August 5, 2009
India Gets Caught Short as Sugar Prices Soar
By VIKAS BAJAJ
LONI KALBHOR, India
— Sanjay Gujar’s family has raised sugar cane for generations. But last year, after sugar prices fell by more than 40 percent, he replanted his six acres here in the sugar bowl of India with bananas.
A year later, after Mr. Gujar and thousands of other Indian farmers abandoned sugar, prices are surging. The price of refined sugar on international markets has jumped 60 percent since the end of last year, to 23 cents a pound, even as other food commodities have stabilized or fallen.
While all commodities move in cycles, sugar in India is a case study in feast-to-famine swings in which bountiful crops are followed by anemic harvests every two or three years.
Volatility is aggravated — some analysts say caused — by government efforts to control prices to balance the interests of farmers and consumers. When prices were rising, for instance, policy makers restricted exports, which helped create a glut. By the time the government reversed course and subsidized exports, many farmers like Mr. Gujar had switched crops.
“Sugar is a political commodity,” said M. R. Desai, president of the National Federation of Cooperative Sugar Factories, and “the government is not ready to let go.”
Even as India rushes toward a future as a technology and services powerhouse, there has been slow, halting progress in its agrarian economy, which still sustains more than half of its 1.1 billion people. Hobbled by small farm sizes, an intense reliance on fickle monsoon rains and extensive government control, Indian farmers are less productive and more vulnerable than their peers in other developing countries like Brazil and China.
Economists say India’s approach to regulating sugar is an example of how populist policies can hurt the very people they were meant to help: farmers and the rural poor.