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Q39 (IAS/2020) Economy › Agriculture & Rural Economy › Agricultural price policy Official Key

Consider the following statements : 1. 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. 2. 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 ?

Result
Your answer:  ·  Correct: D
Explanation

The correct answer is Option 4 (Neither 1 nor 2) because both statements are factually incorrect within the framework of India's agricultural policy.

  • Statement 1 is incorrect: While the government announces MSP for 22 mandated crops (including cereals, pulses, and oilseeds), unlimited procurement is not a legal guarantee. In practice, open-ended procurement is largely restricted to wheat and rice in specific surplus states. For pulses and oilseeds, procurement is typically capped (often at 25% of marketable surplus) under schemes like PSS (Price Support Scheme).
  • Statement 2 is incorrect: MSP is designed as a price floor to protect farmers during gluts; it is not a ceiling. Market prices frequently rise above the MSP based on demand-supply dynamics, international trends, or production shortfalls. The assertion that market prices will "never rise" above MSP is economically fallacious and contradicts market realities.

Therefore, since both statements contain absolute and incorrect claims, Neither 1 nor 2 is the right choice.

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PROVENANCE & STUDY PATTERN
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Don’t just practise – reverse-engineer the question. This panel shows where this PYQ came from (books / web), how the examiner broke it into hidden statements, and which nearby micro-concepts you were supposed to learn from it. Treat it like an autopsy of the question: what might have triggered it, which exact lines in the book matter, and what linked ideas you should carry forward to future questions.
Q. Consider the following statements : 1. In the case of all cereals, pulses and oil-seeds, the procurement at Minimum Support Price (MSP) i…
At a glance
Origin: Mostly Current Affairs Fairness: Low / Borderline fairness Books / CA: 0/10 · 10/10

This question masquerades as a factual query but is actually a test of 'Economic Common Sense' and extreme wording. It punishes aspirants who memorize the list of MSP crops without understanding the operational mechanics of FCI procurement versus the PM-AASHA scheme limitations.

How this question is built

This question can be broken into the following sub-statements. Tap a statement sentence to jump into its detailed analysis.

Statement 1
Does Indian procurement policy allow unlimited procurement at the Minimum Support Price (MSP) for all cereals, pulses and oilseeds in any State/Union Territory?
Origin: Web / Current Affairs Fairness: CA heavy Web-answerable

Web source
Presence: 3/5
"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."
Why this source?
  • Directly asserts the claim about unlimited procurement at MSP for all cereals, pulses and oilseeds.
  • Specifies the geographic scope as "any State/UT of India," matching the statement exactly.

Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 9: Subsidies > 9.5.1 Food Corporation of India (FCI) > p. 292
Strength: 5/5
“Procurement: To facilitate the procurement of food grains (wheat and paddy), FCI and various state agencies in consultation with the State governments establish a large number of purchase centres at various mandis and key points. The procurement policy is open ended. That means, whatever (without any limit) wheat and paddy are offered by farmers, within the stipulated period & conforming to the specifications prescribed by Government of India, are purchased at Minimum Support Price (MSP) by the Government agencies including Food Corporation of India (FCI) for Central Pool. Central Govt. procures wheat and rice/paddy in two ways: • One way is "Centralized Procurement System" where either FCI procures or it asks States to procure and hand over the stock to FCI and FCI pays for it.”
Why relevant

Explicitly states procurement policy is 'open ended' (no limit) for wheat and paddy offered by farmers within stipulated period and quality.

How to extend

A student could generalize that 'open ended' procurement exists for major cereals (wheat/paddy) and then check whether that language appears for other crops/states to judge the broader claim.

Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 9: Subsidies > 9.5.1 Food Corporation of India (FCI) > p. 293
Strength: 5/5
“Minimum Support Price (MSP): The rate announced by GoI at which purchases are made from the farmers by GoI and State governments and their agencies for the central pool. The MSP is same for the entire country and there is no limit for procurement in terms of volume/ quantity provided that stock satisfies Fair Average Quality (FAQ). Central Issue Price (CIP): The price at which food grains (wheat and rice) are issued to the State governments/ UTs from the central pool at uniform prices for distribution under Targeted Public Distribution System (TPDS)/NFSA. CIP is fixed by Department of Food and Public Distribution, Ministry of Consumer Affairs, Food and Public Distribution.”
Why relevant

Says MSP is same nationwide and 'there is no limit for procurement in terms of volume/ quantity' provided stock meets FAQ — context is food grains (wheat and rice).

How to extend

Compare this explicit 'no limit' formulation for food grains with official texts for pulses/oilseeds to see if the same rule applies.

Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 10: Agriculture - Part I > 10.3 Minimum Support Price (MSP) > p. 306
Strength: 4/5
“And if the mandi/private markets prices are above MSP then the Govt.'s purpose is already achieved and Govt. may not procure crops from farmers and the farmers will also be not willing to sell to govt. at MSP. Even though MSP is declared for 25 crops, Govt. procures mostly wheat and rice and that too mostly from Punjab, Haryana and few other states like Western UP, MP. Some other crops which are procured are Cotton by Cotton Corporation of India, pulses for buffer stock and sugarcane by sugar mills.”
Why relevant

Notes MSP is declared for 25 crops but government 'procures mostly wheat and rice' and only some other crops (e.g., pulses) are procured for buffer stock—implying procurement practice varies by crop.

How to extend

Use this pattern to suspect that unlimited procurement may be limited to certain cereals, so check procurement practice variations across crops/states.

Indian Economy, Nitin Singhania .(ed 2nd 2021-22) > Chapter 9: Agriculture > Objectives of MSP include: > p. 329
Strength: 4/5
“Kharif - 14 Crops | Rabi - 6 Crops | Other-2 Crops • Paddy, jowar, bajra, maize, ragi, arhar (tur), | Wheat, barley, gram, masur | Copra and jute moong, urad, cotton, groundnut, sunflower | (lentil), rapeseed/mustard, | seed, soyabean, sesamum, niger seed | safflower PM-AASHA - To address the gaps in MSP Scheme, Pradhan Mantri Annadata Aay SanraksHan Abhiyan (PM-AASHA) was launched in 2018 to ensure remunerative prices to farmers of pulses, oilseeds and copra. This umbrella scheme has three components or sub-schemes: • 1. Price Support Scheme (PSS) Under it, physical procurement of pulses and copra is done by Central Nodal Agencies with proactive role of State Governments.”
Why relevant

Describes PM-AASHA (2018) as an umbrella to address MSP gaps for pulses and oilseeds, and that one component (PSS) involves physical procurement by central nodal agencies—suggesting specialized schemes rather than an automatic open‑ended procurement for these crops.

How to extend

A student could infer that pulses/oilseeds have distinct procurement mechanisms (not necessarily open‑ended) and verify scheme rules/state implementation to test the universal 'unlimited' claim.

Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 10: Agriculture - Part I > 10.4 PM – AASHA > p. 308
Strength: 4/5
“It is also decided that in addition to NAFED, Food Cooperation of India (FCI) will take up PSS operations in states /districts. The procurement expenditure and losses due to procurement will be borne by Central Government as per norms.• Price Deficiency Payment Scheme (PDPS): Under Price Deficiency Payment Scheme this scheme (PDPS), it is proposed to cover all oilseeds for which MSP is notified. In this direct payment of the difference between the MSP and the selling/modal price will be made to pre-registered farmers selling his produce in the notified market yard through a transparent auction process. All payment will be done directly into registered bank account of the farmer.”
Why relevant

Describes Price Deficiency Payment Scheme (PDPS) for all MSP‑notified oilseeds where difference between MSP and market price is paid to farmer—indicating an alternative to physical procurement for oilseeds.

How to extend

From this, one can deduce that for oilseeds, support may be through cash compensation rather than unlimited MSP procurement; check whether PDPS replaces or complements open procurement in states.

Statement 2
Is the Minimum Support Price (MSP) for cereals and pulses in India fixed at a level that market prices will never rise above?
Origin: Web / Current Affairs Fairness: CA heavy Web-answerable

Web source
Presence: 5/5
"the government ... intervene in the market through procurement operations with the objective that market prices do not fall below the Minimum Support Prices (MSPs) fixed by the government."
Why this source?
  • States the government's procurement objective is to prevent market prices from falling below MSP, indicating MSP functions as a floor rather than a ceiling.
  • Describes market intervention through procurement to support prices when they are low — not to cap high prices.
Web source
Presence: 4/5
"recent years have seen larger price swings and also higher prices of pulses in India than before"
Why this source?
  • Notes that recent years have seen larger price swings and higher prices of pulses, showing market prices can and do rise above MSP.
  • Discusses use of other measures (procurement, trade policy) to influence domestic prices, implying MSP does not by itself cap prices upward.

Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 10: Agriculture - Part I > 10.3 Minimum Support Price (MSP) > p. 306
Strength: 5/5
“And if the mandi/private markets prices are above MSP then the Govt.'s purpose is already achieved and Govt. may not procure crops from farmers and the farmers will also be not willing to sell to govt. at MSP. Even though MSP is declared for 25 crops, Govt. procures mostly wheat and rice and that too mostly from Punjab, Haryana and few other states like Western UP, MP. Some other crops which are procured are Cotton by Cotton Corporation of India, pulses for buffer stock and sugarcane by sugar mills.”
Why relevant

Says if mandi/private market prices are above MSP the government may not procure — implying MSP functions as a floor for procurement, not an automatic ceiling on market prices.

How to extend

A student could compare historical mandi/market price series with announced MSPs to see whether market prices have in fact exceeded MSP and how procurement responded.

Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 9: Subsidies > 9.5.1 Food Corporation of India (FCI) > p. 293
Strength: 4/5
“Minimum Support Price (MSP): The rate announced by GoI at which purchases are made from the farmers by GoI and State governments and their agencies for the central pool. The MSP is same for the entire country and there is no limit for procurement in terms of volume/ quantity provided that stock satisfies Fair Average Quality (FAQ). Central Issue Price (CIP): The price at which food grains (wheat and rice) are issued to the State governments/ UTs from the central pool at uniform prices for distribution under Targeted Public Distribution System (TPDS)/NFSA. CIP is fixed by Department of Food and Public Distribution, Ministry of Consumer Affairs, Food and Public Distribution.”
Why relevant

Defines MSP as the rate at which government purchases are made and notes MSP is uniform nationwide with no explicit procurement volume limit (subject to quality).

How to extend

Use this rule to infer MSP is a purchase price set by policy; check procurement rules and market trading to judge whether MSP constrains market price upside.

Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 10: Agriculture - Part I > 10.3 Minimum Support Price (MSP) > p. 305
Strength: 4/5
“Agriculture Crop Year: 1st July - 30th June Marketing Season of Kharif crops starts from 1st October Marketing Season of Rabi crops starts from 1st April Before the sowing, during each Rabi and Kharif crop season, Government of India, Ministry of Agriculture and Farmers' Welfare announces the Minimum Support Prices (MSP) for procurement based on the recommendation of the Commission for Agricultural Costs and Prices (CACP) under Ministry of Agriculture and Farmers' Welfare and upon approval of the Cabinet Committee on Economic Affairs (CCEA). MSP does not have any legal backing till now and farmers can't demand it as a legal right.”
Why relevant

States MSP is announced annually based on CACP recommendations and explicitly notes MSP has no legal backing or enforceable right for farmers.

How to extend

From the lack of legal backing, a student could reason that MSP cannot legally cap market prices and should examine market behavior when MSP changes.

Indian Economy, Nitin Singhania .(ed 2nd 2021-22) > Chapter 9: Agriculture > 2020 > p. 356
Strength: 3/5
“Which of the following factors/policies were affecting the price of rice in India in the recent past? • 1. Minimum Support Price • 2. Government's trading • 3. Government's stockpiling • 4. Consumer subsidies Select the correct answer using the code given below: (a) 1, 2 and 4 only (b) 1, 3 and 4 only (c) 2 and 3 only (d) 1, 2, 3 and 4 4. Consider the following statements: 1. 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. 2. 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.”
Why relevant

Contains the exam-style assertion (to be judged) that 'MSP is fixed in any State/UT at a level to which the market price will never rise' — showing this precise claim exists in study material as contestable.

How to extend

Treat this as a hypothesis to test: compare the claim against procurement practice and market price data, and check whether textbooks endorse or refute it.

Pattern takeaway: UPSC consistently traps students with 'Absolutist Statements' in Economy. If a statement implies the government has infinite money ('unlimited procurement') or can defy market forces ('price will never rise'), it is almost certainly false.
How you should have studied
  1. [THE VERDICT]: Conceptual Trap. While standard books (Vivek Singh/Singhania) cover MSP, the specific phrasing targets the 'limitations' of the policy. It is solvable via logic.
  2. [THE CONCEPTUAL TRIGGER]: Agriculture > Food Management > Procurement Policy. Specifically, the difference between 'Open-Ended Procurement' (Wheat/Rice) and 'Price Support Scheme' (Pulses/Oilseeds).
  3. [THE HORIZONTAL EXPANSION]: 1. Open-Ended Procurement: Only for Wheat & Paddy (FCI buys whatever is offered). 2. PM-AASHA (2018): For Pulses/Oilseeds, procurement is capped (usually 25% of production). 3. PDPS (Price Deficiency Payment): Pays the difference, no physical procurement. 4. CACP recommends MSP for 22 crops + FRP for Sugarcane. 5. Market Intervention Scheme (MIS): For perishables not under MSP.
  4. [THE STRATEGIC METACOGNITION]: When studying a scheme, always ask the 'Boundary Conditions': Is it universal? Is it legally binding? Is it unlimited? The government rarely has the fiscal capacity for 'unlimited' anything.
Concept hooks from this question
📌 Adjacent topic to master
S1
👉 Open-ended procurement applies to wheat and paddy
💡 The insight

Procurement at MSP is described as 'open ended' specifically for wheat and paddy/foodgrains, not broadly for all crops.

High-yield concept for questions on food security and PDS operations: explains which crops the central pool routinely buys without quantity limits and clarifies the operational role of FCI and state agencies. Connects to topics on buffer stocks, central procurement policy and regional concentration of procurement.

📚 Reading List :
  • Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 9: Subsidies > 9.5.1 Food Corporation of India (FCI) > p. 292
  • Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 9: Subsidies > 9.5.1 Food Corporation of India (FCI) > p. 293
🔗 Anchor: "Does Indian procurement policy allow unlimited procurement at the Minimum Suppor..."
📌 Adjacent topic to master
S1
👉 MSP is declared widely but procurement is selective
💡 The insight

MSP is announced for many crops, yet actual government procurement is largely limited to specific crops and regions, and MSP lacks statutory enforceability.

Important for UPSC answers on agricultural price policy: distinguishes the headline MSP announcement from the practical scope of procurement, linking to policy design, political economy of procurement (states/regions that benefit), and legal/entitlement debates.

📚 Reading List :
  • Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 10: Agriculture - Part I > 10.3 Minimum Support Price (MSP) > p. 306
  • Indian Economy, Nitin Singhania .(ed 2nd 2021-22) > Chapter 9: Agriculture > Objectives of MSP include: > p. 329
🔗 Anchor: "Does Indian procurement policy allow unlimited procurement at the Minimum Suppor..."
📌 Adjacent topic to master
S1
👉 Alternative support mechanisms (PDPS / PM-AASHA) for pulses and oilseeds
💡 The insight

For pulses and oilseeds the policy toolkit includes Price Deficiency Payment and PM-AASHA components instead of blanket open-ended procurement.

Useful for answering questions about reforms to MSP/compensation mechanisms: shows policy alternatives to physical procurement, implications for fiscal cost control and farmer support design, and how different schemes target different crop groups.

📚 Reading List :
  • Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 10: Agriculture - Part I > 10.4 PM – AASHA > p. 308
  • Indian Economy, Nitin Singhania .(ed 2nd 2021-22) > Chapter 9: Agriculture > Objectives of MSP include: > p. 329
🔗 Anchor: "Does Indian procurement policy allow unlimited procurement at the Minimum Suppor..."
📌 Adjacent topic to master
S2
👉 MSP is a procurement/administrative price, not a legal price ceiling
💡 The insight

MSP is the pre-announced rate at which the government purchases crops and does not have statutory legal backing as a mandated maximum market price.

High-yield: clarifies the institutional nature of MSP versus market regulation; helps answer questions on policy design, legal status of agricultural measures, and limits of government price control. Links to topics on procurement policy, legal frameworks, and market signals; enables arguments about why MSP may not prevent market price movements.

📚 Reading List :
  • Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 10: Agriculture - Part I > 10.3 Minimum Support Price (MSP) > p. 305
  • Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 9: Subsidies > 9.5.1 Food Corporation of India (FCI) > p. 293
🔗 Anchor: "Is the Minimum Support Price (MSP) for cereals and pulses in India fixed at a le..."
📌 Adjacent topic to master
S2
👉 Market prices can and do rise above MSP
💡 The insight

Mandis/private market prices may exceed MSP, in which case government procurement becomes unnecessary and farmers prefer selling at market prices.

High-yield: directly addresses claims that MSP caps market prices; useful for evaluating policy effectiveness and market dynamics questions. Connects to themes of price discovery, procurement incentives, and why MSP alone cannot control market-level prices.

📚 Reading List :
  • Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 10: Agriculture - Part I > 10.3 Minimum Support Price (MSP) > p. 306
🔗 Anchor: "Is the Minimum Support Price (MSP) for cereals and pulses in India fixed at a le..."
📌 Adjacent topic to master
S2
👉 MSP coverage and actual procurement are limited and concentrated
💡 The insight

Although MSP is declared for many crops nationwide, actual procurement is largely focused on wheat and rice and concentrated in a few surplus states.

High-yield: explains why MSP's impact on market prices varies by crop and region; useful in essay/GS answers on food policy, regional agricultural disparities, and implementation gaps. Enables analysis of why MSP may not prevent price rises for other cereals/pulses.

📚 Reading List :
  • Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 10: Agriculture - Part I > 10.3 Minimum Support Price (MSP) > p. 306
  • Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 9: Subsidies > 9.5.1 Food Corporation of India (FCI) > p. 293
🔗 Anchor: "Is the Minimum Support Price (MSP) for cereals and pulses in India fixed at a le..."
🌑 The Hidden Trap

The logical sibling is the 'Legal Status of MSP'. Unlike the FRP (Fair and Remunerative Price) for Sugarcane which is statutory (Essential Commodities Act), MSP has no statutory backing—farmers cannot demand it as a legal right in court.

⚡ Elimination Cheat Code

Apply the 'Economic Gravity' test. Statement 2 says MSP is a level market price will 'never rise' above. This implies MSP is a Maximum Price (Ceiling). But MSP is a 'Minimum Support Price' (Floor). In a drought, market prices skyrocket above MSP. Basic supply-demand logic kills Statement 2 immediately. Statement 1 dies by the 'All-Unlimited-Any' extreme word triad.

🔗 Mains Connection

Link this to International Relations (WTO): If India actually did 'unlimited procurement' at MSP for all crops, we would breach the 'De Minimis' limits (10% of production value) under the WTO Agreement on Agriculture (Amber Box subsidies), inviting trade sanctions.

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SIMILAR QUESTIONS

IAS · 2004 · Q77 Relevance score: 3.29

Consider the following statements: 1. Regarding the procurement of food grains, Government of India follows a procurement target rather than an open-ended procurement policy. 2. Government of India announces minimum support prices only for cereals. 3. For distribution under Targeted Public Distribution System (TPDS), wheat and rice are issued by the Government of India at uniform Central issue prices to the States/ Union Territories. Which of the statements given above is/ are correct?

IAS · 2009 · Q141 Relevance score: 1.06

Consider the following statements : 1. The Commission for Agricultural Costs and Prices recommends the Minimum Support Prices for 32 crops. 2. The Union Ministry of Consumer Affairs, Food and Public Distribution has launched the National Food Security Mission. Which of the statements given above is/are correct ?

CAPF · 2014 · Q29 Relevance score: 0.41

Which of the statements given below is/ are correct ? 1. For the marketing year 2014-2015, the minimum support price (MSP) for wheat in India has been fixed at Rs. 1,400 / quintal 2. MSP is the rate at which the government sells the grains through the fair price shops Select the correct answer using the code given below : .

IAS · 2018 · Q93 Relevance score: -0.05

Consider the following : 1. Areca nut 2. Barley 3. Coffee 4. Finger millet 5. Groundnut 6. Sesamum 7. Turmeric The Cabinet Committee on Economic Affairs has announced the Minimum Support Price for which of the above ?

IAS · 2023 · Q27 Relevance score: -0.07

Consider the following statements : 1. The Government of India provides Minimum Support Price for niger (Guizotia abyssinica) seeds. 2. Niger is cultivated as a Kharif crop. 3. Some tribal people in India use niger seed oil for cooking. How many of the above statements are correct?