Q. The economic cost of food grains to the Food Corporation of India is Minimum Support Price and bonus (if any) paid to the farmers plus (UPSC Prelims 2019)
Answer: procurement incidentals and distribution cost
Notes: The correct answer is [C] procurement incidentals and distribution cost. The "Economic Cost" of food grains is a specific financial metric used by the Food Corporation of India (FCI) to represent the total expenditure incurred in the process of providing food security.

• Components of Economic Cost: It is broadly divided into three main components:
  1. Pooled Cost of Grains: This includes the Minimum Support Price (MSP) and any additional state bonuses paid to the farmers.
  2. Procurement Incidentals (Option C - Part 1): These are the costs incurred until the grain reaches the first storage point. They include statutory charges (like market fee/mandi tax), labor and packing charges (gunny bags), and internal transport.
  3. Distribution Cost (Option C - Part 2): This covers the expenses incurred in moving the grain from the godowns to the Fair Price Shops (FPS). It includes freight, handling, interest costs, storage losses, and administrative overheads.
• Why other options are incorrect: Options [A], [B], and [D] mention only a fraction of the total cost. For example, "charges for godowns" or "interest" are sub-components that fall under the broader umbrella of distribution costs.

The difference between this Economic Cost and the Central Issue Price (CIP) (the price at which grain is sold to beneficiaries under the National Food Security Act) is what constitutes the Food Subsidy provided by the Government of India.