Policy Analysis: Sugarcane
Pranay Kotasthane pointed out that sugarcane prices did not spike despite the sharp increase in demand due to all the harvest festivals recently. Being a policy analyst, he tried to find out why that is the case. He found that global sugar and sugarcane prices have barely increased over the last 25 years (adjusting for inflation) even though incomes have risen across the world. First, countries subsidize sugarcane production. Combined with better yields, it has resulted in a huge increase in sugarcane production, even over-production in India and Brazil. Then he zooms into India. The Indian government tries to juggle two contradictory aims – keeping the cost of sugar low for the consumer while also ensuring a fair price to sugarcane producers. To avoid sharp price increases that would hurt consumers, the government procures and sells via ration shops. It also proactively bans exporting sugar if it anticipates a rise in inflation. But the sugarcane farm...