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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
Guest previewThis 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.
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.
- 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
āProcurement: 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: ā¢ 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.ā
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
āMinimum 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.ā
Why relevant
Says MSP is same nationwide and 'there is no limit for procurement in terms of volume/ quantity' provided stock meets FAQ ā 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
āAnd 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.ā
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 stockāimplying 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
āKharif - 14 Crops | Rabi - 6 Crops | Other-2 Crops ā¢ 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: ā¢ 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.ā
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 agenciesāsuggesting specialized schemes rather than an automatic openāended procurement for these crops.
How to extend
A student could infer that pulses/oilseeds have distinct procurement mechanisms (not necessarily openāended) 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 ā AASHA > p. 308
Strength: 4/5
āIt 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.ā¢ 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.ā
Why relevant
Describes Price Deficiency Payment Scheme (PDPS) for all MSPānotified oilseeds where difference between MSP and market price is paid to farmerāindicating 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.
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 ā 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 stockāimplying 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 agenciesāsuggesting specialized schemes rather than an automatic openāended procurement for these crops.
A student could infer that pulses/oilseeds have distinct procurement mechanisms (not necessarily openāended) and verify scheme rules/state implementation to test the universal 'unlimited' claim.
Describes Price Deficiency Payment Scheme (PDPS) for all MSPānotified oilseeds where difference between MSP and market price is paid to farmerāindicating 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.
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