Sweet toothless

Ahead of the festive season,Indias sugar is running out. Truth be told,this isnt just happening in India; even in calorie-rich America,sugar producers have warned supplies are running dangerously low. The price on New York futures exchanges of white,refined sugar delivered in October has run up to a three-decade high. The governments own stock of sugar,comfortably high till very recently,is running dangerously low; it is even a conceivable possibility that India will enter the next year with its reserves completely depleted. How did we get here? Who do we hold responsible? And how do we ensure it doesnt happen again?

At first glance,it appears a combination of uncontrollable factors: the drought; problems with the Brazil crop; a long-term move away from sugarcane to more lucrative alternatives paddy,oilseeds. But not everything is that simple. Why is paddy more lucrative,after all? Because of state decisions. In Andhra,for example,sugarcane croppers complain that the government-mandated minimum support price for paddy is Rs 980 per quintal. Sugarcane,at Rs 1,070 per quintal,looks comparable till one realises that paddy has a six-month seed-to-income cycle,but for sugarcane thats closer to 12 to 15 months. That longer cycle causes growers and government both to overcompensate: a glut in the market 15 months ago can and did cause government decision on MSP that reduces supplies today.

Then theres the traditional resistance to imports expressed in arcane regulations over what level of processing is permissible for imported sugar,and whether you have to compensate by exporting a comparable weight,regulations frequently designed to benefit politically powerful millers and refiners. And that,in a nutshell,is where the blame lies: politics. For too long sugar has been the most politically connected of crops,and we see the results today. In one of the most-read and finest papers of the past 10 years,four Indian economists showed that structures of sugar processing in India specifically Maharashtra with government-protected local monopolies,and politically-set input prices cause massive inefficiencies and reduce incentives. But politically,nothing has moved. Today,we face a perfect storm: despite the fact that the agriculture minister knows and cares about the sugar industry,despite the fact that friendly governments are in power,consumers are angry,farmers are angry,millers are angry. The system hasnt worked. Its time for a complete change. Sharad Pawar must know: politics has screwed this up,and its not helping him politically either. Its time for the big change: taking politics out of sugar pricing,and putting the market mechanism in.