UPSC Prelims 2001 Q33: Indian Economy – Agriculture & Rural Development
The prices at which the Government purchases food grains for maintaining the public
distribution system and for building up buffer stocks is known as
- (a) minimum support prices
- (b) procurement prices
- (c) issue prices
- (d) ceiling prices
Answer: (b) procurement prices
Explanation
Prices at which the Government purchases food grains for PDS and buffer stocks
| Price | What it is |
|---|---|
| Procurement price | Price at which the Government (FCI) buys grain for the public distribution system and buffer stocks |
| Minimum support price | Floor price announced before sowing to protect farmers |
| Issue price | Price at which FCI sells grain to States for PDS |
| Ceiling price | Maximum price allowed for sale |
The Government buys food grains from farmers at procurement prices to run the PDS and build buffer stocks. Since the 1970s procurement prices and MSP have been merged into one figure in practice, but the term for the purchase price is procurement price.
Answer: (b) procurement prices.
Why each option is right or wrong
- (a) Incorrect. MSP is a floor price announced before sowing, not the purchase price itself.
- (b) CORRECT. Procurement prices are what the Government pays to buy grain.
- (c) Incorrect. Issue prices are what FCI charges when it sells grain.
- (d) Incorrect. Ceiling prices cap selling prices; they are not purchase prices.
Key point
MSP is recommended by the CACP and fixed by the Union Government; FCI (1965) procures and stores the grain.
Remember
Government buys grain at procurement price, sells at issue price.
Common mistakes
- Choosing MSP because today MSP and procurement price are the same number.
- Mixing up issue price (selling) with procurement (buying).
- Forgetting the role of the Food Corporation of India.
Exam tip
Buying price = procurement; selling price to States = issue.
Sources
- Ministry of Consumer Affairs, Food and Public Distribution — Food Corporation of India: procurement policy
- Commission for Agricultural Costs and Prices — Price Policy Reports