Fair and Remunerative Price (FRP)

Context:

Recently, Maharashtra Government issued a government resolution which will allow sugar mills to pay the basic Fair and Remunerative Price (FRP) in two tranches.

What is the Fair and Remunerative Price (FRP)?

• FRP is the price declared by the government, which mills are legally bound to pay to farmers for the cane procured from them.
• The payment of FRP across the country is governed by The Sugarcane Control order, 1966.
• It mandates payment within 14 days of the date of delivery of the cane.
• The concept of Statutory Minimum Price (SMP) of sugarcane was replaced with the ‘Fair and Remunerative Price (FRP)’ of sugarcane for 2009-10 and subsequent sugar seasons with the amendment of the Sugarcane (Control) Order, 1966 in 2009.
• The cane price announced by the Central Government is decided on the basis of the recommendations of the Commission for Agricultural Costs and Prices (CACP) in consultation with the State Governments and after taking feedback from associations of the sugar industry.  
•  Features:
  • Under the FRP system, the farmers are not required to wait till the end of the season or for any announcement of the profits by sugar mills or the Government. 
  • The new system also assures margins on account of profit and risk to farmers, irrespective of the fact whether sugar mills generate profit or not and is not dependent on the performance of any individual sugar mill.
  • In order to ensure that higher sugar recoveries are adequately rewarded and considering variations amongst sugar mills, the FRP is linked to a basic recovery rate of sugar, with a premium payable to farmers for higher recoveries of sugar from sugarcane

Which Factors are considered for announcing FRP?

• Cost of production of sugarcane
• Return to the growers from alternative crops and the 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
• The realization made from the sale of by-products viz. molasses, bagasse and press mud or their imputed value
• Reasonable margins for the growers of sugarcane on account of risk and profits

How is FRP Paid?

• The FRP is based on the recovery of sugar from the cane.
  • FRP has been fixed at Rs 2,900/tonne at a base recovery of 10% for the sugar season of 2021-22.
• Sugar recovery is the ratio between sugar produced versus cane crushed, expressed as a percentage.
• The higher the recovery, the higher is the FRP, and higher is the sugar produced.

About Fair and Remunerative Prices for Sugarcane

• The central government announced fair and Remunerative Prices for Sugarcane based on the recommendations of the Commission for Agricultural Costs and Prices (CACP) in consultation with the State Governments and after taking feedback from associations of the sugar industry.
• The Cabinet Committee on Economic Affairs announces the Fair and Remunerative Prices for Sugarcane at the union government level.
• Cabinet Committee on Economic Affairs is chaired by Prime Minister.
• Sugarcane (Control) Order, 1966: was amended in 2009 which replaced the Statutory Minimum Price (SMP) of sugarcane with the ‘Fair and Remunerative Price (FRP)’ of sugarcane.
• The methodology used for determining Fair and Remunerative Prices for Sugarcane: The Commission for Agricultural Costs and Prices (CACP) recommends the Fair and Remunerative Prices for Sugarcane by taking into account various factors like
  • Cost of production,
  • Demand-supply situation,
  • Domestic & international prices,
  • Inter-crop price parity etc.
• Benefits: Fair and Remunerative Prices for Sugarcane assures margins to farmers, irrespective of whether sugar mills generate a profit or not.

State Advised Prices (SAP) by sugarcane producing states

• The State Advised Prices (SAP) are announced by key sugarcane-producing states which are generally higher than FRP.
• Key sugar cane-producing states such as Punjab, Haryana, Uttarakhand, UP, and TN announce a State Advised Price (SAP).

What are the changes in the government resolution?

• The first installment would have to be paid within 14 days of delivery of cane, and would be as per the average recovery of the district.
• Farmers would get the second installment within 15 days of the closure of the mill after calculation of the final recovery, which would take into account the sugar produced, and the ethanol produced from ‘B heavy’ or ‘C’ molasses.
• Thus, instead of relying on last season’s FRP, farmers would be paid as per the current season’s recovery.

Why are farmers in Maharashtra protesting?

• Farmers argue that this method would impact their incomes. They point out that while FRP will be paid in installments, and will depend on an unknown variable, their bank loans and other expenses are expected to be paid for as usual.
• Also, farmers mostly require a lumpsum at the beginning of the season (October-November), because their next crop cycle depends on it. 

Sugarcane

• Temperature: Between 21-27°C with hot and humid climate.
• Rainfall: Around 75-100 cm.
• Soil Type: Deep rich loamy soil.
• Top Sugarcane Producing States: Uttar Pradesh, Maharashtra, Karnataka, Tamil Nadu, Bihar.
• India is the second largest producer of sugarcane after Brazil.
• It can be grown on all varieties of soils ranging from sandy loam to clay loam given these soils should be well drained.
• It needs manual labour from sowing to harvesting.
• It is the main source of sugar, gur (jaggery), khandsari and molasses.
• Scheme for Extending Financial Assistance to Sugar Undertakings (SEFASU) and National Policy on Biofuels are two of the government initiatives to support sugarcane production and the sugar industry.

Source: Indian Express

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