Sugar Industry – FRP, SAP, Rangarajan Committee, EBP, MIEQ, etc.
Is India’s sugar surplus leading to a crisis?
From UPSC perspective, the following things are important :
Prelims level : Sugarcane industry
Mains level : Surplus Sugarcane production, factors behind and concerns
What’s the news?
- India’s top sugarcane-growing states rely heavily on groundwater for irrigation, leading to concerns over groundwater depletion.
Central idea
- India’s remarkable achievement of becoming the world’s top sugar producer in 2021-2022, surpassing Brazil, brings with it a significant challenge. The overcultivation of sugarcane has resulted in a sugar surplus and high exports, negatively impacting groundwater levels. To safeguard the agricultural sector and protect vital natural resources, addressing groundwater overuse in the sugar industry is of utmost importance.
Factors Behind the Excess Sugar Production
- Government Policies and Subsidies: The Indian government’s policies and subsidies play a significant role in encouraging farmers to cultivate sugarcane. The fair and remunerative price (FRP) scheme ensures that sugar mills pay a minimum price to sugarcane farmers, guaranteeing them fair profits for their crop.
- Domestic Demand: India’s position as the world’s largest consumer of sugar creates a substantial demand for sugar and its by-products. To meet this demand, farmers increase sugarcane cultivation, leading to excess sugar production.
- Export Incentives: The surplus sugar production in India has led to higher exports, and the government offers export subsidies to boost overseas sales.
Impact of Excessive Sugarcane Cultivation on Groundwater
- Water Depletion in Groundwater Reservoirs:
- Excessive sugarcane cultivation contributes to the depletion of groundwater reserves.
- In regions with inadequate rainfall, farmers heavily rely on groundwater from confined aquifers to sustain sugarcane crops.
- This over-extraction of groundwater leads to a reduction in groundwater levels, depleting the available water resources.
- Groundwater Stress and Drought Concerns:
- The extensive use of groundwater for sugarcane cultivation puts immense stress on groundwater reservoirs. In regions already experiencing groundwater stress, the additional demand for water exacerbates the problem.
- Moreover, sugarcane cultivation often occurs in areas prone to drought, and excessive water usage further exacerbates the vulnerability of these regions to water scarcity.
- Environmental Impacts:
- Groundwater depletion due to excessive sugarcane cultivation can have severe environmental consequences.
- As groundwater levels decline, it affects the health of ecosystems dependent on groundwater sources, such as wetlands, rivers, and lakes. Reduced flow in rivers and streams can harm aquatic life and disrupt local ecosystems.
- Impact on Farmers and Livelihoods: Groundwater depletion directly affects farmers who rely on it for irrigation. As water levels drop, farmers may face difficulties in accessing sufficient water for their crops, leading to reduced yields and economic losses. In areas where sugarcane is the dominant crop, groundwater depletion can impact the livelihoods of farming communities.
- Long-Term Sustainability Concerns:
- The continued excessive use of groundwater for sugarcane cultivation is not sustainable in the long run.
- Depleting groundwater reserves can lead to permanent damage to aquifers and reduce the overall capacity to support agricultural activities in the future.
Solutions to address the problem of excessive sugar production
- Crop Diversification: Encourage farmers to diversify their crops and reduce their heavy reliance on sugarcane cultivation. Introducing fair and comprehensive subsidy schemes for a variety of crops can help farmers diversify their cultivation, preventing monocultures and reducing the strain on groundwater resources.
- Sustainable Sugarcane Cultivation Practices: Promote environmentally responsible sugarcane cultivation practices that prioritize groundwater conservation. Encouraging the use of drip irrigation, which reduces water consumption by up to 70% compared to flood irrigation, can be made mandatory in sugarcane-growing regions. The government can also offer subsidies to farmers for setting up drip irrigation systems.
- Water-Saving and Management Systems: Invest in water-saving and management systems such as rainwater harvesting, wastewater treatment, and canal irrigation networks. These initiatives can minimize stress on groundwater reservoirs as alternative water sources become available for irrigation.
- Groundwater Research and Mapping: Invest in groundwater research and mapping to better understand groundwater availability and distribution. This data can help in devising effective strategies to manage groundwater resources more sustainably.
- Review of Export Incentives: Review export incentives and subsidies to ensure they are not leading to excessive sugar production and environmental degradation. Striking a balance between domestic demand and exports will help manage sugar production more efficiently.
- Public Awareness and Education: Create public awareness campaigns to educate farmers about the importance of sustainable water management and the impact of excessive sugarcane cultivation on groundwater. Providing training and guidance on adopting water-saving practices can facilitate better resource management.
- Government Regulations and Policies: Implement regulations and policies to control groundwater extraction and prevent overexploitation. By enforcing responsible water use, the government can protect groundwater resources and ensure their sustainability.
Conclusion
- Balancing sugar production with responsible water management practices is vital for the well-being of farmers, the preservation of natural resources, and the long-term stability of the agricultural sector. By implementing a multi-faceted approach that encourages crop diversification and sustainable cultivation practices, India can pave the way for a greener and more resilient future.
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Sugar Industry – FRP, SAP, Rangarajan Committee, EBP, MIEQ, etc.
How India’s Sugar Exports to the world are surging?
From UPSC perspective, the following things are important :
Prelims level : Sugar cultivation in India
Mains level : Not Much
Central idea: India’s success story in sugar exports
- India’s sugar exports have soared from $810.9 million in 2017-18 to $4.6 billion in 2021-22, and could cross $5.5 billion in the fiscal year ending March 31.
- The increase is significant in quantity terms too, with India’s shipments increasing from a mere 0.46 lakh tonnes in 2016-17 to 110 lakh tonnes in 2021-22.
- India has gone from being a marginal player in sugar exports five years ago to No. 2 in the world currently, behind only Brazil.
Favourite destinations
- The biggest importers of Indian raw sugar were Indonesia (16.73 lt), Bangladesh (12.10 lt), Saudi Arabia (6.83 lt), Iraq (4.78 lt) and Malaysia (4.15 lt).
- The country also exported 53.71 lt of white/ refined sugar, the leading destinations for which included Afghanistan (7.54 lt), Somalia (5.17 lt), Djibouti (4.90 lt), Sri Lanka (4.27 lt), China (2.58 lt), and Sudan (1.08 lt).
- The highest decline in exports has been registered by the European Union (which produces sugar from beet, unlike India and Brazil that only crush cane): from 39.74 lt in 2017-18 to 8.02 lt in 2021-22.
Which grades of sugar does India export?
- Raw sugar is what mills produce after the first crystallization of juice obtained from crushing of cane.
- This sugar is rough and brownish in color, with an ICUMSA value of 600-1,200 or higher.
- ICUMSA is a measure of the purity of sugar based on color.
- This raw sugar is processed in refineries for removal of impurities and de-colorization.
- The end product is refined white cane sugar having a standard ICUMSA value of 45.
- Till 2017-18, India mainly shipped plantation white sugar with 100-150 ICUMSA value, also known as low-quality whites or LQW in international markets.
Reasons behind India’s surge in sugar exports
- Indian raw sugar is free of dextran, unlike Brazilian raws.
- Indian mills can supply raws with a very high polarization of 98.5-99.5%, which is higher than the polarization of raws from Brazil, Thailand, and Australia.
- Indian raws today fetch a 4% premium over the global benchmark (New York No. 11 futures contract) price, while LQW sells at a $40/tonne discount to the world price (London No. 5 futures) for 45 ICUMSA whites.
- Indonesia agreed to tweak its norms in December 2019 to enable imports from India, which further boosted India’s efforts to push exports of raws.
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Sugar Industry – FRP, SAP, Rangarajan Committee, EBP, MIEQ, etc.
Centre raises Fair Prices for Sugarcane Harvest
From UPSC perspective, the following things are important :
Prelims level : FRP
Mains level : Issues with Sugarcane Pricing
The Cabinet Committee on Economic Affairs has approved Fair and Remunerative Price (FRP) of sugarcane for sugar season 2022-23 (October – September) at ₹305 per quintal.
What is FRP?
- FRP is fixed under a sugarcane control order, 1966.
- It is the minimum price that sugar mills are supposed to pay to the farmers.
- However, states determine their own State Agreed Price (SAP) which is generally higher than the FRP.
Factors considered for FRP:
- The amended provisions of the Sugarcane (Control) Order, 1966 provides for fixation of FRP of sugarcane having regard to the following factors:
- a) cost of production of sugarcane;
- b) return to the growers from alternative crops and the general trend of prices of agricultural commodities;
- c) availability of sugar to consumers at a fair price;
- d) price at which sugar produced from sugarcane is sold by sugar producers;
- e) recovery of sugar from sugarcane;
- f) the realization made from the sale of by-products viz. molasses, bagasse, and press mud or their imputed value;
- g) reasonable margins for the growers of sugarcane on account of risk and profits.
Who determines Sugarcane prices?
Sugarcane prices are determined by the Centre as well as States.
- The Centre 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 Prime Minister.
- The State Advised Prices (SAP) are announced by key sugarcane producing states which are generally higher than FRP.
Minimum Selling Price (MSP) for Sugar
- The price of sugar is market-driven & depends on the demand & supply of sugar.
- However, with a view to protecting the interests of farmers, the concept of MSP of sugar has been introduced since 2018.
- 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.
Basis of price determination
- With the amendment of the Sugarcane (Control) Order, 1966, the concept of Statutory Minimum Price (SMP) of sugarcane was replaced with the Fair and Remunerative Price (FRP)’ of sugarcane in 2009-10.
- The cane price announced by the Central Government is decided on the basis of the recommendations of the Commission for Agricultural Costs and Prices (CACP).
- This is done in consultation with the State Governments and after taking feedback from associations of the sugar industry.
Try this PYQ:
Q.The Fair and Remunerative Price (FRP) of sugarcane is approved by the:
(a) Cabinet Committee on Economic Affairs
(b) Commission for Agricultural Costs and Prices
(c) Directorate of Marketing and Inspection, Ministry of Agriculture
(d) Agricultural Produce Market Committee
Post your answers here.
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Sugar Industry – FRP, SAP, Rangarajan Committee, EBP, MIEQ, etc.
Sugarcane Pricing in India
From UPSC perspective, the following things are important :
Prelims level : Sugarcane pricing mechanism
Mains level : Not Much
Earlier this month, the Supreme Court issued notices to States and major sugar producers to develop a mechanism to ensure that farmers are paid on time.
Who determines Sugarcane prices?
Sugarcane prices are determined by the Centre as well as States.
- The Centre 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 Prime Minister.
- The State Advised Prices (SAP) are announced by key sugarcane producing states which are generally higher than FRP.
Minimum Selling Price (MSP) for Sugar
- The price of sugar is market-driven & depends on the demand & supply of sugar.
- However, with a view to protecting the interests of farmers, the concept of MSP of sugar has been introduced since 2018.
- 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.
Basis of price determination
- With the amendment of the Sugarcane (Control) Order, 1966, the concept of Statutory Minimum Price (SMP) of sugarcane was replaced with the Fair and Remunerative Price (FRP)’ of sugarcane in 2009-10.
- The cane price announced by the Central Government is decided on the basis of the recommendations of the Commission for Agricultural Costs and Prices (CACP).
- This is done in consultation with the State Governments and after taking feedback from associations of the sugar industry.
Try this PYQ:
Q.The Fair and Remunerative Price (FRP) of sugarcane is approved by the:
(a) Cabinet Committee on Economic Affairs
(b) Commission for Agricultural Costs and Prices
(c) Directorate of Marketing and Inspection, Ministry of Agriculture
(d) Agricultural Produce Market Committee
Post your answers here.
What is FRP?
- FRP is fixed under a sugarcane control order, 1966.
- It is the minimum price that sugar mills are supposed to pay to the farmers.
- However, states determine their own State Agreed Price (SAP) which is generally higher than the FRP.
Factors considered for FRP:
- The amended provisions of the Sugarcane (Control) Order, 1966 provides for fixation of FRP of sugarcane having regard to the following factors:
a) cost of production of sugarcane;
b) return to the growers from alternative crops and the general trend of prices of agricultural commodities;
c) availability of sugar to consumers at a fair price;
d) price at which sugar produced from sugarcane is sold by sugar producers;
e) recovery of sugar from sugarcane;
f) the realization made from the sale of by-products viz. molasses, bagasse, and press mud or their imputed value;
g) reasonable margins for the growers of sugarcane on account of risk and profits.
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Sugar Industry – FRP, SAP, Rangarajan Committee, EBP, MIEQ, etc.
Minimum Selling Price for Sugar
From UPSC perspective, the following things are important :
Prelims level : Minimum Selling Price (MSP) for Sugar
Mains level : Not Much
The Indian Sugar Mills’ Association (ISMA) has asked for an increase in the Minimum Selling Price of Sugar.
Try this PYQ:
Q.The Fair and Remunerative Price (FRP) of sugarcane is approved by the:
(a) Cabinet Committee on Economic Affairs
(b) Commission for Agricultural Costs and Prices
(c) Directorate of Marketing and Inspection, Ministry of Agriculture
(d) Agricultural Produce Market Committee
Minimum Selling Price (MSP) for Sugar
- The price of sugar is market-driven & depends on the demand & supply of sugar.
- However, with a view to protecting the interests of farmers, the concept of MSP of sugar has been introduced since 2018.
- 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.
How is the pricing of Sugarcane done?
- With the amendment of the Sugarcane (Control) Order, 1966, the concept of Statutory Minimum Price (SMP) of sugarcane was replaced with the Fair and Remunerative Price (FRP)’ of sugarcane in 2009-10.
- The cane price announced by the Central Government is decided on the basis of the recommendations of the Commission for Agricultural Costs and Prices (CACP).
- This is done in consultation with the State Governments and after taking feedback from associations of the sugar industry.
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