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Fair and Remunerative Price (FRP) of Sugarcane
Note4Students
From UPSC perspective, the following things are important :
Prelims level: Fair and Remunerative Price (FRP)
Mains level: Not Much
Introduction
- The Cabinet Committee on Economic Affairs approved ₹340/quintal as the Fair and Remunerative Price (FRP) of sugarcane for sugar season 2024-25 at sugar recovery rate of 10.25%.
- This is about 8% higher than FRP of sugarcane for the current season 2023-24.
Fair and Remunerative Price (FRP): Explained
- Legal Framework: FRP is established under the Sugarcane Control Order, 1966.
- Minimum Payment: It denotes the minimum price obligated to be paid by sugar mills to farmers for their sugarcane produce.
- State Agreed Price (SAP): States have the authority to determine their SAP, typically higher than the FRP.
- The fixation of FRP considers various factors, including:
- Cost of sugarcane production,
- Return from alternative crops,
- Consumer sugar prices,
- Sale price of sugar,
- Sugarcane-to-sugar recovery rate,
- Income from by-products (e.g., molasses, bagasse),
- Adequate profit margins for sugarcane growers.
Determining Sugarcane Prices
- Central Determination: FRP is set by the Central Government based on recommendations from the Commission for Agricultural Costs and Prices (CACP) and endorsed by the Cabinet Committee on Economic Affairs.
- State Role: States announce SAP, often surpassing the FRP.
Minimum Selling Price (MSP) for Sugar
- Market Dynamics: Sugar prices fluctuate based on market demand and supply.
- Introducing MSP: To safeguard farmers’ interests, MSP for sugar was introduced in 2018.
- Components Considered: MSP incorporates elements of FRP for sugarcane and the minimal conversion cost of efficient mills.
Basis of Price Determination
- Transition from SMP to FRP: In 2009-10, FRP replaced the Statutory Minimum Price (SMP) of sugarcane.
- Consultative Process: The Central Government, in consultation with state authorities and sugar industry associations, determines the sugarcane price based on CACP recommendations.
Try this PYQ from CSP 2019:
Q. The Fair and Remunerative Price (FRP) of sugarcane is approved by the:
(a) Cabinet Committee on Economic Affairs
(b) Commission for Agricultural Costs and Prices
(c) Directorate of Marketing and Inspection, Ministry of Agriculture
(d) Agricultural Produce Market Committee
Post your answers here.
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Ethanol Production Policy: New Directive on Sugarcane Usage
Note4Students
From UPSC perspective, the following things are important :
Prelims level: Ethanol
Mains level: Ethanol production from sugarcane
Central Idea
- The Ministry of Consumer Affairs, Food and Public Distribution issued a directive to sugar mills and distilleries, not to use sugarcane juice or syrup for ethanol production in the ethanol year 2023-2024.
No Sugarcane Juice for Ethanol Production
- Continuation of Existing Supplies: The directive allows the continued supply of ethanol from B-Heavy molasses based on existing offers received by Oil Marketing Companies (OMCs).
- Regulatory Oversight: The Department of Food and Public Distribution, responsible for monitoring sugar production and availability, implements this directive under the Sugar (Control) Order.
Rationale behind the Directive
- Ensuring Sugar Availability: The government’s decision aims to ensure sufficient sugar availability in India, considering the lower sugar production in the country.
- Food vs. Fuel Consideration: Businesses highlighted this move as a balance between food security and fuel production.
- Impact on Ethanol Blending Targets: The directive is significant in the context of India’s goal of achieving 20% ethanol blending by the 2025-2026 ethanol year.
Implications for Industry
- ISMA’s Response: The Indian Sugar Mills Association (ISMA) is assessing the implications of the order.
- Effect on Domestic Sugar Supply: Industry sources indicate that this decision will ensure adequate sugar supply domestically, especially with reduced sugarcane production in states like Maharashtra and Karnataka.
- Impact on Ethanol Blending Program: The restriction is likely to affect the ethanol blending program, which is a key component of India’s renewable energy strategy.
- Consequences for Ethanol-Only Units: Facilities dedicated solely to ethanol production may face challenges due to this new policy.
Conclusion
- The directive represents a strategic decision by the Indian government to prioritize domestic sugar availability over ethanol production from sugarcane.
- Monitoring the impact of this directive on both the sugar industry and the ethanol blending program will be crucial in the coming years.
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Centre’s Ethanol Policy Shift: Impact on Sugar and Ethanol Industries
Note4Students
From UPSC perspective, the following things are important :
Prelims level: Ethanol Blended Petrol (EBP) Programme
Mains level: Read the attached story
Central Idea
- The Centre has taken significant steps to increase domestic sugar availability, including banning sugar exports and restricting the diversion of sugar for ethanol production.
- On December 7, the Ministry of Consumer Affairs, Food and Public Distribution directed mills and distilleries not to use sugarcane juice/syrup for ethanol production.
Ethanol Blended Petrol (EBP) Programme
- Programme’s Success: The EBP programme, a key achievement of the government, has seen ethanol blending with petrol increase from 1.6% in 2013-14 to 11.8% in 2022-23.
- Feedstock Diversification: The success is attributed to diversifying feedstocks, including C-heavy molasses, B-heavy molasses, sugarcane juice/syrup, and grains.
Ethanol Production from Different Feedstocks
- C-heavy Molasses: Traditionally used for ethanol production, yielding 220-225 litres of ethanol per tonne.
- B-heavy Molasses: Provides higher ethanol yield (290-320 litres per tonne) compared to C-heavy molasses.
- Direct Fermentation of Sugarcane: Fermenting the entire sugarcane without sugar extraction yields 80-81 litres of ethanol per tonne.
Centre’s Ethanol Blending Scheme: Food vs. Fuel Debate
- Increased Ethanol Production Post-2017: The use of B-heavy molasses and sugarcane juice/syrup, along with new substrates like surplus rice, broken grains, and maize, boosted ethanol production.
- Differential Pricing Policy: The government incentivized ethanol production from non-C-heavy molasses feedstocks with higher prices.
- Impact on Industry: Companies like Triveni Engineering & Industries Ltd (TEIL) adapted to multiple feedstocks, including grain during the off-season.
Challenges and Setbacks for the Industry
- Directive’s Impact: The December 7 directive is a setback, especially for companies with capacities to produce ethanol from cane juice/syrup.
- Tender for Ethanol Supply: The OMCs’ tender for 825 crore litres of ethanol for 2023-24 might be affected, particularly the 135 crore litres from sugarcane juice/syrup.
- Uncertainty in Pricing: The Centre has not announced prices for various ethanol feedstocks for 2023-24, despite the ethanol supply year aligning closer to the sugar year.
Sugar Supply Concerns and Policy Implications
- Low Sugar Stocks: The 2022-23 sugar year ended with low stocks, prompting the government to prioritize domestic sugar supply.
- Uncertain Production Forecasts: The National Federation of Cooperative Sugar Factories predicts a decrease in sugar production for 2023-24.
- Government’s Prioritization: The latest decisions reflect the government’s focus on domestic supply and consumer needs over exports and fuel production.
Conclusion
- Shift in Government Policy: The Centre’s recent actions indicate a shift towards prioritizing domestic sugar availability over ethanol production.
- Broader Implications: These decisions impact both the sugar and ethanol industries, reflecting the complex balance between food security and renewable energy initiatives.
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Pressmud for Green Energy and CBG Production
Note4Students
From UPSC perspective, the following things are important :
Prelims level: Pressmud
Mains level: NA
Central Idea
- Leading Sugar Producer: Since 2021-22, India has surpassed Brazil to become the world’s leading sugar producer.
- Second-Largest Exporter: India also holds the position of the second-largest sugar exporter globally.
- Ethanol Biofuel Sector Growth: The expansion of this sector has bolstered the sugar industry and improved the financial health of sugar mills.
Pressmud: A Valuable Byproduct
- Pressmud, also known as filter cake or press cake, is an agricultural waste product from sugar production.
- It is obtained during the repeated filtration of cane juice before sugar extraction.
- Approximately 3-4 percent of press mud is produced per tonne of crushed cane.
- Traditionally, pressmud is recycled as manure through composting and supplied to local farmers.
- Recognized as a resource for green energy, pressmud can be used to produce biogas through anaerobic digestion, leading to compressed biogas (CBG) creation.
- It is beneficial for crops and horticulture due to its richness in micronutrients.
Challenges with Pressmud
- Storage Issues: Pressmud undergoes gradual decomposition, complicating long-term storage and increasing production costs.
- Price Increase: The recognition of its potential has led to a substantial rise in pressmud prices.
Pressmud as CBG Feedstock: Advantages and Challenges
- Supply Chain Simplification: Using pressmud eliminates complexities associated with agricultural residue supply chains.
- Quality and Pre-treatment: Unlike municipal solid waste, pressmud’s quality is consistent, and it lacks lignin, reducing pre-treatment costs.
- Conversion Efficiency: Pressmud is more efficient and economical as a feedstock for CBG production compared to cattle dung and agricultural residue.
- Economic and Competitive Factors: The increasing price of pressmud and competition for its use in fertilizers and bio-composting pose challenges.
Regional Production and Sugar Mills in India
- Primary Sugarcane States: Uttar Pradesh and Maharashtra contribute significantly to India’s sugarcane cultivation.
- Operational Sugar Mills: As of 2022-23, India had 531 operational sugar mills.
- Sugar and Pressmud Production: The total sugar production was 32.74 million tonnes, with approximately 11.4 million tonnes of pressmud.
Potential and Future Steps
- CBG Potential: The available pressmud can generate significant quantities of CBG, valued at substantial economic returns.
- Required Interventions: To maximize this potential, states need to implement bioenergy policies, control pressmud prices, and establish long-term agreements with sugar mills.
- Research and Training: Developing storage technologies for pressmud and conducting training for CBG plant operators are essential.
Back2Basics: Sugarcane By-products
| Description | Uses | |
| Bagasse | Fibrous residue left after sugarcane crushing. | – Biofuel for energy production
– Raw material for paper, board, building materials |
| Molasses | Thick, dark syrup produced during sugar refining. | – Alcohol production (e.g., rum)
– Sweetener in animal feed – Base for fermentation products – Ingredient in food products |
| Vinasse | (Distillery Waste) Liquid waste from ethanol production using molasses. | – Liquid fertilizer
– Biogas production |
| Carbon Dioxide | Gas produced during fermentation in sugar manufacturing. | – Carbonation in beverages
– Enhancing plant growth in greenhouses |
| Fly Ash | Ash produced from burning bagasse. | – Material in cement and concrete
– Soil amendment in agriculture |
| Heat Energy | Thermal energy generated from manufacturing processes. | – Cogeneration for electricity and heating |
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Is India’s sugar surplus leading to a crisis?
Note4Students
From UPSC perspective, the following things are important :
Prelims level: Sugarcane industry
Mains level: Surplus Sugarcane production, factors behind and concerns
What’s the news?
- India’s top sugarcane-growing states rely heavily on groundwater for irrigation, leading to concerns over groundwater depletion.
Central idea
- India’s remarkable achievement of becoming the world’s top sugar producer in 2021-2022, surpassing Brazil, brings with it a significant challenge. The overcultivation of sugarcane has resulted in a sugar surplus and high exports, negatively impacting groundwater levels. To safeguard the agricultural sector and protect vital natural resources, addressing groundwater overuse in the sugar industry is of utmost importance.
Factors Behind the Excess Sugar Production
- Government Policies and Subsidies: The Indian government’s policies and subsidies play a significant role in encouraging farmers to cultivate sugarcane. The fair and remunerative price (FRP) scheme ensures that sugar mills pay a minimum price to sugarcane farmers, guaranteeing them fair profits for their crop.
- Domestic Demand: India’s position as the world’s largest consumer of sugar creates a substantial demand for sugar and its by-products. To meet this demand, farmers increase sugarcane cultivation, leading to excess sugar production.
- Export Incentives: The surplus sugar production in India has led to higher exports, and the government offers export subsidies to boost overseas sales.
Impact of Excessive Sugarcane Cultivation on Groundwater
- Water Depletion in Groundwater Reservoirs:
- Excessive sugarcane cultivation contributes to the depletion of groundwater reserves.
- In regions with inadequate rainfall, farmers heavily rely on groundwater from confined aquifers to sustain sugarcane crops.
- This over-extraction of groundwater leads to a reduction in groundwater levels, depleting the available water resources.
- Groundwater Stress and Drought Concerns:
- The extensive use of groundwater for sugarcane cultivation puts immense stress on groundwater reservoirs. In regions already experiencing groundwater stress, the additional demand for water exacerbates the problem.
- Moreover, sugarcane cultivation often occurs in areas prone to drought, and excessive water usage further exacerbates the vulnerability of these regions to water scarcity.
- Environmental Impacts:
- Groundwater depletion due to excessive sugarcane cultivation can have severe environmental consequences.
- As groundwater levels decline, it affects the health of ecosystems dependent on groundwater sources, such as wetlands, rivers, and lakes. Reduced flow in rivers and streams can harm aquatic life and disrupt local ecosystems.
- Impact on Farmers and Livelihoods: Groundwater depletion directly affects farmers who rely on it for irrigation. As water levels drop, farmers may face difficulties in accessing sufficient water for their crops, leading to reduced yields and economic losses. In areas where sugarcane is the dominant crop, groundwater depletion can impact the livelihoods of farming communities.
- Long-Term Sustainability Concerns:
- The continued excessive use of groundwater for sugarcane cultivation is not sustainable in the long run.
- Depleting groundwater reserves can lead to permanent damage to aquifers and reduce the overall capacity to support agricultural activities in the future.
Solutions to address the problem of excessive sugar production
- Crop Diversification: Encourage farmers to diversify their crops and reduce their heavy reliance on sugarcane cultivation. Introducing fair and comprehensive subsidy schemes for a variety of crops can help farmers diversify their cultivation, preventing monocultures and reducing the strain on groundwater resources.
- Sustainable Sugarcane Cultivation Practices: Promote environmentally responsible sugarcane cultivation practices that prioritize groundwater conservation. Encouraging the use of drip irrigation, which reduces water consumption by up to 70% compared to flood irrigation, can be made mandatory in sugarcane-growing regions. The government can also offer subsidies to farmers for setting up drip irrigation systems.
- Water-Saving and Management Systems: Invest in water-saving and management systems such as rainwater harvesting, wastewater treatment, and canal irrigation networks. These initiatives can minimize stress on groundwater reservoirs as alternative water sources become available for irrigation.
- Groundwater Research and Mapping: Invest in groundwater research and mapping to better understand groundwater availability and distribution. This data can help in devising effective strategies to manage groundwater resources more sustainably.
- Review of Export Incentives: Review export incentives and subsidies to ensure they are not leading to excessive sugar production and environmental degradation. Striking a balance between domestic demand and exports will help manage sugar production more efficiently.
- Public Awareness and Education: Create public awareness campaigns to educate farmers about the importance of sustainable water management and the impact of excessive sugarcane cultivation on groundwater. Providing training and guidance on adopting water-saving practices can facilitate better resource management.
- Government Regulations and Policies: Implement regulations and policies to control groundwater extraction and prevent overexploitation. By enforcing responsible water use, the government can protect groundwater resources and ensure their sustainability.
Conclusion
- Balancing sugar production with responsible water management practices is vital for the well-being of farmers, the preservation of natural resources, and the long-term stability of the agricultural sector. By implementing a multi-faceted approach that encourages crop diversification and sustainable cultivation practices, India can pave the way for a greener and more resilient future.
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How India’s Sugar Exports to the world are surging?
Note4Students
From UPSC perspective, the following things are important :
Prelims level: Sugar cultivation in India
Mains level: Not Much
Central idea: India’s success story in sugar exports
- India’s sugar exports have soared from $810.9 million in 2017-18 to $4.6 billion in 2021-22, and could cross $5.5 billion in the fiscal year ending March 31.
- The increase is significant in quantity terms too, with India’s shipments increasing from a mere 0.46 lakh tonnes in 2016-17 to 110 lakh tonnes in 2021-22.
- India has gone from being a marginal player in sugar exports five years ago to No. 2 in the world currently, behind only Brazil.
Favourite destinations
- The biggest importers of Indian raw sugar were Indonesia (16.73 lt), Bangladesh (12.10 lt), Saudi Arabia (6.83 lt), Iraq (4.78 lt) and Malaysia (4.15 lt).
- The country also exported 53.71 lt of white/ refined sugar, the leading destinations for which included Afghanistan (7.54 lt), Somalia (5.17 lt), Djibouti (4.90 lt), Sri Lanka (4.27 lt), China (2.58 lt), and Sudan (1.08 lt).
- The highest decline in exports has been registered by the European Union (which produces sugar from beet, unlike India and Brazil that only crush cane): from 39.74 lt in 2017-18 to 8.02 lt in 2021-22.
Which grades of sugar does India export?
- Raw sugar is what mills produce after the first crystallization of juice obtained from crushing of cane.
- This sugar is rough and brownish in color, with an ICUMSA value of 600-1,200 or higher.
- ICUMSA is a measure of the purity of sugar based on color.
- This raw sugar is processed in refineries for removal of impurities and de-colorization.
- The end product is refined white cane sugar having a standard ICUMSA value of 45.
- Till 2017-18, India mainly shipped plantation white sugar with 100-150 ICUMSA value, also known as low-quality whites or LQW in international markets.
Reasons behind India’s surge in sugar exports
- Indian raw sugar is free of dextran, unlike Brazilian raws.
- Indian mills can supply raws with a very high polarization of 98.5-99.5%, which is higher than the polarization of raws from Brazil, Thailand, and Australia.
- Indian raws today fetch a 4% premium over the global benchmark (New York No. 11 futures contract) price, while LQW sells at a $40/tonne discount to the world price (London No. 5 futures) for 45 ICUMSA whites.
- Indonesia agreed to tweak its norms in December 2019 to enable imports from India, which further boosted India’s efforts to push exports of raws.
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Centre raises Fair Prices for Sugarcane Harvest
Note4Students
From UPSC perspective, the following things are important :
Prelims level: FRP
Mains level: Issues with Sugarcane Pricing
The Cabinet Committee on Economic Affairs has approved Fair and Remunerative Price (FRP) of sugarcane for sugar season 2022-23 (October – September) at ₹305 per quintal.
What is FRP?
- FRP is fixed under a sugarcane control order, 1966.
- It is the minimum price that sugar mills are supposed to pay to the farmers.
- However, states determine their own State Agreed Price (SAP) which is generally higher than the FRP.
Factors considered for FRP:
- The amended provisions of the Sugarcane (Control) Order, 1966 provides for fixation of FRP of sugarcane having regard to the following factors:
- a) cost of production of sugarcane;
- b) return to the growers from alternative crops and the general trend of prices of agricultural commodities;
- c) availability of sugar to consumers at a fair price;
- d) price at which sugar produced from sugarcane is sold by sugar producers;
- e) recovery of sugar from sugarcane;
- f) the realization made from the sale of by-products viz. molasses, bagasse, and press mud or their imputed value;
- g) reasonable margins for the growers of sugarcane on account of risk and profits.
Who determines Sugarcane prices?
Sugarcane prices are determined by the Centre as well as States.
- The Centre announces Fair and Remunerative Prices which are determined on the recommendation of the Commission for Agricultural Costs and Prices (CACP) and are announced by the Cabinet Committee on Economic Affairs, which is chaired by Prime Minister.
- The State Advised Prices (SAP) are announced by key sugarcane producing states which are generally higher than FRP.
Minimum Selling Price (MSP) for Sugar
- The price of sugar is market-driven & depends on the demand & supply of sugar.
- However, with a view to protecting the interests of farmers, the concept of MSP of sugar has been introduced since 2018.
- MSP of sugar has been fixed taking into account the components of Fair & Remunerative Price (FRP) of sugarcane and minimum conversion cost of the most efficient mills.
Basis of price determination
- With the amendment of the Sugarcane (Control) Order, 1966, the concept of Statutory Minimum Price (SMP) of sugarcane was replaced with the Fair and Remunerative Price (FRP)’ of sugarcane in 2009-10.
- The cane price announced by the Central Government is decided on the basis of the recommendations of the Commission for Agricultural Costs and Prices (CACP).
- This is done in consultation with the State Governments and after taking feedback from associations of the sugar industry.
Try this PYQ:
Q.The Fair and Remunerative Price (FRP) of sugarcane is approved by the:
(a) Cabinet Committee on Economic Affairs
(b) Commission for Agricultural Costs and Prices
(c) Directorate of Marketing and Inspection, Ministry of Agriculture
(d) Agricultural Produce Market Committee
Post your answers here.
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Sugarcane Pricing in India
Note4Students
From UPSC perspective, the following things are important :
Prelims level: Sugarcane pricing mechanism
Mains level: Not Much
Earlier this month, the Supreme Court issued notices to States and major sugar producers to develop a mechanism to ensure that farmers are paid on time.
Who determines Sugarcane prices?
Sugarcane prices are determined by the Centre as well as States.
- The Centre announces Fair and Remunerative Prices which are determined on the recommendation of the Commission for Agricultural Costs and Prices (CACP) and are announced by the Cabinet Committee on Economic Affairs, which is chaired by Prime Minister.
- The State Advised Prices (SAP) are announced by key sugarcane producing states which are generally higher than FRP.
Minimum Selling Price (MSP) for Sugar
- The price of sugar is market-driven & depends on the demand & supply of sugar.
- However, with a view to protecting the interests of farmers, the concept of MSP of sugar has been introduced since 2018.
- MSP of sugar has been fixed taking into account the components of Fair & Remunerative Price (FRP) of sugarcane and minimum conversion cost of the most efficient mills.
Basis of price determination
- With the amendment of the Sugarcane (Control) Order, 1966, the concept of Statutory Minimum Price (SMP) of sugarcane was replaced with the Fair and Remunerative Price (FRP)’ of sugarcane in 2009-10.
- The cane price announced by the Central Government is decided on the basis of the recommendations of the Commission for Agricultural Costs and Prices (CACP).
- This is done in consultation with the State Governments and after taking feedback from associations of the sugar industry.
Try this PYQ:
Q.The Fair and Remunerative Price (FRP) of sugarcane is approved by the:
(a) Cabinet Committee on Economic Affairs
(b) Commission for Agricultural Costs and Prices
(c) Directorate of Marketing and Inspection, Ministry of Agriculture
(d) Agricultural Produce Market Committee
Post your answers here.
What is FRP?
- FRP is fixed under a sugarcane control order, 1966.
- It is the minimum price that sugar mills are supposed to pay to the farmers.
- However, states determine their own State Agreed Price (SAP) which is generally higher than the FRP.
Factors considered for FRP:
- The amended provisions of the Sugarcane (Control) Order, 1966 provides for fixation of FRP of sugarcane having regard to the following factors:
a) cost of production of sugarcane;
b) return to the growers from alternative crops and the general trend of prices of agricultural commodities;
c) availability of sugar to consumers at a fair price;
d) price at which sugar produced from sugarcane is sold by sugar producers;
e) recovery of sugar from sugarcane;
f) the realization made from the sale of by-products viz. molasses, bagasse, and press mud or their imputed value;
g) reasonable margins for the growers of sugarcane on account of risk and profits.
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Minimum Selling Price for Sugar
Note4Students
From UPSC perspective, the following things are important :
Prelims level: Minimum Selling Price (MSP) for Sugar
Mains level: Not Much
The Indian Sugar Mills’ Association (ISMA) has asked for an increase in the Minimum Selling Price of Sugar.
Try this PYQ:
Q.The Fair and Remunerative Price (FRP) of sugarcane is approved by the:
(a) Cabinet Committee on Economic Affairs
(b) Commission for Agricultural Costs and Prices
(c) Directorate of Marketing and Inspection, Ministry of Agriculture
(d) Agricultural Produce Market Committee
Minimum Selling Price (MSP) for Sugar
- The price of sugar is market-driven & depends on the demand & supply of sugar.
- However, with a view to protecting the interests of farmers, the concept of MSP of sugar has been introduced since 2018.
- MSP of sugar has been fixed taking into account the components of Fair & Remunerative Price (FRP) of sugarcane and minimum conversion cost of the most efficient mills.
How is the pricing of Sugarcane done?
- With the amendment of the Sugarcane (Control) Order, 1966, the concept of Statutory Minimum Price (SMP) of sugarcane was replaced with the Fair and Remunerative Price (FRP)’ of sugarcane in 2009-10.
- The cane price announced by the Central Government is decided on the basis of the recommendations of the Commission for Agricultural Costs and Prices (CACP).
- This is done in consultation with the State Governments and after taking feedback from associations of the sugar industry.
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