How hike in Fair and Remunerative Price for sugarcane will affect farmers and sugar mills | Explained Premium

As Centre hikes of sugarcane FRP amid farmers protest, problems plaguing sugar industry remain unsolved. Here’s a look at what FRP is, how it affects MSP and the ongoing protests

The story so far: As farmers protest on Delhi borders, the Cabinet Committee on Economic Affairs on Wednesday approved ₹340/quintal as the Fair and Remunerative Price (FRP) of sugarcane for sugar season 2024-25 at 10.25% sugar recovery rate. Affirming its ‘guarantee’ to double farmers’ income, the Centre pointed out that the new FRP was 8% higher than that offered in the current season 2023-24. The new FRP will kick in from October 1, 2024, announced Union Information and Broadcasting Minister Anurag Thakur at a press briefing on February 21.

Hailing his Cabinet’s decision, Prime Minister Narendra Modi said the increase in sugarcane purchase price would benefit crores of farmers.

In a press release, the Centre informed that the new FRP was 107% higher than the A2+FL cost of sugarcane, benefiting over 5 crore sugarcane farmer families and lakhs of others operating in the sugar sector. A2+FL cost is the actual cost incurred by the farmer on seeds, fertilizers, chemicals, hired labour, and the family labour (FL) working on the farm.

Elaborating on the decision, Centre stated that with each 0.1% increase in recovery, farmers will get additional price of ₹3.32/quintal while the same amount will be deducted on reduction of recovery by 0.1%. With the minimum price being fixed at ₹315.10/quintal at 9.5% sugar recovery, farmers are assured of FRP at ₹ 315.10/quintal. Sugar recovery refers in percentage terms to the amount of sugar obtained from a certain amount of sugarcane after processing.

“It is noteworthy that India is already paying the highest price of sugarcane in the world and despite that Government is ensuring the world’s cheapest sugar to domestic consumers of Bharat,” read the release. It also stated that due to Modi government’s timely policy interventions, sugar mills have become self-sustainable and have not needed any financial assistance since 2021-22.

Fair and Remunerative Price (FRP) is the minimum price sugar mills have to pay farmers for sugarcane. In 2009, amending the Sugarcane (Control) Order, 1966, the Centre replaced the Statutory Minimum Price (SMP) of sugarcane with the Fair and Remunerative Price (FRP). Various factors like cost of production of sugarcane, recovery of sugar from sugarcane, price at which sugar is sold, profit from sale of sugar by-products like molasses, bagasse and press mud, margin for sugarcane growers, return to sugarcane growers from alternative crops, are considered in the FRP.

The price is decided by the Centre based on recommendations of the Commission for Agricultural Costs and Prices (CACP) and in consultation with State governments and sugar industry. However, some States like Uttar Pradesh, Haryana and Punjab offer higher prices for sugarcane under State Advised Price (SAP), which mills in those States must abide by.