Previous Year Question
Consider the following statements:
In the case of all cereals, pulses and oilseeds, the procurement at Minimum Support Price is unlimited in any State/Union Territory of India.
In the case of cereals and pulses, the MSP is fixed in any State/Union Territory at a level to which the market price will never rise.
Which of the statements given above is/are correct?
1 only
2 only
Both 1 and 2
Neither 1 nor 2
Correct Answer: D
Detailed Solution
Statement 1 is incorrect. Procurement at MSP is not unlimited for every cereal, pulse and oilseed in every State or Union Territory.
Paddy and wheat are principally procured under an open-ended procurement policy. Produce brought to designated procurement centres during the notified procurement period and conforming to the prescribed quality specifications may be purchased at MSP. However, this policy cannot be extended to all cereals, pulses and oilseeds as a single general rule.
Pulses, oilseeds and copra are generally procured under the Price Support Scheme of PM-AASHA. Procurement normally requires:
the market price to fall below MSP;
a proposal from the concerned State Government;
approval by the Central Government; and
compliance with the approved period, quality standards and quantity.
Under the Price Support Scheme, the approved procurement limit was generally restricted to 25% of the State’s production. Procurement of all pulses and oilseeds is therefore not unlimited.
Statement 2 is incorrect. MSP is neither a maximum price nor a price ceiling. It is a declared support price intended to protect farmers against an excessive fall in market prices.
When demand is strong or supply is limited, the market price may rise above MSP, and farmers may sell their produce in the open market at the higher price. MSP does not prevent such an increase.
Thus:
Market Price < MSP
may trigger procurement or price-support intervention, while:
Market Price > MSP
is also entirely possible.