The Fair and Remunerative Price (FRP) of surgarcane is approved by the

Updated 11 Apr 2026 · From UPSC Prelims GS Paper I 2015, Q44

Contents16
UPSC Prelims GS2015Indian Economy
  1. ACabinet Committee on Economic Affairs.
  2. BCommission for Agricultural Costs and Prices.
  3. CDirectorate of Marketing and Inspection, Ministry of Agriculture
  4. DAgricultural Produce Market Committee
Show answer

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.

Why this was asked

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

Must know

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

Good to know

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 --> s4

Key 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

Exam traps

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

Must know

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

Good to know

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

Exam traps

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

Must know

CCEA is chaired by the Prime Minister and approves major economic policies

Final authority for approving MSP and FRP based on CACP recommendations

Good to know

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

Exam traps

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

Must know

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

Good to know

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

Exam traps

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