Mod 2: Farm Prices — CACP, MSP, Procurement and Price Stabilisation
4B.2.1 CACP and cost concepts — how MSP is worked out
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- School
- Class 10+2
- BPSC
- UPSC
- Name the body that recommends MSP and the body that decides it.
- Explain A2, A2+FL and C2.
- Count the crops covered.
- List CACP’s objectives.
A wheat farmer spends ₹1,200 a quintal in cash and works his own field with his family. What is his real cost?
Show answer
Cash cost (A2) plus the value of family labour (FL) — and, fully, the rent of his own land and interest on his own capital (C2). MSP is built on these cost concepts.
A three-step relay.
📌 Solves: Q215, Q216, Q217, Q218, Q219, Q220
Climb the ladder: each step adds a cost.
Margin = (MSP − cost) ÷ cost × 100. The cost shown is only an example; enter the CACP cost for any crop.
📌 Solves: Q214
CheckQuick check: Which cost includes rent of owned land?
C2.
Count: 22 + FRP. Plus two derived MSPs.
| Group | Crops |
|---|---|
| Cereals (7) | Paddy, wheat, maize, jowar, bajra, ragi, barley |
| Pulses (5) | Gram, tur, moong, urad, masur (lentil) |
| Oilseeds (7) | Groundnut, rapeseed-mustard, soybean, sesamum, sunflower, safflower, niger |
| Commercial (3) | Copra, cotton, raw jute |
| Derived | Toria (from mustard) and de-husked coconut (from copra) — fixed by DFPD |
| Separate | Sugarcane — Fair and Remunerative Price (FRP) |
22 crops recommended by CACP + 2 derived = MSP for 24 commodities.
| Objective | ✔/✘ |
|---|---|
| Stabilise farm prices | ✔ |
| Meaningful real income to farmers | ✔ |
| Protect consumers via PDS at reasonable prices | ✔ |
| “Maximum price” for farmers | ✘ |
📌 Solves: Q211, Q221
No law guarantees MSP purchase for every crop; procurement happens mainly for wheat and paddy (Topic 4B.2.2).
1 markExpand CACP.
Commission for Agricultural Costs and Prices.
NumericalA2+FL = ₹1,200/qtl. What is the minimum MSP under the 1.5× rule?
₹1,800 per quintal.
PYQ patternWho determines MSP in India? (a) CACP (b) Agriculture Ministry (c) Finance Commission (d) NABARD
(a) as per key (CACP recommends; Government approves).
PrelimsSince 1997-98 the MSP of major crops has been: (a) = C2 (b) > C2 (c) < C2 (d) unrelated to C2
(b).
Q219 · Q220 · Q221 · Q216 · Q217 · Q211 · Q218 · Q214 · Q215
Arranged in chronological order of exam year in the Questions panel →
- Use the calculator for paddy (MSP ₹2,441): find the largest A2+FL cost at which the 50% margin rule is still met.
- I know CACP history (1965, 1985).
- I can explain A2, A2+FL, C2.
- I can count MSP crops.
- APC Jan 1965 → CACP 1985.
- CACP recommends; CCEA approves.
- A2 < A2+FL < C2; MSP ≥ 1.5 × A2+FL since 2018-19.
- 22 crops + FRP; 24 commodities.
- Objectives: stability, farmer income, consumer protection.
- CACP — Price Policy reports; Department of Agriculture & FW.
- Union Budget 2018-19 speech.
- CACP (APC 1965, renamed 1985) recommends MSP; CCEA approves.
- C2 = A2 + FL + rent of owned land + interest on owned capital.
- MSP for 22 crops (+ toria, de-husked coconut) and FRP for sugarcane.
- Since 1997-98 MSP of major crops > C2.
- Question: Agricultural Prices Commission set up in? Answer: 1965.
- Question: Which body recommends MSP? Answer: CACP.
- Question: Since 1997-98, MSP compared with C2? Answer: Higher than C2.
MCQs — previous-year questions in exam-year order
Answer this question, then use Next.
PYQ · Q219 · M.P.P.C.S. (Pre) 1990
Who recommends support price of the wheat?
PYQ · Q220 · M.P.P.C.S. (Pre) 1992
Institution which recommends support prices of foodgrains:
PYQ · Q221 · I.A.S. (Pre) 1995
Which of the followings are the objectives of the Commission for Agricultural Costs and Prices (CACP)? 1. To stabilize agricultural prices 2. To ensure meaningful real income levels to the farmers 3. To protect the interest of the consumers by providing essential agricultural commodities at reasonable rates through public distribution system 4. To ensure maximum price for the farmer
PYQ · Q216 · U.P.P.C.S. (Mains) 2002
The Agricultural Prices Commission (APC) was set up in the year:
PYQ · Q217 · U.P.P.C.S. (Spl.) (Pre) 2008
Minimum Support Price is decided by:
PYQ · Q211 · I.A.S. (Pre) 2009
Consider the following statements: 1. The Commission for Agriculture Cost and Prices recommends the Minimum Support Prices for 32 crops. 2. The Union Ministry of Consumer Affairs, Food and Public Distribution has launched the National Food Security Mission.
CACP: MSP for 22 crops + FRP; toria & de-husked coconut fixed by DFPD based on mustard and copra. NFSM under MoA&FW.
PYQ · Q218 · U.P.P.C.S. (Pre) (Re-Exam.) 2015
Which of the followings makes recommendation regarding fixing of minimum support price for various crops?
PYQ · Q214 · R.A.S./R.T.S. (Pre) 2016; R.A.S./R.T.S. (Pre) (Re. Exam) 2016
Since 1997-98, which statement is correct regarding Minimum Support Price (MSP)?
PYQ · Q215 · 65th B.P.S.C. (Pre) 2019
Who determines the minimum support price in India?
C2 = A2 + FL + rent and interest on owned land/capital. CACP uses A2+FL for return; C2 as benchmark. CACP (name since 1985; earlier Agricultural Prices Commission, Jan 1965).
One-liners
Write your answer, then submit to see the correct answer.
Agricultural Prices Commission set up in?
1965.Which body recommends MSP?
CACP.Since 1997-98, MSP compared with C2?
Higher than C2.4B.2.2 MSP in practice — procurement, FCI economics and markets
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- School
- Class 10+2
- BPSC
- UPSC
- Explain what procurement achieves.
- Break down the economic cost of FCI grain.
- Separate MSP, procurement price and issue price.
- Know who regulates mandis.
If the market price of wheat is ₹2,900 and MSP is ₹2,610, where will the farmer sell?
Show answer
In the market. A farmer sells to the government only when the market price falls below MSP. MSP is a floor, not a profit guarantee.
Three benefits, one picture.
| Statement | ✔/✘ |
|---|---|
| If market price is high, farmers sell to the government | ✘ |
| Ensures a minimum fixed price | ✔ |
| Helps food security | ✔ |
| Highly profitable, immense profit | ✘ |
📌 Solves: Q222, Q223
MSP is announced for many crops but bought at scale for few.
- Procurement is mostly rice and wheat, pulses to a limited extent, and in a few States (Punjab, Haryana, MP, Telangana, Chhattisgarh…).
- Procurement is not unlimited for all cereals, pulses and oilseeds.
- MSP is uniform across India; no State has an MSP that the market “can never exceed”.
| Crop | MSP? |
|---|---|
| Areca nut | ✘ |
| Barley | ✔ |
| Coffee | ✘ |
| Finger millet (ragi) | ✔ |
| Groundnut | ✔ |
| Sesamum | ✔ |
| Turmeric | ✘ |
📌 Solves: Q210, Q212, Q213
Why does a quintal cost the FCI much more than MSP?
Illustrative values — change them to see the effect.
📌 Solves: Q209
Don’t mix these up.
| Term | Meaning |
|---|---|
| MSP | Floor price announced before sowing |
| Procurement price | Price at which the government actually buys for PDS and buffer stock (often MSP + bonus) |
| Issue price | Price at which FCI/government sells to States/PDS |
| Ceiling price | Maximum price for consumers |
📌 Solves: Q194, Q226, Q228, Q229
Because the economic cost adds handling, transport, storage and interest to MSP.
1 markWho regulates agricultural markets?
APMCs under State APMC Acts.
2 marksDifference between procurement price and issue price.
Procurement: government buys from farmers; issue: government sells to PDS.
PYQ patternPrice at which government buys foodgrains for PDS and buffer stock: (a) MSP (b) Procurement price (c) Issue price (d) Ceiling price
(b).
PrelimsEconomic cost to FCI = MSP + bonus + ?
Procurement incidentals and distribution cost.
Q229 · Q228 · Q222 · Q194 · Q223 · Q212 · Q209 · Q210 · Q226 · Q213
Arranged in chronological order of exam year in the Questions panel →
- Draw the economic-cost tree from memory.
- I know what procurement achieves.
- I can break down FCI economic cost.
- I know which crops have MSP.
- Procurement: stability, remunerative price, buffer stock.
- Mainly wheat & rice, few States.
- Economic cost = MSP + bonus + incidentals + distribution.
- APMCs regulate markets.
- Kerala: MSP for 16 fruits/vegetables (Nov 2020).
- FCI — economic cost methodology; DFPD.
- Kerala Agriculture Department (2020).
- Procurement ensures stable prices, remunerative returns, buffer stocks.
- Economic cost = acquisition (MSP + bonus + incidentals) + distribution.
- MSP crops include barley, ragi, groundnut, sesamum, niger — not areca, coffee, turmeric.
- APMCs under State Acts regulate markets.
- Question: Price at which govt purchases foodgrains? Answer: Procurement price.
- Question: First state to fix MSP for vegetables? Answer: Kerala.
- Question: Who regulates agricultural markets? Answer: APMCs under State Acts.
MCQs — previous-year questions in exam-year order
Answer this question, then use Next.
PYQ · Q229 · I.A.S. (Pre) 2001
The prices at which the government purchases foodgrains for maintaining the public distribution system and for building up buffer-stock is known as:
PYQ · Q228 · U.P.P.C.S. (Spl.) (Mains) 2008
The price at which the Government purchases foodgrains, is:
PYQ · Q222 · R.A.S./R.T.S. (Pre) 2013
Public procurement of foodgrains at support prices ensures the following: (A) Stability in farm prices (B) Remunerative prices to the farmers (C) Building food stocks for public distribution
PYQ · Q194 · Uttarakhand P.C.S. (Pre) 2021; I.A.S. (Pre) 2015
Who regulates the market of Agricultural Products in India?
Agriculture is State subject; APMCs.
PYQ · Q223 · U.P.P.C.S. (Mains) 2016
Consider the following statements regarding the Minimum Support Price: I. If the market price is high, then farmers will sell their produce to the government. II. This ensures minimum fixed prices for the farmers yields. III. It is helpful in Food Security Mission. IV. It is highly profitable for the farmers as they earn immense profit on their yields.
Farmers sell to govt only if market price < MSP.
PYQ · Q212 · I.A.S. (Pre) 2018
Consider the following: 1. Areca nut 2. Barley 3. Coffee 4. Finger millet 5. Groundnut 6. Sesamum 7. Turmeric. The CCEA has announced the Minimum Support Price for which of the above?
PYQ · Q209 · I.A.S. (Pre) 2019
The economic cost of foodgrains to the Food Corporation of India is Minimum Support Price and bonus (if any) paid to the farmers plus
Economic cost = acquisition cost (MSP + bonus + procurement incidentals) + distribution cost.
PYQ · Q210 · I.A.S. (Pre) 2020
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.
MSP for 24 commodities: 7 cereals (paddy, wheat, barley, jowar, maize, ragi, bajra), 5 pulses (gram, tur, moong, urad, lentil), 8 oilseeds (groundnut, rapeseed-mustard, toria, soyabean, sunflower, sesamum, safflower, nigerseed), copra, cotton, jute, de-husked coconut + FRP sugarcane.
PYQ · Q226 · U.P. R.O. / A.R.O. (Mains) 2021
Which State of India has recently decided to fix a Minimum Support Price (MSP) for fruits and vegetables?
Oct 2020, effective 1 Nov 2020; 16 commodities.
PYQ · Q213 · I.A.S. (Pre) 2023
Consider the following statements: 1. The Government of India provides Minimum Support Price for niger (Guizotia abyssinica) seeds. 2. Niger is cultivated as a Kharif crop. 3. Some tribal people in India use niger seed oil for cooking. How many of the above statements are correct?
One of 14 kharif MSP crops; among highest MSPs.
One-liners
Write your answer, then submit to see the correct answer.
Price at which govt purchases foodgrains?
Procurement price.First state to fix MSP for vegetables?
Kerala.Who regulates agricultural markets?
APMCs under State Acts.4B.2.3 MSP numbers, sugarcane FRP, PM-AASHA and the Price Stabilisation Fund
🏫 School → 🇮🇳 UPSC · NCERT-linked · latest official data
- School
- Class 10+2
- BPSC
- UPSC
- Quote MSPs then and now for wheat, paddy, groundnut.
- Explain FRP for sugarcane.
- Know PM-AASHA components.
- Trace the two Price Stabilisation Funds.
Wheat MSP was ₹1,350 in 2013. What is it for the 2027-28 marketing season?
Show answer
₹2,610 per quintal (approved 30 Sept 2026) — up ₹25 from ₹2,585.
Same crop, different decade. Keep the latest number ready.
| Crop | Question period | Latest |
|---|---|---|
| Wheat | ₹1,350 (2013) | ₹2,610 (RMS 2027-28) |
| Paddy (common) | ₹1,750 (2018-19; Grade A ₹1,770) | ₹2,441 (KMS 2026-27; Grade A ₹2,461), +₹72 |
| Groundnut | ₹900 (1995-96) | ₹7,517 (2026-27; ₹7,263 in 2025-26) |
| Crop | MSP | Increase |
|---|---|---|
| Wheat | 2,610 | +25 |
| Barley | 2,286 | +136 |
| Gram | 5,958 | +83 |
| Masur (lentil) | 7,390 | +390 |
| Rapeseed–mustard | 6,613 | +413 |
| Safflower | 7,215 | +675 (highest) |
CCEA, 30 September 2026.
📌 Solves: Q224, Q225, Q227
Sugarcane has its own price word.
📌 Solves: Q206, Q207, Q208
Two umbrella tools when prices fall or spike.
| Component | What it does |
|---|---|
| PSS — Price Support Scheme | Physical procurement of notified pulses, oilseeds, copra at MSP (NAFED, NCCF) |
| PDPS — Price Deficiency Payment | Pays oilseed farmers the gap between MSP and market price |
| MIS — Market Intervention Scheme | Perishable horticulture crops |
| PSF link | Buffer of tur, urad, chana, moong, masur to curb hoarding |
Launched Sept 2018; continuation approved Sept 2024.
📌 Solves: Q157, Q253, Q254
To push farmers towards oilseeds and pulses and cut edible-oil imports (NMEO, Topic 4A.3.2).
1 markFRP is related to which crop?
Sugarcane.
2 marksName the three components of PM-AASHA.
PSS, PDPS, MIS.
PYQ patternPM-AASHA is related to the welfare of: (a) Women (b) Disabled (c) Farmers (d) Students
(c).
PrelimsWhich body approves FRP of sugarcane?
Cabinet Committee on Economic Affairs.
Q227 · Q253 · Q207 · Q224 · Q208 · Q225 · Q206 · Q254 · Q157
Arranged in chronological order of exam year in the Questions panel →
- Make a table of all six rabi MSPs for 2027-28.
- I know the latest MSPs.
- I know FRP replaced SMP in 2009.
- I can name PM-AASHA’s parts.
- I know both PSFs.
- Wheat: ₹1,350 (2013) → ₹2,610 (RMS 2027-28).
- Paddy: ₹1,750 (2018-19) → ₹2,441 (2026-27).
- Groundnut: ₹900 (1995-96) → ₹7,517.
- FRP from 2009-10; CCEA approves.
- PM-AASHA 2018: PSS, PDPS, MIS. PSF: plantations 2003-13; onion/potato/pulses from 2014-15.
- CCEA decisions (PIB): Kharif MSP May 2026; Rabi MSP 30 Sept 2026.
- Sugarcane (Control) Amendment Order 2009; Essential Commodities Act 1955.
- PM-AASHA guidelines; Department of Consumer Affairs (PSF).
- Wheat MSP RMS 2027-28: ₹2,610 (+25).
- Paddy common MSP 2026-27: ₹2,441.
- FRP (sugarcane) replaced SMP from 2009-10; approved by CCEA.
- PM-AASHA (2018): PSS, PDPS, MIS.
- PSF 2014-15: onion, potato, pulses.
- Question: Wheat MSP for RMS 2027-28? Answer: ₹2,610 per quintal.
- Question: Who approves FRP of sugarcane? Answer: CCEA.
- Question: PM-AASHA is for whose welfare? Answer: Farmers.
MCQs — previous-year questions in exam-year order
Answer this question, then use Next.
PYQ · Q227 · U.P.P.C.S. (Pre) 1995
Minimum Support Price for groundnut announced by the Government of India for 1995-96 is -
2026-27 groundnut MSP Rs 7517 (2025-26 Rs 7263).
PYQ · Q253 · U.P.P.C.S. (Pre) 2006
Government of India has taken a decision to set up a Price Stabilisation Fund for the growers of:
Then (c): PSF 1 Apr 2003 - 30 Sep 2013 for small growers (<4 ha) of coffee, tea, rubber, tobacco. New PSF 2014-15 for onion, potato (pulses added later) -> now (a).
PYQ · Q207 · I.A.S. (Pre) 2010
Consider the following statements: 1. The Union Government fixes the Statutory Minimum Price of sugarcane for each sugar season. 2. Sugar and sugarcane are essential commodities under the Essential Commodities Act.
PYQ · Q224 · U.P. Lower Sub. (Pre) 2013
The Minimum Support Price fixed by the Government for the purchase of wheat in 2013 is:
RMS 2026-27 wheat MSP Rs 2585 (+160 over Rs 2425 for RMS 2025-26).
PYQ · Q208 · U.P.B.E.O. (Pre) 2019; I.A.S. (Pre) 2015
Which of the following organizations approves the Fair and Remunerative Price (F.R.P.) of the sugarcane?
CCEA on CACP recommendation.
PYQ · Q225 · U.P.P.C.S. (Pre) 2018
From 4th July, 2018 the Minimum Support Price (MSP) during 2018-19 for paddy per quintal is:
2018-19 common 1750 (Grade A 1770). May 2026 CCEA: 2026-27 common Rs 2441 (Grade A 2461), +72.
PYQ · Q206 · Chhattisgarh P.C.S. (Pre) 2021
'Fair and Remunerative Price' is related to which of the following crops?
Sugarcane (Control) Order 1966 amended 22.10.2009; SMP replaced by FRP from 2009-10.
PYQ · Q254 · U.P. R.O./A.R.O. (Mains) 2021
Which of the following crop is covered for price control under the price stabilization fund of the Government of India?
Strategic buffer; calibrated release.
PYQ · Q157 · Chhattisgarh P.C.S. (Pre) 2024
'PM-AASHA' Scheme is related to the welfare of:
Pradhan Mantri Annadata Aay Sanrakshan Abhiyan, Sept 2018: PSS (pulses, oilseeds, copra), PDPS (oilseeds), MIS (perishables), plus PSF buffer. Sept 2024 continuation approved with PSS, PDPS, MIS.
Practice · latest data
The MSP of wheat for Rabi Marketing Season 2027-28, approved on 30 September 2026, is:
An increase of ₹25 over ₹2,585 for RMS 2026-27. Safflower got the highest hike (₹675).
One-liners
Write your answer, then submit to see the correct answer.
Wheat MSP for RMS 2027-28?
₹2,610 per quintal.Who approves FRP of sugarcane?
CCEA.PM-AASHA is for whose welfare?
Farmers.