Syllabus:

GS 3: Issues related to Direct and Indirect Farm Subsidies and Minimum Support Prices

Context:

The Centre has raised the Fair and Remunerative Price (FRP) of sugarcane to ₹355 per quintal for 2025-26, up from ₹340 last season.

More on the News

• The FRP hike will encourage sugarcane farmers to plant more when sugar production is seeing a dip. 
• Cabinet Committee on Economic Affairs decided to provide a premium of ₹3.46 per quintal for each 0.1% increase in recovery above 10.25% and to reduce the FRP by ₹3.46 per quintal for every 0.1% decrease in recovery.
• To further protect farmers, the government has stipulated that there will be no deduction for sugar mills with a recovery rate below 9.5%. Farmers supplying to these mills will receive ₹329.05 per quintal for sugarcane in the upcoming season.
• The FRP for the 2025-26 season is 105.2% higher than the cost of production, which is calculated at ₹173 per quintal.

Fair and Remunerative Price (FRP)

FRP is the minimum price mandated by the Government that sugar mills are legally obligated to pay farmers for their produce.

The FRP for sugarcane is decided every year by the Centre’s Cabinet Committee on Economic Affairs (CCEA) headed by the Prime Minister, on the recommendation of the Commission for Agricultural Costs and Prices (CACP). 

• The Commission for Agricultural Costs & Prices (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.

However, while the MSP is not legally guaranteed, sugar mills are legally obligated to pay the FRP.

The payment of FRP across the country is governed by the Sugarcane Control Order, 1966 issued under Essential Commodities Act, 1955 which mandates payment within 14 days of the date of delivery of the cane, failing which the cane commissioner may act against the miller.

The FRP is based on the recovery of sugar from the cane. 

• Sugar recovery is the ratio between sugar produced versus cane crushed, expressed as a percentage. 

The FRP is based on the recommendations of the Rangarajan Committee report on reorganizing the sugarcane industry.  

The FRP for sugarcane is decided using the same mechanism as the one that is used to calculate the Minimum Support Price (MSP) of 23 other crops.

Mains PYQ:

Q. What do you mean by Minimum Support Price (MSP)? How will MSP rescue the farmers from the low-income trap? (2018)