Not sure why you get that impression santa. My logic is as follows:
1. You need hot oil (with smoke points generally well up above 200C) to fry the spices sufficently to release their essential oils and flavour. Without reaching these temeperatures (I dont know what temperatures these are?) the spices will remain uncooked and raw tasting or bitter?
2. Prior to this the hot oil may be used to fry any onions (do you really add onions to your main dish santa? Is this bir style?), garlic, ginger, etc. As you say, water will be present which will reduce the temperature of the oil (but to what temperature though, I dont know. Somewhere between 100C and the smoke point of the oil presumably?)
3. Then the oil is definately used to fry the spices (dry or in a paste). Here (at some stage) we need the temperature of the oil to rise sufficiently (certainly above 100C?) to fry the spices regardless of whether its bir or authentic style. The temperature will only rise as the water (from the onions, paste, tomato puree, etc, evaporates, hence the accompanying oil separation?
So I question the sense of adding sugar (to the spice mix) knowing that we want to fry the spices at these high temperatures (up towards 200C or so? I dont know?) for them to release their flavours. If so, I imagine the sugar (in the spice mix) would quickly melt and burn at these temeperatures. If not, the temperature wont be hot enough for the spices to be sufficiently cooked?
Make sense?
