Analysis: Difference in price rise between FRP and MSP

The Minimum Support Price (MSP) of sugar and the Fair and Remunerative Price (FRP) of sugarcane have consistently been a topic of discussion among farmers and the sugar industry. Let’s take a closer look at the difference in the increase between the FRP and MSP since the government introduced the MSP mechanism for the first time.

In June 2018, the Indian government fixed the MSP of sugar, for first time, at Rs. 29 per kg when the FRP of sugarcane was Rs. 2550 per ton. However, the FRP has been steadily increasing, while the MSP of sugar has remained unchanged since February 2019.

The FRP of sugarcane climbed significantly from Rs. 2550 per ton in 2017-18 to Rs. 3050 per ton in 2022-23. On the other hand, the MSP of sugar has remained at Rs. 31 per kg since 2018-19. The sugar industry has been struggling financially due to the increase in FRP and other cost elements that have raised the cost of production of sugar to Rs. 38 per kg.

Sugar producers are urging the government to increase the MSP of sugar in line with the rise in FRP. This move would ensure that farmers receive a fair price for their sugarcane and help the industry remain financially viable.

The year wise rate of FRP of sugarcane and MSP of sugar is tabulated below: 

(Source: ISMA)

The FRP of sugarcane has been on a steady increase, going from Rs. 2550 per ton in 2017-18 to Rs. 3050 per ton in 2022-23. In contrast, the MSP of sugar has remained at Rs. 31 per kg since 2018-19, despite the increasing cost of production. The industry’s financial struggles highlight the need for government intervention to balance the MSP and FRP and protect the interests of both farmers and sugar producers.

Recently, Indian Sugar Mills Association (ISMA) had urged the government to increase the MSP of sugar from the current level of Rs 31 per kg to Rs 38 per kg in line with FRP of cane. In a communication to the food ministry, ISMA President Aditya Jhunjhunwala stated that there has been no increase in MSP since 2018-19 despite FRP going up significantly.

“We had previously informed that the cost of production of sugar was Rs 36 per Kg and now which has gone up to Rs. 38 per Kg due to increase in FRP and also other cost elements”, he further added.

ISMA claims that besides cost of raw material, cost of other components have also gone up:
1. Cost of steel and other metal impacting the repair and maintenance;
2.Significant increase in cost of important chemicals like sulphur, lime etc.;
3.Significant increase in price of packing materials especially jute bags and HDPE/ PP bags (due to HDPE granules price increase);
4.Increase in cost of manpower,
5.Significant increase in interest rates (REPO rate up by 1% over last year) impacting term loans and working capital ISMA

ISMA communication also stated that Commission for Agricultural Costs and Prices (CACP) and other expert bodies like Group of Ministers, Committee of Secretaries, Niti Aayog, and various state governments have recommended for increase in the MSP of sugar to appropriate level duly considering the increase in FRP of sugarcane.

MSP plays a key role for sugar industry, as about 85% of revenue comes from sale of sugar and therefore, it is an important component for the mills to clear the cane price dues on time.


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