MSP, APMC & Procurement — Set 1

Correct Answer: B. Commission for Agricultural Costs and Prices

The Commission for Agricultural Costs and Prices (CACP) recommends MSP for agricultural commodities in India. CACP is an attached office of the Ministry of Agriculture and Farmers Welfare. It submits price policy reports for Kharif, Rabi, and commercial crops separately. The final announcement is made by the Cabinet Committee on Economic Affairs (CCEA).

Correct Answer: C. Cabinet Committee on Economic Affairs

The Cabinet Committee on Economic Affairs (CCEA), chaired by the Prime Minister, gives the final approval and announcement of MSP. CACP only recommends the prices; it is the CCEA that officially fixes them. This ensures MSP decisions have the highest executive sanction. The announcement is typically made before the sowing season begins.

Correct Answer: B. Only actual paid-out expenses by the farmer

A2 refers to the actual paid-out expenses incurred by the farmer, including seeds, fertilizers, pesticides, hired labour, and irrigation charges. It does not include the value of family labour or owned resources. A2 is the narrowest cost concept used by CACP. Most farmers prefer C2+50% as recommended by the Swaminathan Commission.

Correct Answer: B. Actual paid-out costs plus imputed value of family labour

A2+FL includes all actual paid-out costs (A2) plus the imputed value of unpaid family labour. This formula accounts for the contribution of family members who work on the farm without direct wages. The government has stated that MSP is fixed at 1.5 times A2+FL for most crops. Critics argue this still does not cover the full cost of cultivation.

Correct Answer: B. A2+FL plus imputed rent of owned land and interest on owned capital

C2 is the most comprehensive cost formula that includes A2+FL plus the imputed rent of owned land and interest on owned fixed capital. It represents the true economic cost of production. The Swaminathan Commission recommended fixing MSP at C2+50% to give farmers a fair return. The government currently announces MSP at 1.5 times A2+FL, not C2.

Correct Answer: C. 1.5 times C2 cost

The National Commission on Farmers, chaired by M.S. Swaminathan, recommended that MSP should be at least 50% more than the comprehensive cost of production (C2+50%). This is considered the most farmer-friendly formula as it covers all real costs including imputed rent. The government has consistently fixed MSP at 1.5 times A2+FL instead. This gap between C2 and A2+FL-based MSP has been a major demand of farmer agitations.

Correct Answer: C. 23

The government currently announces MSP for 23 agricultural commodities. These include 14 Kharif crops, 6 Rabi crops, and 2 other commercial crops plus copra and jute. The list was expanded over the years to cover more crops. However, effective procurement at MSP exists mainly for paddy and wheat through FCI.

Correct Answer: C. Wheat

Wheat is a Rabi crop, not a Kharif crop, so it is under MSP as a Rabi crop. Paddy, cotton, and moong are Kharif crops that receive MSP. The 14 Kharif crops include paddy, jowar, bajra, maize, ragi, arhar/tur, moong, urad, groundnut, sunflower, soybean, sesamum, nigerseed, and cotton. Wheat is the principal Rabi crop procured at MSP.

Correct Answer: C. 1965

The Food Corporation of India (FCI) was established in 1965 under the Food Corporations Act, 1964. It was set up to handle procurement, storage, and distribution of food grains. FCI plays a central role in implementing the price support policy for wheat and paddy. Its headquarters is in New Delhi and it operates across all states.

Correct Answer: B. Procuring food grains at MSP from farmers

FCI's primary function is to procure food grains (mainly wheat and paddy) from farmers at the announced MSP. This ensures farmers receive at least the minimum guaranteed price for their produce. The procured grain is stored in FCI warehouses and distributed through the Public Distribution System. FCI also maintains buffer stocks for food security.