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?

QUESTION

Easy

Economy

Prelims 2020

Consider the following statements:

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.
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?

Select an option to attempt

Explanation

Statement 1 is incorrect: Procurement at MSP is not "unlimited." While the government provides an open-ended procurement policy for certain cereals (like rice and wheat) in specific states, for most pulses and oilseeds, procurement is capped by targets, storage capacity, and the Price Support Scheme (PSS) guidelines.

Statement 2 is incorrect: MSP is designed as a safety net (floor price), not a price ceiling. It does not prevent market prices from rising higher due to demand.

Note on MSP Calculation: As per the Union Budget 2018-19, the Government of India follows the principle of fixing MSP at a level of at least 1.5 times the all-India weighted average cost of production (A2+FL). This formula is recommended by the Commission for Agricultural Costs and Prices (CACP) to ensure a minimum 50% return over the cost of production for farmers.