FAIR AND REMUNERATIVE PRICE (Syllabus: GS Paper 3 – Economy)

News-CRUX-10     23rd February 2024        

Context: Recently, the Cabinet Committee on Economic Affairs approved ₹340/quintal as the Fair and Remunerative Price (FRP) of sugarcane for sugar season 2024-25 at sugar recovery rate of 10.25%.

Fair and Remunerative Price (FRP)

  • About: FRP was introduced by the government in 2009 by an amendment to the Sugarcane (Control) Order, 1966. FRP is the minimum price that Sugar mills are legally bound to pay the farmers for the cane that they buy from them. Mills have the option to pay the FRP in instalments by entering into a contract with farmers.
  • Based on: The FRP is based on the Rangarajan Committee report on reorganising the sugarcane industry.
  • Replaced: The Statutory Minimum Price (SMP) on the Commission for Agricultural Costs and Prices (CACP) consultation.
  • Timely Payment Assurance: The FRP system ensured timely payment to farmers, regardless of the profit or loss incurred by sugar mills, with a mandate for payment within 14 days of sugarcane delivery.
  • Grading based on Recovery Rate: The FRP system implemented grading based on sugar recovery rates from sugarcane, offering a premium for higher recovery and deductions for lower recovery, with a standard recovery rate of 10.25 percent and corresponding premium and deduction rates.
  • Process: Central Government announces Fair and Remunerative Prices 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).

oThe CCEA is chaired by the Prime Minister.

oCACP is a department within the Ministry of Agriculture and Farmers Welfare. It is an advisory committee, and the Government is not bound to accept its suggestions.

Factors considered in determination of FRP:

  • Cost of production of sugarcane.
  • Return to growers from alternative crops & general trend of prices of agricultural commodities.
  • Availability of sugar to consumers at a fair price.
  • Price at which sugar produced from sugarcane is sold by sugar producers.
  • Recovery of sugar from sugarcane.
  • Realization made from sale of by-products viz. molasses, bagasse, press mud.
  • Reasonable margins for the growers of sugarcane on account of risk and profits.