Fair and remunerative price (FRP) is the minimum price rate at which sugarcane is to be purchased by sugar mills from farmers. The ‘FRP’ of sugarcane is determined under Sugarcane (Control) Order, 1966.
Recommended FRP is arrived at by taking into account various factors such as cost of production, demand-supply situation, domestic & international prices, inter-crop price parity etc.
FRP assures margins to farmers, irrespective of whether sugar mills generate a profit or not.
How are the prices of sugarcane determined?
The prices of sugarcane are determined by the central government and the state governments.
Central Government: Fair and Remunerative Price (FRP)
The Central Government announces FRP which are determined on the recommendation of the Commission for Agricultural Costs and Prices (CACP) and announced by the Cabinet Committee on Economic Affairs (CCEA). CCEA is chaired by the Prime Minister of India. The FRP is based on the Rangarajan Committee report on reorganising the sugarcane industry.
State Government: State Advised Prices (SAP)
The SAP is announced by the Governments of key sugarcane producing states. SAP is generally higher than FRP. The price is calculated by the experts, who calculate the entire economics of the crop by taking input cost and then suggest to the government, which may agree or not.
The FRP and SAP issue
At present, the Central Government releases FRP every year before the start of the sugar season. This FRP is a formula-linked cane price to encourage higher productivity. This FRP is what the mills would have to pay to the cane farmers.
But some states would like to fix a cane price over and above the FRP, which the mills would have to pay to the farmers. This price is called State Advised Price (SAP). The problem with the State Advised Price is that it is generally politically motivated.
Consequent to this, the Sugarcane became the most attractive crop to grow. On the one hand, farmers increased the cultivation of sugarcane crops; while on the other hand, the mills were forced to pay higher prices. The result was that arrears to farmers kept rising until they reached record high.
PRACTICE QUESTIONS
QUES . The Fair and Remunerative Price (FRP) of sugarcane is approved by the: UPSC PRELIMS 2015
(a) Cabinet Committee on Economic Affairs
(b) Commission for Agricultural Costs and Prices
(c) Directorate of Marketing and Inspection, Ministry of Agriculture
(d) Agricultural Produce Market Committee
Ans: (a)
