The Fair and Remunerative Price (FRP) of surgarcane is approved by the
Contents16
- ACabinet Committee on Economic Affairs.
- BCommission for Agricultural Costs and Prices.
- CDirectorate of Marketing and Inspection, Ministry of Agriculture
- DAgricultural Produce Market Committee
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Answer: (A) Cabinet Committee on Economic Affairs.
There are two bodies involved in the sugarcane pricing process, and students often confuse their roles.
(1) The Commission for Agricultural Costs and Prices (CACP) — this body only RECOMMENDS the Fair and Remunerative Price (FRP). It studies input costs, market prices, and other factors and then suggests an appropriate price. But it does not have the authority to finalize or approve the price.
(2) The Cabinet Committee on Economic Affairs (CCEA) — this is the body that gives the FINAL APPROVAL to the FRP. The CCEA is chaired by the Prime Minister and takes the ultimate decision.
Think of it this way: CACP is like a consultant who gives advice, and CCEA is the decision-maker who approves the final price.
The Directorate of Marketing and Inspection deals with quality grading/marketing, and APMCs regulate local mandis — neither is involved in FRP approval.
This CACP-recommends vs CCEA-approves distinction also applies to Minimum Support Prices (MSPs) for other crops.
FRP directly affects sugarcane farmers across major producing states like Uttar Pradesh, Maharashtra, and Karnataka, making it a significant policy decision requiring Cabinet-level approval.
UPSC tests the distinction between CACP's advisory role (recommends prices) versus CCEA's decision-making authority (approves final prices) - a pattern that applies to both FRP and MSP.
The question checks if students can identify the correct level of authority in India's agricultural pricing hierarchy.
Fair and Remunerative Price (FRP)
Indian Economy Fair and Remunerative Price FRP sugarcane
Fair and Remunerative Price (FRP) for Sugarcane: Mechanism & Approval
FRP is the minimum price guaranteed to sugarcane farmers by the Central Government
CACP recommends FRP based on cost studies, CCEA approves the final price
Sugar mills are legally bound to pay at least the FRP to farmers
FRP replaced the earlier Statutory Minimum Price (SMP) system
What is FRP
Fair and Remunerative Price (FRP) is the minimum guaranteed price for sugarcane that sugar mills must pay to farmers. The Central Government announces this price annually to ensure farmers get a fair return on their investment and are protected from market fluctuations.
FRP Approval Process
%%{init: {"flowchart": {"wrappingWidth": 460}}}%%
flowchart TD
s1["`**CACP Studies & Recommends**
**Commission for Agricultural Costs and Prices** analyzes input costs, market prices, and profitability to recommend FRP`"]
s2["`**CCEA Reviews & Approves**
**Cabinet Committee on Economic Affairs** (chaired by PM) gives final approval to the FRP`"]
s3["`**Government Announces**
Ministry of Agriculture announces the approved FRP for the sugar season`"]
s4["`**Mills Pay Farmers**
Sugar mills are legally obligated to pay at least the FRP amount`"]
s1 --> s2
s2 --> s3
s3 --> s4Key Features
FRP is crop-specific - applies only to sugarcane, unlike MSP which covers multiple crops
Mills can pay above FRP but never below it - it sets the price floor
FRP considers cost of production plus reasonable profit margin for farmers
State governments can announce State Advised Price (SAP) higher than FRP
Trap: CACP only recommends FRP - it does not approve. CCEA approves the final price
Trap: Don't confuse FRP (sugarcane only) with MSP (multiple crops) - both follow CACP recommends → CCEA approves model
Trap: Directorate of Marketing deals with quality standards, not price approval
Trap: APMC regulates local mandis, not Central government pricing decisions
Commission for Agricultural Costs and Prices (CACP)
Indian Economy Commission for Agricultural Costs and Prices CACP
Commission for Agricultural Costs and Prices (CACP): Role & Functions
CACP is a statutory body that recommends MSP for 23 crops and FRP for sugarcane
CACP recommends only - final approval lies with CCEA
Uses A2+FL cost formula as primary basis for MSP calculation
Established in 1965, works under Ministry of Agriculture
CACP's Role
CACP is the expert body that studies agricultural production costs and market conditions to recommend fair prices for farmers. It conducts detailed cost analysis but has no approval authority - it only advises the government.
CACP Cost Categories
Cost Type | Components | Usage in MSP |
|---|---|---|
A2 | Paid-out costs: seeds, fertilizers, pesticides, hired labor, fuel | Base cost calculation |
FL | Imputed value of family labor | Added to A2 for A2+FL |
A2+FL | A2 + Family Labor costs | Primary basis for MSP |
C2 | A2+FL + rent + interest on owned capital | Comprehensive cost (sometimes used) |
Key Functions
Recommends MSP for 23 crops including cereals, pulses, oilseeds, and commercial crops
Recommends FRP for sugarcane based on cost-plus pricing methodology
Studies input costs, market prices, demand-supply situation across regions
Considers cost of cultivation, price trends, inter-crop price parity in recommendations
Trap: CACP recommends MSP/FRP but never approves - that power rests with CCEA
Trap: CACP covers 23 crops for MSP + sugarcane for FRP - not all agricultural products
Trap: A2+FL is the main cost formula, not C2 (though C2 is sometimes referenced)
Cabinet Committee on Economic Affairs (CCEA)
Indian Polity Cabinet Committee on Economic Affairs CCEA
Cabinet Committee on Economic Affairs (CCEA): Powers & Agricultural Pricing
CCEA is chaired by the Prime Minister and approves major economic policies
Final authority for approving MSP and FRP based on CACP recommendations
Approves investment proposals above ₹1000 crore and disinvestment decisions
One of the 8 Cabinet Committees - highest decision-making body for economic matters
Role in Agricultural Pricing
CCEA is the final decision-making authority for all major agricultural price policies in India. While CACP provides technical recommendations, CCEA takes the political and economic decision to approve MSPs and FRP after considering broader policy implications.
CCEA vs CACP in Price Policy
Aspect | CACP | CCEA |
|---|---|---|
Role | Technical recommendation | Final approval |
Authority | Advisory body | Decision-making body |
Composition | Agricultural economists & experts | Cabinet Ministers led by PM |
Process | Cost analysis & field studies | Policy review & approval |
Output | Recommendation report | Government notification |
Other CCEA Functions
Approves FDI policy changes and foreign investment proposals above threshold limits
Decides on disinvestment of PSUs and strategic sale policies
Approves major infrastructure projects and their financing mechanisms
Reviews subsidy policies including food, fertilizer, and fuel subsidies
Trap: CCEA approves while CACP recommends - don't reverse their roles
Trap: CCEA is chaired by PM, not Agriculture Minister or Finance Minister
Trap: CCEA handles economic policy approval, not day-to-day agricultural administration
Minimum Support Price (MSP)
Indian Economy
Minimum Support Price (MSP): Mechanism & Current Status
MSP covers 23 crops including cereals, pulses, oilseeds, and commercial crops
Same approval process as FRP: CACP recommends → CCEA approves
Government procures at MSP through agencies like FCI, NAFED
MSP aims to ensure cost of production + 50% profit margin (A2+FL + 50%)
MSP vs FRP Distinction
While FRP applies only to sugarcane, MSP covers 23 different crops. Both follow the identical approval mechanism - CACP recommends based on cost analysis, and CCEA gives final approval. The key difference is coverage and procurement arrangements.
MSP Crop Categories
Category | Crops Covered | Key Examples | Procurement Agency |
|---|---|---|---|
Cereals | 7 crops | Rice, Wheat, Maize, Barley | FCI primarily |
Pulses | 5 crops | Arhar, Moong, Urad, Chana | NAFED |
Oilseeds | 8 crops | Groundnut, Sunflower, Soybean | NAFED, State agencies |
Commercial | 3 crops | Cotton, Sugarcane (FRP), Copra | CCI, State agencies |
MSP Implementation Challenges
Procurement concentration: Mainly rice and wheat, limited for pulses/oilseeds in many states
Geographic bias: Punjab, Haryana get majority of procurement; eastern/southern states lag
Private market: MSP often becomes maximum price when market prices fall below MSP
Legal status: No law mandating MSP as minimum price in private markets
Trap: MSP covers 23 crops, FRP only covers sugarcane - different scope
Trap: A2+FL + 50% is the target formula, but actual MSP may vary based on market conditions
Trap: MSP recommendation and approval process is same for all crops - CACP to CCEA