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Economy
Mahesh

26/02/24 07:40 AM IST

Govt announces Fair and Remunerative Price for sugarcane

In News
  • The Centre announced a hike in the Fair and Remunerative Price (FRP) of sugarcane to Rs 340 per quintal for Sugar Season 2024-25 (October-September) from the existing Rs 315 per quintal.
About FRP
  • FRP is the price that the Centre’s Cabinet Committee on Economic Affairs (CCEA) decides.
  • This committee includes the Prime Minister, the Defence Minister, the Home Minister, the Finance Minister, the Minister of Agriculture and Farmers Welfare and some other senior ministers.
  • The FRP is based on the recovery of sugar from the cane. For the sugar season of 2024-25, FRP is Rs 340/quintal at a recovery of 10.25%.
  • With each increase of recovery by 0.1%, farmers will get an additional price of Rs 3.32 while the same amount will be deducted on reduction of recovery by 0.1%
  • Sugar recovery is the ratio between sugar produced versus cane crushed, expressed as a percentage.
  • The higher the recovery, the higher the FRP, and the higher the sugar produced from the cane.
FRP v/s MSP
  • Sugar is one of the 23 crops for which the government provides MSP.
  • MSPs serve as a basic, guaranteed payment for farmers given the various vulnerabilities involved in agriculture, such as unfavourable weather conditions.
  • In such scenarios, fluctuations in production could lead to price changes, shortage of food items for consumers and a lack of income for the farmers to support themselves.
  • To address this, the government announces the MSP every year for certain crops.
  • It is the price at which the government is supposed to procure/buy that crop from farmers if the market price falls below it
  • MSPs provide a floor for market prices and ensure that farmers receive a certain “minimum” remuneration so that their costs of cultivation (and some profit) can be recovered.
  • The price is fixed based on the recommendations of the Commission for Agricultural Costs and Prices (CACP).
  • It comprises a Chairman, a Member Secretary, one Member (Official) and two Members (Non-Official).
  • The non-official members are representatives of the farming community and usually have an active association with the farming community.
While recommending the MSP, the following factors are considered
  •  the demand and supply of a commodity;
  • its cost of production;
  • the market price trends (both domestic and international);
  • inter-crop price parity;
  • the terms of trade between agriculture and non-agriculture (that is, the ratio of prices of farm inputs and farm outputs);
  • a minimum of 50 per cent as the margin over the cost of production; and
  • the likely implications of an MSP on consumers of that product.
Why does sugarcane have both the FRP and MSP?
  • In 2020, the government’s think tank NITI Aayog released the final report of its task force on the Sugar and Sugarcane industry.
  • Since sugarcane has a very short shelf life, the responsibility of procurement of cane is on the sugar mills that are mandatorily expected to pay the FRP on purchase upfront.
  • Additionally, other crops that are under the MSP can be sold at prices higher than the MSP itself.
  • However, with regard to sugarcane, the absence of shelf life prompts them to sell their produce at any price prevailing in the cane-crushing season irrespective of demand and supply forces.
  • The central government had introduced MSP for sugar in 2018. It was fixed at Rs 2,850 per quintal which was subsequently raised to Rs 3,100 per quintal.
  • This was part of the measures announced to arrest the constant slide of sugar and to keep the demand and supply ratio to a safe limit.
  • The Centre had also fixed mill-wise sales quota.
  • Mills which breached either of the conditions were liable for action under the Essential Commodities Act, 1955 which would include a fine as well as a jail term (ranging from 3 months to 7 years) or both.
  • It was reasoned that these measures would help mills generate enough revenue to pay their farmers the FRP.
Source- Indian Express

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