Agricultural Economy and MSP: CACP, Costs and Procurement

The correct answer is B, 22. The Government of India announces a Minimum Support Price for twenty-two mandated crops on the recommendation of the Commission for Agricultural Costs and Prices. These cover cereals, pulses, oilseeds and commercial crops such as copra, raw cotton and raw jute. Sugarcane is kept outside this list and is dealt with separately through a Fair and Remunerative Price.

Option A is wrong because twenty is short of the mandated list and matches no official grouping. Option C is wrong because twenty-four is often chosen by candidates who count sugarcane and one or two minor crops along with the mandated list. Option D is wrong because eighteen is far too small; the pulses and oilseeds alone account for more than ten of the twenty-two. The figure to remember is twenty-two mandated crops plus a separate FRP for sugarcane.

The correct answer is D, Targeted Public Distribution System. The public distribution system was made targeted in 1997, when households were divided into those above and those below the poverty line and the subsidy was concentrated on the poorer group. Grain from the central pool, procured largely by the Food Corporation of India, is issued to the States and sold through fair price shops under this system.

Option A is wrong because it is a made-up phrase about population spread and has no place in food policy. Option B is wrong for the same reason; it describes nothing in the administration of food subsidy. Option C is wrong because although it borrows the word target, there is no scheme by that name; the development programmes of that period were the Integrated Rural Development Programme and its successors. Only option D is the correct expansion.

The correct answer is A, 65 per cent. When the Government announced the rabi Minimum Support Prices for the marketing season 2021-22, it also published the margin of each price over the A2 plus FL cost of production. For barley that margin worked out to about sixty-five per cent, which is comfortably above the declared floor of fifty per cent, that is one and a half times the cost.

Option B is wrong because ninety-three per cent was the margin for wheat in the same announcement, and the two are frequently interchanged. Option C is wrong because fifty per cent is the minimum the policy promises, not the figure estimated for barley. Option D is wrong because a margin above one hundred per cent applied to no rabi crop in that season. The point to carry away is that the margin is measured over the A2 plus FL cost.

The correct answer is B, the Commission for Agricultural Costs and Prices. Set up in January 1965 as the Agricultural Prices Commission and renamed in 1985, it works under the Ministry of Agriculture and Farmers Welfare. It studies the cost of production, demand and supply, price trends and the terms of trade, and recommends a price for each mandated crop, which the Cabinet Committee on Economic Affairs then approves.

Option A is wrong because the Food Corporation of India buys at the announced price but plays no part in fixing it. Option C is wrong because NITI Aayog is a policy think tank without any statutory role in price fixation. Option D is wrong because the Reserve Bank of India is the monetary authority and deals with interest rates and currency, not with crop prices. The Commission recommends and the Cabinet decides.

The correct answer is C, C2. The C2 cost is the most comprehensive of the measures the Commission uses. It begins with all paid-out costs, adds the imputed value of unpaid family labour, and then adds two items the farmer never actually pays out: the rent the owned land could have fetched and the interest the money locked in owned fixed capital could have earned.

Option A is wrong because A2 covers only the costs actually paid in cash or kind, such as seed, fertiliser, hired labour, fuel and irrigation charges. Option B is wrong because A2 plus FL stops at adding family labour and does not touch owned land or capital; it is nevertheless the basis of the one and a half times formula. Option D is wrong because B1 is an intermediate cost in the series and is not the comprehensive measure the question describes.

The correct answer is B, A2 plus FL. The Union Budget of 2018 announced that the Minimum Support Price would be kept at a level at least one and a half times the cost of production, and the cost used for that calculation is A2 plus FL, that is all paid-out expenses together with the imputed value of unpaid family labour.

Option A is wrong because using A2 alone would ignore the labour of the farmer's own family, which is a large part of the real cost. Option C is wrong because C2 is the base the Swaminathan Commission had recommended, and the difference between the two bases is exactly what makes this question worth asking. Option D is wrong because C3 is a further mark-up over C2 used for some analytical purposes and has no role in the announced formula.

The correct answer is B, 1965. The Food Corporation of India was set up in 1965 under the Food Corporations Act of 1964, at a time of severe food shortage, to procure food grains, maintain buffer stocks, distribute grain through the public distribution system and keep prices stable for both the farmer and the consumer. The Agricultural Prices Commission was created in the same year.

Option A is wrong because 1955 saw the Imperial Bank of India become the State Bank of India, not the creation of the FCI. Option C is wrong because 1975 is the year the twenty point programme was launched and is unconnected with the Corporation. Option D is wrong because 1982 is the year NABARD was set up as the apex institution for rural credit, which is the most common confusion in this question.

The correct answer is B, the Price Support Scheme. Under it, central nodal agencies, chiefly NAFED, buy pulses, oilseeds and copra at the Minimum Support Price when prices in the mandis fall below that level, and the losses are borne by the Government. It is the procurement arm of the MSP system for crops the Food Corporation of India does not handle.

Option A is wrong because the Market Intervention Scheme is meant for perishable horticultural crops such as onion, potato, apple and grapes, which have no MSP at all. Option C is wrong because a price deficiency payment pays the farmer the gap in cash instead of buying the crop, and is used in some State schemes rather than as the central procurement route. Option D is wrong because the Open Market Sale Scheme is about selling stocks, not buying them.

The correct answer is B, sugarcane. The Fair and Remunerative Price is the minimum price a sugar mill is legally bound to pay a cane grower, fixed by the Central Government on the recommendation of the CACP under the Sugarcane Control Order. Because the obligation falls on the mill and not on a government agency, sugarcane is kept apart from the twenty-two crops covered by the ordinary MSP.

Option A is wrong because wheat is a mandated MSP crop procured by the Food Corporation of India. Option C is wrong because raw cotton has an MSP and is procured by the Cotton Corporation of India. Option D is wrong because raw jute also has an MSP, with the Jute Corporation of India as the procuring agency. Only sugarcane has an FRP, and some States additionally declare a higher State Advised Price.

The correct answer is C, 2016. e-NAM was launched on 14 April 2016, the birth anniversary of Dr B. R. Ambedkar, as an online trading platform that links the regulated mandis of the States into one national market. It allows a buyer to bid for a lot after seeing an assaying report, so a farmer is not limited to the traders present in the local yard.

Option A is wrong because 2014 saw the setting up of NITI Aayog later in the year and no agricultural market platform. Option B is wrong because 2015 is the year the Soil Health Card scheme was launched, which is often confused with e-NAM. Option D is wrong because 2018 is the year of the one and a half times MSP announcement and of the model contract farming law, not of e-NAM.

The correct answer is B, marginal. The Agriculture Census groups operational holdings by size into marginal below one hectare, small from one to two hectares, semi-medium from two to four, medium from four to ten and large above ten hectares. The marginal and small groups together form the overwhelming majority of holdings in India, which is why fragmentation is treated as a structural problem of Indian agriculture.

Option A is wrong because small refers to the one to two hectare class, one step above marginal. Option C is wrong because semi-medium covers two to four hectares. Option D is wrong because medium covers four to ten hectares. Papers often give the classes in a jumbled order, so the safest method is to remember the boundaries one, two, four and ten hectares in sequence.

The correct answer is C, 1982. The National Bank for Agriculture and Rural Development was set up on 12 July 1982 on the recommendation of the Shivaraman Committee, taking over the refinancing functions earlier performed by the Reserve Bank of India and the Agricultural Refinance and Development Corporation. It refinances cooperative banks and regional rural banks rather than lending directly to farmers.

Option A is wrong because 1969 is the year fourteen major commercial banks were nationalised and the lead bank scheme began. Option B is wrong because 1975 is the year the regional rural banks were created, which NABARD later came to supervise. Option D is wrong because 1991 is the year of economic liberalisation and of the Narasimham Committee on the financial system, not of NABARD's founding.

A related fact often paired with this one is that NABARD has its head office in Mumbai and that agriculture is a component of priority sector lending, under which banks must direct a fixed share of their credit to the sector.