Good politics is not always good economics. That perhaps explains the UPA government's decision to alter its new sugarcane policy. 

A sharp rise in cane prices may trigger a rush among farmers to plant cane for the next season which in turn could lead to over-supply. And if millers are unable to buy out the entire stock, many farmers may again shift to other crops, a tendency, that might harm all stakeholders, including the farmer, the millers and the common man, like you and me.

Farmers in Uttar Pradesh are demanding Rs 270-280 per quintal for sugarcane while sugar companies in Maharashtra may have to pay only around Rs 200/quintal for sugarcane, while prices in the South are almost similar.

Companies are willing to pay higher prices since they can realise higher retail prices from end consumers but this could push retail prices above Rs 40 a kilo.

“Very high sugar prices are definitely not in anybody's interest. What I have heard is that millers are in talks with farmers, and an amicable solution will evolve shortly,” said Sameer Somaya, president of ISMA.

Optimists do believe that the sector holds significant long-term prospects.

“There are many sectors that have to battle political factors. If we go by the fundamentals of the sugar sector, long term prospects are very favourable,” said Ajay Loganandan, head of investment advisory at HSBC.

With all political parties vying to prove their superior concern for the cause of farmers, the end result is that the farmers will go back smiling. But the harsh reality is that input costs for sugar companies will go up considerably.