Why is it in the News?

The Cabinet Committee on Economic Affairs recently approved ?340/quintal as the Fair and Remunerative Price (FRP) of sugarcane for the sugar season 2024-25 at a sugar recovery rate of 10.25%.

What is the Fair and Remunerative Price (FRP)?

• FRP was introduced by the government in 2009 by an amendment to the Sugarcane (Control) Order, 1966.
• It replaced the Statutory Minimum Price (SMP) on the Commission for Agricultural Costs and Prices (CACP) consultation.
• The FRP system assured timely payment to farmers, irrespective of the profit and loss to sugar mills.
  • Further, the new system made it mandatory for sugar mills to pay the farmers within 14 days of delivery of sugarcane.
• Additionally, the FRP system introduced grading on the basis of sugar recovery rate from sugarcane wherein a premium was paid to the farmer on higher recovery and a reduction in rates on lower recovery.
• The FRP is based on the Rangarajan Committee report on reorganising the sugarcane industry.

Factors 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
  • The price at which sugar produced from sugarcane is sold by sugar producers
  • Recovery of sugar from sugarcane
  • The realisation 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

Effect of the New FRP:

• Sugar production in India was hit hard in the October-December 2023 quarter as production fell by 11.21 million metric tonnes;
  • It was 12 million in the same quarter the previous year.
  • The increase in FRP is going to increase the cost for producers.
• The increased FRP will benefit over five crore sugarcane farmers in the country, however, the increase in production cost could affect end-consumers as well.
• Factors such as FRP hikes, akin to MSP, make it attractive to farmers but also increase prices in the local market as mills pass on that cost to consumers