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Question

Difficulty: MediumAgriculture Sector Economics, Land Reforms, Subsidies, and Public Distribution System

Regarding the pricing policy of sugarcane and the framework of Fair and Remunerative Price (FRP) in India, which of the following statements are correct?

  1. Fair and Remunerative Price (FRP) for sugarcane is statutorily governed under the provisions of the Sugarcane (Control) Order, 1966 issued under the Essential Commodities Act, 1955.Answer
  2. The statutory FRP is recommended by the Commission for Agricultural Costs and Prices (CACP) and announced by the Cabinet Committee on Economic Affairs (CCEA).Answer
  3. C
    The statutory FRP is fixed at a uniform flat rate per quintal regardless of the individual sugar recovery rate achieved by a sugar mill.
  4. D
    State governments are legally prohibited from fixing State Advised Prices (SAP) that exceed the federally announced FRP.

Answer

The statements establishing that FRP is statutorily governed under the Sugarcane (Control) Order, 1966 and that FRP is recommended by the CACP and approved by the CCEA are correct.
The sugarcane pricing system operates under the Sugarcane (Control) Order, 1966 (issued under the Essential Commodities Act, 1955), giving FRP a statutory basis. The pricing recommendations are made by the Commission for Agricultural Costs and Prices (CACP) and finalized by the Cabinet Committee on Economic Affairs (CCEA). Therefore, the statements describing the statutory origin under the 1966 Order and the recommendation-approval process by CACP and CCEA are correct.

Step-by-Step Solution

1
Analyze the statutory framework governing sugarcane pricing in India.
The Sugarcane (Control) Order, 1966, enacted under the Essential Commodities Act, 1955, provides statutory authority for setting the Fair and Remunerative Price (FRP).
Unlike general Minimum Support Prices (MSPs) which are executive decisions, FRP carries legal obligation for sugar factories to pay farmers within 14 days.
2
Examine the recommendation and approval authority for FRP.
The Commission for Agricultural Costs and Prices (CACP) recommends FRP after assessing cost factors, and the Cabinet Committee on Economic Affairs (CCEA) approves it.
This follows the standard institutional mechanism for agricultural price policy decisions in India.
3
Evaluate the formula component linked to sugar recovery rate and state pricing rights.
FRP incorporates a baseline recovery rate differential, and states retain the operational flexibility to announce higher State Advised Prices (SAP).
Misinterpreting FRP as a flat rate or assuming states cannot declare higher SAP ignores the dual-pricing framework present in Indian agricultural economics.

Key Concept

Sugarcane Pricing Mechanism and Statutory FRP Framework
Estimated Time:1m 30s
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Topics

Agriculture Sector Economics, Land Reforms, Subsidies, and Public Distribution System