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.
India, of course, is far from alone. The United States restricts imports and uses subsidies to help producers maintain domestic prices at about twice the level of world prices. (Sugar retails for 56 cents a pound in the United States, up 5 percent from December.)
Europe also protects its sugar industry. In 2006 the European Commission began changing the way it controls the commodity and started paying high-cost manufacturers to stop making sugar.
Sugar policies in the West are typically intended to bolster the incomes of politically powerful farmers and factory owners, but here in India, policy makers try to walk the line between helping farmers and consumers. An estimated 28 percent of Indians still live below the poverty line.
Moreover, sugar is an Indian culinary and cultural touchstone. It is liberally mixed into everything from syrupy tea to dense sweets. (The country’s sweet tooth also has a dark side. Diabetes is growing faster here than almost anywhere else in the world.)
Even now with sugar prices up sharply, demand is growing, because India’s population is growing, said Sanjay Manyal, a sugar analyst at Icici Direct.com, a securities firm.
To meet that demand, India will probably import 20 to 30 percent of the sugar it uses this fiscal year. Less than two years ago, the country exported 20 percent of the sugar it made.
To understand India’s sugar problems, industry officials say it is important to consider what happened in 2006 when the government banned exports to bring down prices. Those efforts were almost too successful. Within a few months prices began falling as it became clear that farmers had planted too much cane.
Farmers said conditions were so bad in 2007 and 2008 that sugar mills, which usually arrange to have cane harvested, did not even bother to send out crews. Many farmers, including Mr. Gujar, burned their crop in the field.
“Government policy, well intentioned though it may have been, seems to have aggravated the cycle,” said Samir S. Somaiya, president of the Indian Sugar Mills Association and a mill owner.
The government then tried to help by subsidizing exports. At the same time, farmers began switching to other crops. The ground was being laid for the current shortage.
Industry officials and analysts say the recent rise in prices has lured some farmers back to sugar cane, but India will not produce enough to satisfy domestic demand until at least 2011.
Officials at India’s Agriculture Ministry, which regulates sugar, declined to answer questions.