Fair and Remunerative Price

Fair and Remunerative Price (FRP) is an arrangement for the price to be paid to sugarcane farmers by the Sugar Mills and is announced each year by the Centre, on the advice of Commission for Agricultural Costs and Prices (CACP) and after consultation with State Governments.
The system assures margins on account of profit and risk to farmers, irrespective of the fact whether sugar mills generate profit or not and is not dependent on the performance of any individual sugar mill.
Under the FRP system, the price paid to farmers for sugarcane is not linked to the profits generated by sugar mills. Instead, FRP is based on the recovery rate of sugar from sugarcane.
In order to ensure that higher sugar recoveries are adequately rewarded and considering variations amongst sugar mills, the FRP is linked to a basic recovery rate of sugar, with a premium payable to farmers for higher recoveries of sugar from sugarcane.

State Advised Price or SAP is the price announced by the state government, over and above the FRP.
Since sugar pricing comes under the concurrent list, the Supreme Court has held that both the centre and the state have the power to fix sugarcane prices — while the centre’s price is the minimum price, states can set an SAP that is usually higher than the centre’s FRP.

While FRP and SAP are different versions of the price for sugarcane that need to be paid by the mills to farmers, MSP or Minimum Selling Price is the assured price of sugar for mills.
Prices of sugar are market driven and depend on demand & supply of sugar. However, to ensure that the industry gets, at least, the minimum cost of sugar production so as to clear cane price dues to farmers, the concept of sugar MSP has been introduced since 2018.
MSP of sugar is fixed taking into account the components of Fair & Remunerative Price of sugarcane and minimum conversion cost of the most efficient mills.

Factors that are taken into account for calculating FRP, other than sugar recovery, include —
- cost of production of sugarcane,
- general trend of agricultural commodities’ prices,
- availability of sugar to consumers at a fair price.
Reasonable margins for sugarcane growers are also to be taken into consideration, as per the amended provisions of the Sugarcane (Control) Order, 1966.

The Central government has hiked the Fair and Remunerative Price of sugarcane by ₹5 a quintal, setting the FRP at ₹290 a quintal for the 2021-22 sugar season, which runs from October to September.
Despite demands from sugar mills, however, the Centre refused to hike the Minimum Selling Price that they can sell the processed sugar, citing consumer interests.
The FRP is linked to the basic recovery rate of sugar (10%), and those with a recovery rate higher than 10% get a higher FRP.

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