Profitability Determinants and Operational Efficiency of Sugar Mills in Maharashtra A Panel Data Analysis

Abstract

The sugar industry plays a vital role in India’s rural economy, particularly in Maharashtra, one of the leading states in sugarcane production and processing. However, the financial sustainability of sugar mills has been increasingly challenged by fluctuating input costs, volatile market prices, and operational inefficiencies. This study investigates the determinants of profitability and assesses operational efficiency among cooperative sugar mills in Maharashtra through a panel data analysis. Using data spanning from 2006–07 to 2015–16, the study applies Panel Least Squares regression models to identify the key factors influencing profitability. Variables such as cane cost, conversion cost, capacity utilisation, and mill age are included in the econometric model to explain profitability variations across mills and over time. The results indicate that cane cost and conversion cost significantly affect profitability, with higher input costs having a negative impact. In contrast, higher capacity utilisation is positively associated with profitability, underscoring the importance of efficient resource use. The study also finds that older mills tend to demonstrate lower operational efficiency, suggesting a need for technological upgrading and modernisation. These findings enhance the understanding of structural challenges in the sugar sector and provide valuable insights for policymakers aiming to improve the sector’s sustainability. Strengthening operational practices and encouraging investment in modern technologies are identified as critical strategies for ensuring the long-term viability of cooperative sugar mills in Maharashtra.