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How is Minimum selling price for sugar decided?

GS Paper 3

Topics Covered: Issues related to direct and indirect farm subsidies and minimum support prices.

 

Context:

The Union government has increased the minimum price that sugar mills must pay to sugar cane farmers by ₹5 a quintal, setting the fair and remunerative price (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 price at which they can sell the processed sugar, citing consumer interests.

 

Significance of the decision:

The decision will benefit five crore sugar cane farmers and their dependents as well as five lakh workers employed by sugar mills and related industries.

 

Sugar Pricing Policy:

Prices of sugar are market driven & depend on demand & supply of sugar. However, with a view to protect the interests of farmers, the concept of Minimum Selling Price (MSP) of sugar was introduced in 2018 so that industry may get at least the minimum cost of production of sugar, so as to enable them to clear cane price dues of farmers.

  • In exercise of the powers conferred under the Essential Commodities Act, 1955, Government has notified Sugar Price (Control) Order, 2018.
  • Under the provisions of said order, the Government will fix the Minimum Selling Price (MSP).
  • 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.

Also, please note that the State Advised Prices (SAP) are announced by key sugarcane producing states which are generally higher than FRP.

 

FRP:

Fair and remunerative price (FRP) is the minimum price at which rate sugarcane is to be purchased by sugar mills from farmers.

 

Background:

The Federal/Central Government 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 the Prime Minister.

 

Insta Curious:

Can government make Minimum Support Price (MSP)=Statutory Minimum Price (SMP)? Read this to understand.

 

InstaLinks:

Prelims Link:

  1. What is Minimum Selling Price?
  2. How is it set?
  3. Differences between Minimum Support Price and Minimum Selling Price.
  4. What is FRP?

Mains Link:

Discuss the significance of Minimum Selling Price (MSP) for sugar.

Sources: the Hindu.