The world over, governments are looking at ways to wean people away from sugar. In India, the government itself probably needs to be weaned off the sweetener.

Nearly three decades after abolishing 'permit raj', the country's sugar sector continues to be tightly under government control.

The reason for the government's fixation with sugar is not difficult to fathom. Sugarcane farmers and mills in Uttar Pradesh and Maharashtra are among the most politically influential.

Officially, the government decontrolled the sugar sector in 2012-13. But the decontrol has mostly been on paper. Six years on, the government controls pretty much everything – from sugarcane prices to monthly sales quota and the minimum sale price.

Not that the sugar industry is complaining. In fact, it is the industry that lobbied for restoring the government control on sales and prices, citing regulated cane prices.

Cane prices fixed by the central government, and added on by the state governments, are higher than those for most competing crops, and that is the underlying cause of the mess that the sector is currently in. 

According to the government's own analysis, the average annual realisation from sugarcane cultivation per hectare was three-and-a-half times the average return from a rice-wheat or cotton-wheat cycle in 2015-16.

Though the support prices of competing crops have since been increased to 150% of the cost of cultivation, the returns from sugarcane are higher at about 177% of the production cost. 

No wonder then that farmers are growing more and more sugarcane. With yields and sugar recovery also improving, there is now a problem of plenty.

India produced record 32.8 mln tn sugar last year. This year, though production is seen slightly lower at 30.7 mln tn, the overall surplus is likely at a new high due to a large carryover from last year.

The surplus this year is estimated to be 15 mln tn or seven months of consumption. This has led to a fall in sugar prices, making it difficult for mills to recover their production cost and pay farmers for the cane – mills owed 200 bln rupees to sugarcane growers at the last count.

With elections round the corner, the government has taken a host of measures to ensure mills have adequate liquidity to pay farmers. 

Since last season, it has doubled the import duty on sugar, scrapped the export duty, brought in sale quotas for mills, set minimum sale price for sugar, created a government-funded buffer, and announced subsidies for mills that export sugar. It has also put in place a new policy to incentivise mills to convert sugarcane juice and sugar-rich B-heavy molasses to ethanol to reduce production of sugar.

That's not the end of the story. The government will have to look at ways to support sugar mills in the next season as well, as the supply overhang will continue even if there is a drop in output.

Going by past experience, the government will give in to the industry's demands for more sops.

But these are, at best, short-term fixes. 

Fact is that India does not need so much sugar. The average per capita sugar consumption in the country is about 18.5-20.0 kg a year, and it is growing at less than 2% a year, way below the rise in output. 

The world market too cannot absorb India's surplus without a subsidy, as the production cost here is far higher compared to Brazil, Thailand and Australia.

The only way out is to limit production, and for that the government should seriously look at rationalising sugarcane prices.

The government should also take a step away from the sector. 

Though sugar is an essential commodity, its monthly household consumption is just about 2 kg on an average, far less than that of food grains, pulses and edible oils. So it is not the consumers that need to be protected.

The government is still unwilling to let go of the controls, primarily because it wants to protect sugarcane farmers. 

But then why protect only these farmers? Why not those who grow other perishables and cash crops that are out of the ambit of minimum support prices? Or even those who fail to benefit from procurement operations under MSP? 

Policies that protect the interests of only a section of farmers no longer make sense.

Over a longer period of time, it is ultimately the industry that benefits the most from the government's protectionist measures. The increase in the number of private sugar mills in the country over the last decade can vouch for that.

The government has been protecting sugar mills and sugarcane farmers since the 1930s, much before the era of shortages forced the introduction of minimum support prices of far more essential commodities–wheat and rice–in the 1960s.

It's time the government shakes off this colonial hangover. It should stop giving preferential treatment to sugarcane, sugar and sugar mills, and let market dynamics decide production patterns.