Question map
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 ?
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.
PROVENANCE & STUDY PATTERN
Full viewThis 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.
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?
- 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?
- 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.
Explicitly states procurement policy is 'open ended' (no limit) for wheat and paddy offered by farmers within stipulated period and quality.
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.
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).
Compare this explicit 'no limit' formulation for food grains with official texts for pulses/oilseeds to see if the same rule applies.
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.
Use this pattern to suspect that unlimited procurement may be limited to certain cereals, so check procurement practice variations across crops/states.
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.
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.
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.
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.
- 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.
- 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.
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.
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.
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).
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.
States MSP is announced annually based on CACP recommendations and explicitly notes MSP has no legal backing or enforceable right for farmers.
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.
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.
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.
- [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.
- [THE CONCEPTUAL TRIGGER]: Agriculture > Food Management > Procurement Policy. Specifically, the difference between 'Open-Ended Procurement' (Wheat/Rice) and 'Price Support Scheme' (Pulses/Oilseeds).
- [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.
- [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.
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.
- 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
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.
- 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
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.
- 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
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.
- 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
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.
- Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 10: Agriculture - Part I > 10.3 Minimum Support Price (MSP) > p. 306
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.
- 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
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.
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.
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.