Choice of technique in the sugar industry: an interactive multi-objective model

Abstract

The Choice of Technique (C.O.T) problem has always been treated in the literature as a problem of ranking the alternative techniques available on a single criterion, viz., net objectives, if included, have been clubbed together (for e.g., by weighted sum) into a single criterion. In this study the C.O.T. problem at the industry level has been modeled explicitly as a multi-objective problem with three objectives, viz., maximization of employment generated, minimization of investment and maximization of reinvestible surplus generated. Further, the formulation allows the choice of more than one technique, a mix, for an industry (or sector). It has been shown that the C.O.T. problem remains the same in the context of both the creation of a new industry and the expansion of an existing industry. The whole study as for the creating of additional capacity in the sugar industry in India. Using actual data pertaining to the sugar industry (for the five-year period starting 1977-78) the study provides a model and a complete solution procedure to evaluate policy alternatives. The policy variables considered are statutory minimum cane price, levy sugar. Five scenarios in which the policy variables assume different values are presented. The model is intended to be a very useful tool to the sugar industry. The following implications for policy emerge: 1) The performance on all objectives is poor if there were no levy procurement and no statutory minimum cane price; 2) Increasing cane price worsens performance on all objectives; and increasing the proportion of levy sugar gives a better performance; so does an increase in issue price.

Another major contribution of this study is an interactive solution procedure for multiple objective decision problems which have: a) linear objective function and constraints, and b) objectives falling into two sets such a better performance on any objective in one set necessarily implies a worse performance on the objectives of the second set. A limitation of this study is that it has been carried out with a hypothetical decision-maker. This is among the first empirical studies to be conducted on C.O.T. at the industry level.