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Indian Economy

Fair and Remunerative Price (FRP)

  • 26 Feb 2022
  • 6 min read

For Prelims: Fair and Remunerative Price (FRP), Sugarcane.

For Mains: Agricultural Pricing, Sugar production in the Indian Economy, Challenges faced by sugarcane industry.

Why in News?

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 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.

What is the FRP?

  • FRP is the price declared by the government, which mills are legally bound to pay to farmers for the cane procured from them.
    • Mills have the option of signing an agreement with farmers, which would allow them to pay the FRP in installments.
    • Delays in payment can attract an interest up to 15% per annum, and the sugar commissioner can recover unpaid FRP as dues in revenue recovery by attaching properties of the mills.
  • The payment of FRP across the country is governed by the Sugarcane Control order, 1966 issued under the Essential Commodities Act (ECA), 1955 which mandates payment within 14 days of the date of delivery of the cane.
  • It has been determined on the recommendation of the Commission for Agricultural Costs and Prices (CACP) and announced by the Cabinet Committee on Economic Affairs (CCEA).
    • CACP is an attached office of the Ministry of Agriculture and Farmers Welfare. It is an advisory body whose recommendations are not binding on the Government.
    • CCEA is chaired by the Prime Minister of India.
  • The FRP is based on the Rangarajan Committee report on reorganizing the sugarcane industry.

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.

What is 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: IE

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