Fair and Remunerative Price

Why in news?

The Centre’s decided to increase the Fair and Remunerative Price (FRP) for sugarcane by 11% in the Fair and Remunerative Price (FRP) for sugarcane for the upcoming sugar season.

What is FRP?

• FRP is the minimum price that the sugar mills have to pay to farmers.
• It is supposed to signal to farmers the need to plant more or less cane for the coming year.

What is the necessity to increase FRP?

• The country’s sugar output dropped to a seven-year low of 203 lakh tonnes (2016-17).
• So the domestic availability of sugar is expected to be low this year.
• It is this scenario the decision to hike the FRP appears to be an attempt to incentivise farmers to plant more cane for the upcoming season.

What are the shortcomings of FRP?

• Successive governments have been prompt to hike the FRP in deficit years.
• But they have subsequently shied away from slashing it in surplus years.
• e.g Between 2010-11 and 2017-18, despite excess production in most years, the FRP for cane has nearly doubled from Rs 130/quintal to Rs 255/quintal.
• Contrarily, they have been reluctant to allow higher cane prices to reflect in the end-product.
• Sugar prices in the same period have barely risen 30%, leading to a loss-making industry and unpaid cane dues.

What should be done?

• To resolve this issue, the Centre should implement long-overdue reforms and allow cane prices to be decided by a market-based formula that shares revenue between millers and farmers in a pre-decided proportion.
• This should be accompanied by dismantling reservations that force farmers to sell their output to a single mill.
• Allowing cane prices to respond to market forces is also critical to ensure that alternative food crops get equal priority when farmers make their sowing decisions.

Source: Business Line