The economic cost of food grains to the Food Corporation of India is Minimum Support Price and bonus (if any) paid to the farmers plus
- A.transportation cost only
- B.interest cost only
- C.procurement incidentals and distribution cost
- D.procurement incidentals and charges for godowns
Correct answer
Explanation
The correct answer is C, procurement incidentals and distribution cost. The economic cost is the full cost the Food Corporation of India bears on each quintal of wheat or rice it handles. It has three parts. The first is the pooled cost of grain, which is the Minimum Support Price and any state bonus paid to farmers. The second is procurement incidentals, the costs incurred while buying the grain, such as mandi charges, state taxes, commission to arhtiyas, gunny bags, labour and storage until the grain is moved. The third is distribution cost, which covers moving the grain across the country, handling it and holding it in depots until it is issued to states for the public distribution system. The gap between this economic cost and the lower central issue price is met by the Centre as the food subsidy. Option A is wrong because transport is only one piece of distribution cost. Option B is wrong because interest is only one element of carrying cost. Option D is wrong because godown charges alone leave out the larger cost of moving and distributing grain. Exam tip: economic cost equals pooled cost of grain plus procurement incidentals plus distribution cost.
Practice Questions
View allAmong the agricultural commodities imported by India, which one of the following accounts for the highest imports in terms of value in the last five years?
- A.Spices
- B.Fresh fruits
- C.Pulses
- D.Vegetable oils
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Edible vegetable oils are India's largest agricultural import by value, and they have stayed at the top since well before this question was set.
Read the full explanation →'Broad-based Trade and Investment Agreement (BTIA)' is sometimes seen in the news in the context of negotiations held between India and
- A.European Union
- B.Gulf Cooperation Council
- C.Organization for Economic Cooperation and Development
- D.Shanghai Cooperation Organization
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The Broad-based Trade and Investment Agreement was the name given to the free trade agreement that India and the European Union began negotiating in 2007.
Read the full explanation →Consider the following statements : 1. Purchasing Power Parity (PPP) exchange rates are calculated by comparing the prices of the same basket of goods and services in different countries. 2. In terms of PPP dollars, India is the sixth largest economy in the world. Which of the statements given above is/are correct?
- A.1 only
- B.2 only
- C.Both 1 and 2
- D.Neither 1 nor 2
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Statement 1 is the definition of purchasing power parity, while statement 2 understates India's position. A PPP exchange rate is the rate at which the currency of one country would have to be converted into that of another to buy the same basket of goods and services in both.
Read the full explanation →What is/are the most likely advantages of implementing 'Goods and Services Tax (GST)'? 1. It will replace multiple taxes collected by multiple authorities and will thus create a single market in India. 2. It will drastically reduce the 'Current Account Deficit' of India and will enable it to increase its foreign exchange reserves. 3. It will enormously increase the growth and size of economy of India and will enable it to overtake China in the near future. Select the correct answer using the code given below :
- A.1 only
- B.2 and 3 only
- C.1 and 3 only
- D.1, 2 and 3
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The main and certain advantage of GST is that it subsumes many indirect taxes into one and creates a common national market.
Read the full explanation →Which one of the following is not a strategy in the Rainfed Area Development (RAD) scheme of India?
- A.Diversified farming
- B.Soil health management
- C.Adaptation of cluster-based approaches
- D.Optimizing canal irrigation
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Rainfed Area Development is meant for farms that depend on rain, not on canals, so improving canal irrigation is not one of its strategies.
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