Invisible monopsony in Indian sugar sector

Sugarcane market in India is almost turning monopsonic given the trend in declining jaggery processing units coupled with policies like cane reservation area and minimum distance criterion. With the exploratory research approach, this article tries to identify the monopsonic characteristics exhibited by the sugarcane market, the reasons behind it and its impact on sugarcane farmers and millers. Single buyer, restriction on entry of firms, geographic immobility of the seller and buyer being the price maker, are some of the monopsonic characteristics exhibited. The reasons behind it could be deteriorating jaggery sector, lobbying capacities of sugar millers and inclined State support towards sugar mills. This kind of market structure has several negative impacts on its stakeholders like a limited opportunity for the seller to select their buyer and vice versa, low welfare as compared to perfect competition, farmers lose their control over their micro-level decisions.