Q. Consider the following statements: - In the case of all cereals, pulses and oil-seeds, the procurement at Minimum Support Price (MSP) is unlimited in any State/UT of India.
- In the case of cereals and pulses, the MSP is fixed in any State/UT at a level to which the market price will never rise.
Which of the statements given above is/are correct? (UPSC Prelims 2020)
Answer:
Neither 1 nor 2
Notes: The correct answer is
[D] Neither 1 nor 2. This question tests the practical implementation and economic logic of the Minimum Support Price (MSP) mechanism in India.
- Statement 1 (Incorrect): While the government announces MSP for 22 mandated crops (plus Fair and Remunerative Price for Sugarcane), "unlimited" procurement does not exist for all cereals, pulses, and oilseeds across all States/UTs. Procurement is generally open-ended for wheat and rice to maintain the Central Pool for the Public Distribution System (PDS). However, for pulses and oilseeds, procurement is often capped (e.g., under the PM-AASHA scheme) and depends on the specific requirements and storage capacities of state agencies like NAFED.
- Statement 2 (Incorrect): The MSP is intended to be a safety net or a "floor price" to protect farmers from sudden slumps in market prices; it is not a ceiling. Market prices frequently rise above the MSP depending on demand-supply dynamics, international market trends, and production shocks. If the market price is higher than the MSP, farmers are free to sell their produce in the open market (mandis) to private traders.
Key Fact: The MSP is recommended by the
Commission for Agricultural Costs and Prices (CACP) and approved by the Cabinet Committee on Economic Affairs (CCEA). The CACP considers various factors, including the cost of production (A2+FL), changes in input prices, and inter-crop price parity.