Knowledge Nugget: What you must know about the Fair and Remunerative Price (FRP) for UPSC Exam

Key Takeaways :

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

2. 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), a body under the Ministry of Agriculture and Farmers’ Welfare.

3. 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.

4. 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 which mandates payment within 14 days of the date of delivery of the cane, failing which the cane commissioner may act against the miller. Failure to clear farmers’ due can even lead to the attachment of mill properties.

5. 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 higher the recovery, the higher is the FRP, and higher is the sugar produced.

What is MSP?

1. Minimum support price (MSP) is the price at which the government is supposed to procure/buy that crop from farmers if the market price falls below it. MSPs provide a floor for market prices and ensure that farmers receive a certain “minimum” remuneration so that their costs of cultivation (and some profit) can be recovered.

2. MSP was introduced in the mid-sixties when India was in food deficit. The government was keen to boost domestic production through green revolution technologies but realised farmers wouldn’t plant input-intensive high yielding wheat or paddy varieties unless guaranteed a minimum price. MSP was first fixed for wheat in 1966-67 at Rs. 54 per quintal.

3. The MSPs are announced by the Union government on the recommendations of the Commission for Agricultural Costs and Prices.

4. The Commission for Agricultural Costs & Prices recommends MSPs for 22 mandated crops and fair and remunerative price (FRP) for sugarcane. The Cabinet Committee on Economic Affairs (CCEA) of the Union government takes a final decision on the level of MSPs.

5. While recommending MSPs, the CACP looks at the following factors:

— the demand and supply of a commodity;

— its cost of production;

— the market price trends (both domestic and international);

— inter-crop price parity;

— the terms of trade between agriculture and non-agriculture (that is, the ratio of prices of farm inputs and farm outputs);

— a minimum of 50 per cent as the margin over the cost of production; and

— the likely implications of an MSP on consumers of that product.

6. Crops covered under MSP

— 7 types of cereals (paddy, wheat, maize, bajra, jowar, ragi and barley),

— 5 types of pulses (chana, arhar/tur, urad, moong and masur),

— 7 oilseeds (rapeseed-mustard, groundnut, soyabean, sunflower, sesamum, safflower, nigerseed),

— 4 commercial crops (cotton, sugarcane, copra, raw jute)

BEYOND THE NUGGET: Pradhan Mantri Fasal Bima Yojana (PMFBY)

(After knowing about the FRP and MSP, it becomes important to learn about the PMFBY, as government schemes, especially those for farmers, remain relevant for both Prelims and Mains. Additionally, in 2016, a direct question was asked on the PMFBY.)

1. The Union Cabinet on January 1, 2025, approved the continuation of the Pradhan Mantri Fasal Bima Yojana until 2025-26.

2. PMFBY was launched in 2016 to replace the existing National Agricultural Insurance Scheme (NAIS) and the Modified National Agricultural Insurance Scheme (MNAIS). It works on the One Nation, One Crop, One Premium.

3. Under the scheme, all farmers including sharecroppers and tenant farmers growing “notified crops” in the “notified areas” are eligible for coverage.

4. Initially, the scheme was compulsory for loanee farmers; in February 2020, the Centre revised it to make it optional for all farmers.

5. The scheme’s objective is to stablise farmers’ income to ensure their continuation in farming, encourage them to adopt innovative agricultural practices, and ensure the flow of credit to the farmers. For this, the scheme provides insurance coverage to the farmers in the event of failure of any of the notified crops as a result of natural calamities, pests & diseases.

6. Under the PMFBY, a farmer is required to pay as a premium 2% of the sum insured or actuarial rate, whichever is less, for all kharif foodgrain and oilseed crops; 1.5% of sum insured or actuarial rate, whichever is less, for all rabi foodgrain and oilseed crops; and 5% for horticultural crops.

Post Read Question

With reference to the Fair and Remunerative Price (FRP), consider the following statements:

1. The payment of FRP across the country is governed by the Sugarcane Control order, 1966.

2. It mandates payment within 14 days.

3. If the sugar recovery is higher then the FRP will also be higher.

4. FRP is the price declared by the various state governments.

How many of the statements given above are correct?

(a) Only one

(b) Only two

(c) Only three

(d) All four

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