When it was suggested that I write on the sugar conundrum, I was initially sceptical. After all, in a globalised economy, we should take the downside sportingly — so imports of essentials, if scarce, are the obvious way out. In a trading economy — bless the Brazilians, Mauritians and others with plenty of land and big subsidies — we can import all the sugar we want. In the last sugar cycle, in the early part of the decade, the sugar industry continued to be protected at 60 per cent-plus tariff rates — the envy of poor cotton producers, who were at the time introducing breakthroughs with so-called “illegal” BT cotton seeds but without any protection at all. Government eventually allowed free import of raw sugar for mills. Refined sugar imports are still largely controlled.

This is a problem embedded in history. At forty, when I became Chairman of the Agricultural Prices Commission, the sugar industry had just come out of a trough. Charan Singh had decontrolled sugar, telling his Jats at the height of the peak to “grow cane on [his] head.” But I remembered my economics, specifically the “agricultural cobweb” and I knew that would lead to a cycle.

Sugar, unlike other crops, is an 18-month crop. So it’s more

susceptible to over-correction. As now, so it was then: in UP, the farmer would go by last year’s high price, overproduce, and there would be a crash. We couldn’t fix it with my equations and my ACP charts; so we went into the mandis and mills, in Modinagar and Moradabad, in Kolhapur and Sangli and in Barabanki. Turns out the farmer doesn’t make money only out of selling cane to the factory; he also makes gur, so his return is both what the mills give him and what he makes from gur — where in oversupply his return falls. So, back then, we were protecting farmers stuck to each mill, as well as the mill itself. The cost of processing could be brought down by 25 per cent if crushing capacity went above 2,400 tonnes a day. We suggested giving it all up in three years.

... contd.