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
