What is the Fair and Remunerative Price (FRP) of sugarcane?

What is Fair and Remunerative Price?

The fair and remunerative price is the minimum price at which sugarcane is to be purchased by sugar factories from the sugarcane producers i.e. farmers. FRP is determined by the central government on the basis of recommendations of the Commission for Agricultural Costs and Prices (CACP- a decentralised agency function under the Ministry of Agriculture & Farmers Welfare, Government of India) in consultation with the State Governments and after taking feedback from associations of the Sugar Industry. The government announces minimum support prices (MSPs) for 22 mandated crops and fair and remunerative price (FRP) for sugarcane. The mandated crops are 14 crops of the Kharif season, 6 rabi crops and two other commercial crops.

With the amendment of the Sugarcane (Control) Order, 1966 on 22.10.2009, 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. The FRP of sugarcane will be uniformly applied across the country. In addition to the FRP, some States like Punjab, Haryana, Uttarakhand, Uttar Pradesh and Tamil Nadu announce a State Advised Price (SAP), which is higher than the FRP.

Why is FRP important?

The fair and remunerative price ensures a guaranteed price to sugarcane farmers. FRP also assures a margin to farmers, irrespective of whether sugar factories generate a profit or not. The FRP determination favours sugarcane growers keeping in view their entitlement to FRP for their produce.

What factors are considered in fixing FRP of sugarcane?

The amended provisions of the Sugarcane (Control) Order, 1966 provides for fixation of FRP of sugarcane having regard to the following factors:

• 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 does FRP get calculated?

The FRP is approved by the Cabinet Committee on Economic Affairs (CCEA) chaired by the Prime Minister on the basis of the cost of production recommended by the Commission for Agricultural Cost and Prices (CACP). The cost of production is one of the important factors in estimating at Fair and Remunerative Price (FRP) for sugarcane. The CACP uses State-wise cost estimates compiled under ‘Comprehensive Scheme for Studying the Cost of Cultivation of Principal Crops in India. The latest CS data is available for the year 2017-2018. Based on the CS data, State-wise projections of the cost of cultivation (CoC) are made for the subsequent sugarcane season. The projected CoC of sugarcane for the crop year 2020-21 are based on actual estimates available for the latest three years viz. 2015-16 to 2017-18 for each State.

The assessment of input costs for all three consecutive years ending with 2017-18 is made by constructing the Composite Input Price Indices (CIPIs) (base year 2011-12=100). Different government agencies provide the latest data on prices of major inputs like human labour, bullock labour, machine labour, fertilisers, manures, seeds, pesticides and irrigation as per the data available from different government agencies. And based on the constructed CIPIs, the CACP makes projections for the State-wise cost of cultivation i.e. A2, A2+FL and C2.

The State-wise average recovery rates during TE2018-19 projected A2, A2 +FL and C2 CoPs of sugarcane for sugar season 2020-21 at State-specific rates and adjusted at a uniform recovery rate of 10 per cent, and production shares during TE2018-19 are presented in Table 1. It can be seen from the Table that all-India average recovery rate for sugarcane during TE2018-19 is 10.49 per cent. The A2 +FL cost of production of sugarcane (unadjusted for recovery) at the all-India level for the sugar season 2020- 21 is projected to be Rs. 166 per quintal. This Is a weighted average of State level costs, with Andhra Pradesh at Rs. 190/QTL, Karnataka at Rs. 138/QTL, Maharashtra at Rs. 171/QTL, Tamil Nadu at Rs. 187/QTL, Uttar Pradesh at Rs. 168/QTL and Uttarakhand at Rs. 130/QTL. The A2 CoP, unadjusted for recovery, at all India level is projected at Rs. 135/QTL and C2 at Rs. 235 per quintal.

What is the fair and remunerative price for the year 2020-21?

Based on these estimated costs and considering various other factors related to the sugar economy, the Cabinet Committee on Economic Affairs (CCEA) has increased Rs. 10 (compare to 2019-2020) and approved FRP of sugarcane for the year 2020-21 to Rs. 285 per quintal linked to the basic recovery rate of 10 per cent. It is higher by 79.42% over the production cost (Cost A2+FL) and ensures that farmers get a return of more than 50 % over their production cost.

The sugar recovery rate refers to sugar produced after processing a definite weight of sugarcane. The recovery rate varies for different districts and States. Moreover, to promote efficiency, for every 0.1 percentage point increase in sugar recovery over and above 10 per cent, the FRP should be increased by Rs. 2.85 per quintal. The Commission also recommends that for every 0.1 percentage point decline in sugar recovery below 10 per cent, the FRP should be reduced by Rs. 2.85 per quintal. The recommended FRP of Rs. 285 per quintal for the sugar season 2020-21 will cover A2 +FL cost of production of all six major sugarcane producing States.