, chiefly due to problems of cane supply [Indian Sugar Committee,1921; Attwood, 1984, 1985 and 1990]. Consequently, they flourished onlyafter a protective sugar tariff was enacted in 1932. Even more to thepoint, in recent decades the northern factories, private and co-operativealike, have been protected against competition from the rapidly expandingco-operatives in western and southern India by the central government'ssugar pricing policies. The government requisitions 45 per cent of eachfactory's output as 'levy sugar' for the ration shops. Levy sugar prices

Dow

nloa

ded

by [

McG

ill U

nive

rsity

Lib

rary

] at

06:

52 2

6 M

arch

201

5


are calculated on a cost-plus basis: that is, the government pays more tothe high-cost, inefficient northern factories than to those in Maharashtra[Attwood and Baviskar, 1987]. Thus, operating in a highly regulated andprotected environment, one in which state governments, as a matter ofcourse, assume direct management of 'co-operative' institutions, the co-operative sugar factories in the north feel little pressure to operate moreefficiently.

In Maharashtra, competition engenders greater co-operation amongdirectors and shareholders - because both have a stake in outperformingother factories - while the lack of competition in northern India encour-ages directors to pursue their personal interests at the expense of theorganisation.

CONCLUSION

The rhetoric behind most co-operative planning suggests that people ina certain area, who need better services, can best provide these forthemselves by pooling their resources. Nothing in this rhetoric explainswhy co-operative sugar factories in Maharashtra have been expandingvigorously and diversifying into other product lines. If the crop getsprocessed and sold and the members get paid, why make additionalefforts? Why should factory leaders take on the heavy costs and risks ofadopting new technologies, expanding capacity, or setting up complex andexpensive by-product plants? The answer can only be that these factoriesare competing with each other. It is not enough simply to offer an adequatecane price to your shareholders: it must, if possible, be a better price thanyour neighbour's.

Most economic theories of competition focus on costs, prices, and othermonetary factors. However, competitive innovation is propelled in thisinstance not simply by economic factors but in large part by politics. Theleaders are held accountable for the performance of their factories, and atthe same time they have wide-open opportunities in state politics. Thusthey use efficiency and innovation to raise cane prices to buy votes.

Having introduced this image of a marketplace for political support, itmay be wise to qualify it. No large-scale organisation could take risksand plan for the future if the loyalty of its members were for sale fora few rupees at any time. On the contrary, it is clear that leaders caninnovate and make big investments precisely because there is a certainamount of trust and loyalty from the shareholders. However, this loyaltywill stretch only so far. In the case of Ganesh factory (and presumablyothers), a prolonged decline in efficiency may lead to a loss of confidenceand increased unwillingness to accept lower cane prices than those availablenearby.

As with other kinds of organisations, then, there are occasions, suchas the drought-precipitated crisis at Ganesh, when the organisation loses

Dow

nloa

ded

by [

McG

ill U

nive

rsity

Lib

rary

] at

06:

52 2

6 M

arch

201

5


credibility and individual interests come to the fore. On the other hand,there are strategies, such as investments in diversification, which can onlywork if the members have some confidence in their leaders over the longterm. Interpreting the dynamics of competition, innovation, and possiblefailure requires us to think simultaneously about individual calculations ofself-interest along with other factors, including those mentioned earlier,which make for group cohesion and a sense of common purpose.

Political competition is often seen as wasteful - as indeed it is, in somerespects. For one thing, the number of sugar factories in Maharashtraseems to have grown more rapidly than the supply of irrigation. In everycorner of the state, local leaders are eager to establish their own factories,but many of the new units have been sited in areas with inadequate canesupply. However, since some of the older factories, like Sanjivani, havecreated their own irrigation sources, it is a bit early to condemn the morerecent ones as unworkable. In addition, there is a question of distributivejustice: should a semi-arid region invest so much irrigation in sugarcane,when the same volume of water could be spread over a much wider area toprotect seasonal crops from drought? [Rath and Mitra, 1987]. Competitiveambitions in the sugar sector push in one direction, which may not behealthy for the state as a whole.

Another problem caused by competition is that aspiring factory leadersspend lavishly on their election campaigns, and some hope to recoup theirexpenses with under-the-counter payments from merchants and suppliersdoing business with the factories. Such payments have become more orless standard practice in some co-operative factories and constitute partof the 'cost of doing business'. In a recent paper, Baviskar [1988] hasdiscussed the reasons for the spread of this pattern, plus the public debateand legislation which are intended to curb mismanagement in the sugarco-operatives.

If elected leaders were concerned only with lining their pockets, how-ever, the co-operatives would be mired in corruption and unable to operateefficiently. This does not seen to be a serious problem in most cases, despitelurid stories in the press. Certainly, there is some corruption: I have beentold that contractors expect to pay an additional ten per cent under thecounter to the top officers of many factories, and this extra amount isreturned in the payment which the factory officially makes to the contrac-tor. Hence costs are raised and efficiency lowered, to an extent. What isremarkable, however, is that there seem to be limits to this kind of behav-iour, limits imposed partly by the competitive environment.10 Bribes andkickbacks are universal, particularly where business interacts with politics.In this case, institutions survive and function efficiently because individualgreed is held in check.

Moreover, leaders are virtually compelled to acquire 'black money' insome way, in order to be able to spend it for their factories. I was told ofone factory with an excellent technical and financial record which applied

Dow

nloa

ded

by [

McG

ill U

nive

rsity

Lib

rary

] at

06:

52 2

6 M

arch

201

5


to the central government for a license to expand capacity. Nothing hap-pened, despite various political strings being pulled. Then the managingdirector was sent to Delhi with Rs 20,000 cash in his pocket, and thelicense was granted forthwith. Such practices are universal in the businessworld in India, because government bureaucracies regulate virtually everyaspect of the economy. In other words, some of the black money (thereis no telling how much) has to be spent by leaders for the benefit of theirorganisations. This may or may not be good for the country as a whole,but the co-operatives don't have much choice in the matter.

Finally, we might also consider whether there is a more efficient modelfor the management of such enterprises. There are certainly worsealternatives, as already indicated by comparison with the northern sugarco-operatives and a recent news story concerning the state-owned BiharState Sugar Corporation. This corporation, which runs at least fifteensugar factories, has recently lost over Rs 160 million. The mills have beenrun with such negligence that a committee of inquiry recommended thatlosses should be recovered personally from the engineers and managersresponsible [Times of India, 1989]. Expenditures in these factories wereuncontrolled and unaccounted for, and technical results were ludicrous:against a norm of 8.5 per cent sugar recovery for this region, the actualrecovery in these factories was about 6.5 per cent.

Leadership in Maharashtra's co-operative sugar factories may be waste-ful in some circumstances. Overall, however, it does not seem to approachthe corruption and inefficiency found in some of the state-managed 'co-operatives' or state-owned corporations of northern India. One vital reasonfor this difference is competition - and the accountability of elected leadersfor the performance of their factories.

Since Adam Smith wrote The Wealth of Nations more than 200 yearsago, governments have known of the possible benefits of competition, asa means of stimulating innovation and thus promoting economic growth.Even the leaders of the Soviet Union and China are now hoping touse competition to improve enterprises which are over-centralised, over-regulated, over-protected, over-bureaucratised and massively wasteful.Competition may still be a dirty word in India, but it has sneaked inby the back door, at least in the co-operative sector in Maharashtra. Aslong as it is there, we could learn some instructive lessons by comparingthis industry with others in the public and private sectors.

final version received April 1989

NOTES

1. The contrasts drawn in this section between Maharashtra and the north apply with lessforce to the north-west, which is more arid than eastern Uttar Pradesh and Bihar.However, the north Indian plains in general, including the north-west, have scheduled

Dow

nloa

ded

by [

McG

ill U

nive

rsity

Lib

rary

] at

06:

52 2

6 M

arch

201

5


(labouring) castes which are larger, and landholding castes which are smaller, than inMaharashtra [Schwartzberg, 1968], suggesting that economic and social inequalities aremore extreme there.

2. In fact, the co-operatives in Maharashtra often run above their rated capacity andusually outpace the northern private factories in this respect [Attwood and Baviskar,1987: A44].

3. Detailed evidence on the technical performance of individual factories is publishedannually by the Deccan Sugar Institute.

4. This project, on 'Cooperative Enterprises and Rural Development in India', involvescollaboration between McGill and Delhi Universities, funded by IDRC and FCAR (seeacknowledgements). The results of eighteen case studies were presented at a conferencein Delhi in 1988 and will be edited and compared in forthcoming publications.

5. Even two decades earlier, the private factories complained that overconcentration of newcooperatives in areas where they were already established had reduced their externalcane supplies, since farmers were joining co-operatives rather than continue selling tothe private units [Vartak, 1966]. Needless to say, they protested even more over the landreforms which had deprived them of their estates [Somaiya, 1966: 39],

6. My information on Kopargaon and Sanjivani comes from brief visits in 1986 and1989, including interviews with chairmen and managing directors. In addition, likeother cooperative factories, these two publish pamphlets in English describing theirachievements. (This in itself is suggestive, since the pamphlets are not prepared for theoccasional use of visiting anthropologists.) I must mention my debt to C.S. Mujgule, whoarranged these visits and whose long practical experience in the sugar industry has beenextremely helpful. I also collected data from the Directorate of Sugar (Government ofMaharashtra), the Deccan Sugar Institute, and the Maharashtra State Cooperative SugarFactory Federation, and drew on my previous field experience in the Malegaon factory.

7. Bagasse is used as fuel in the factories.8. Verma [1983] gives more examples of corruption in cane supply cooperatives.9. The distinctive and awkward cane-supply system of the northern cooperatives has its

roots in the history of the private sugar industry of that region, just as the systemin Maharashtra is rooted in the divergent history of its private industry [Amin, 1984;Attwood, 1984, 1985 and 1990].

10. Leadership by the 'sugar barons' should also be interpreted in relation to wider socialand political values imbibed from the history of their region. Much could be written onthe political activists and social reformers who have shaped Maharashtra's traditions ofpublic leadership over the last century and influenced the goals and methods of factoryleaders. However, that is a topic for another paper.

REFERENCES

Amin, S., 1984, Sugarcane and Sugar in Gorakhpur, Delhi: Oxford University Press.Attwood, D.W., 1974, 'Political Entrepreneurs and Economic Development', Ph.D.

Dissertation, McGill University (University Microfilms).Attwood, D.W., 1979, 'Conflict Cycles: The Interaction of Local and Regional Politics in

India', Man (n.s.) 14: pp.145-60.Attwood, D.W., 1984, 'Capital and the Transformation of Agrarian Class Relations: Sugar

Production in India', in M. Desai et al., (eds.), Agrarian Power and AgriculturalProductivity in South Asia, Berkeley CA: University of California Press; and Delhi:Oxford University Press.

Attwood, D.W., 1985, 'Peasants versus Capitalists in the Indian Sugar Industry: Impact ofthe Irrigation Frontier', Journal of Asian Studies, 45: pp.59-80.

Attwood, D.W., 1988a, 'Social and Political Preconditions for Successful Cooperatives: TheCooperative Sugar Factories of Western India', in D.W. Attwood and B.S. Baviskar(eds.), Who Shares? Cooperatives and Rural Development, Delhi: Oxford University Press.

Dow

nloa

ded

by [

McG

ill U

nive

rsity

Lib

rary

] at

06:

52 2

6 M

arch

201

5


Attwood, D.W., 1988b, 'Poverty, Inequality and Economic Growth in Rural India', in D.W.Attwood et al. (eds.), Power and Poverty: Development and Development Projects in theThird World, Boulder, CO: Westview.

Attwood, D.W., 1990, 'Cooperative Sugar Factories in Western India', in H. Dick and J.Perkins (eds.), The Political Economy of Sugar in the Asia-Pacific Region, AustralianAssociation for Asian Studies, forthcoming.

Attwood, D.W., n.d., Raising Cane: The Political Economy of Sugar in Western India (Ms.)Attwood, D.W. and B.S. Baviskar, 1987, 'Why Do Some Cooperatives Work But Not Oth-

ers?' Economic and Political Weekly 22, No.26: pp.A38-A56.Attwood, D.W. andB.S. Baviskar (eds.) 1988, WhoShares? Cooperatives and Rural Develop-

ment, Delhi: Oxford University Press.Batra, S.M., 1988a, 'Agrarian Relations and Sugar Cooperatives in North India', in D.W.

Attwood and B.S. Baviskar (eds.), Who Shares? Cooperatives and Rural Development,Delhi: Oxford University Press.

Batra, S.M., 1988b, 'The Dominant Economic Classes and Co-operative Sugar Factory inNorth India', Paper presented at the Conference on Cooperative Enterprises and RuralDevelopment in India, New Delhi.

Baviskar, B.S., 1968, 'Co-operatives and Politics', Economic and Political Weekly, 3, No.12:pp.490-95.

Baviskar, B.S., 1971a, 'Co-operatives and Caste in Maharashtra: A Case Study', in P.M.Worsley (ed.), Two Blades of Grass, Manchester: Manchester University Press.

Baviskar, B.S., 1971b, 'Factions and Party Politics: General Elections in an AssemblyConstituency in Maharashtra', Sociological Bulletin, 20: pp.54-77.

Baviskar, B.S., 1980, The Politics of Development: Sugar Co-operatives in Maharashtra,Delhi: Oxford University Press.

Baviskar, B.S., 1988, 'Leadership, Democracy and Development: Cooperatives in KolhapurDistrict, Maharashtra', Paper presented at the Conference on Cooperative Enterprisesand Rural Development in India, New Delhi.

Baviskar, B.S. and D.W. Attwood, 1984, 'Rural Cooperatives in India: A ComparativeAnalysis of their Economic Surivival and Social Impact', Contributions to Indian Sociology(n.s.) 18: pp.85-107.

Carter, A.T., 1974, Elite Politics in Rural India: Political Stratification and Political Alliancesin Western Maharashtra, Cambridge: Cambridge University Press.

Deccan Sugar Institute, 1988, Working Results of Sugar Factories in Maharashtra, Season1986-87 and 1987-88, Manjari (Pune District): Deccan Sugar Institute.

Esman, M.J. and N.T. Uphoff, 1984, Local Organisations: Intermediaries in Rural Develop-ment, Ithaca, NY: Cornell University Press.

Indian Sugar Committee, 1921, Report, Simla: Government Central Press.Lele, J., 1981, Elite Pluralism and Class Rule: Political Development in Maharashtra, India,

Toronto: University of Toronto Press.Ludden, D.. 1988, 'Economic Development and Social Change in Indian Agriculture: A

Historical Perspective', in D.W. Attwood et al. (eds.), Power and Poverty: Developmentand Development Projects in the Third World, Boulder, CO: Westview.

Nash, J. et al. (eds.), 1976, Popular Participation in Social Change, The Hague: Mouton.Rajagopalan, R., n.d., 'Indian Sugar Economy: A Cobweb of Policies', mimeo, Institute of

Rural Management, Anand.Rath, N. and A.K. Mitra, 1987, Economics of Irrigation in Water-Scarce Regions: A Study of

Maharashtra, Pune: Gokhale Institute of Politics and Economics.Rosenthal, D. B., 1977, The Expansive Elite: District Politics and State Policy-Making in

India, Berkeley, CA: University of California Press.Schwartzberg, J.E., 1968, 'Caste Regions of the North Indian Plain', in M. Singer and B.S.

Cohn (eds.), Structure and Change in Indian Society, Chicago: Aldine.Sharma, M., 1978, The Politics of Inequality: Competition and Control in an Indian Village,

Honolulu: University Press of Hawaii.

Dow

nloa

ded

by [

McG

ill U

nive

rsity

Lib

rary

] at

06:

52 2

6 M

arch

201

5


Shlomowitz, R., 1984, 'Plantations and Smallholdings: Comparative Perspectives from theWorld Cotton and Sugar Cane Economies, 1865-1939', Agricultural History, 58: pp.1-16.

Somaiya, S.K., 1966, 'Joint-Stock Sugar Mills in Maharashtra: Their Present Dire Plight andProspects for Survival', in The Deccan Sugar Factories Association Silver Jubilee Souvenir,pp.38-42., Bombay: Deccan Sugar Factories Association.

Times of India, 1989, 'Engineers, GMs of Sugar Corp. Indicted', The Times of India (Delhi)4 Jan., pt.2,p.1.

Vartak, D.V., 1966, 'Cane Supply Position & Sugar Factories in Ahmednagar District', in TheDeccan Sugar Factories Association Silver Jubilee Souvenir, pp.63-68, Bombay: DeccanSugar Factories Association.

Verma, H.S., 1983, 'Producers' Co-operatives and Producers' Interests: The Case of Co-operative Cane Development Unions in Uttar Pradesh', mimeo, Lucknow: Giri Instituteof Development Studies.

Widstrand, C.G. (ed.), 1972, African Co-operatives and Efficiency, Uppsala: ScandinavianInstitute of African Studies.

Dow

nloa

ded

by [

McG

ill U

nive

rsity

Lib

rary

] at

06:

52 2

6 M

arch

201

5

Does competition help co‐operation?

Documents

Transcript of Does competition help co‐operation?