Minimum Support Price and Procurement Questions and Answers

Answer: B

The price guarantee is the Minimum Support Price.

The Minimum Support Price (MSP) is announced by the government, on the recommendation of the Commission for Agricultural Costs and Prices, before the sowing season. It assures farmers that if market prices fall below that level, the government will buy their produce at the MSP, which encourages them to grow the crop.

The procurement price is what the government pays when buying for its stocks, the issue price is what the public distribution system charges consumers, and the equilibrium price is set by market supply and demand. None of them is announced in advance as a guarantee.

Answer: D

The CACP was established, under that name, in 1985.

The Agricultural Prices Commission was set up in January 1965 to advise the government on price policy for agricultural produce. In 1985 it was renamed the Commission for Agricultural Costs and Prices (CACP), reflecting its wider mandate to take costs of cultivation into account. It recommends the minimum support prices of the major crops.

1965 is the trap: it is the founding year of the predecessor body, not of the CACP. 1955 and 1975 match neither event.

Answer: B

The MSP for Grade A paddy in 2025-26 was ₹ 2389 per qtl.

For the kharif marketing season 2025-26 the Government of India raised the minimum support price of paddy by ₹ 69 a quintal: common paddy to ₹ 2369 and Grade A paddy to ₹ 2389. The Grade A rate is always ₹ 20 above the common rate.

₹ 2369 is therefore the rate for common paddy, the near miss in the options. ₹ 2775 and ₹ 3699 are far above any paddy MSP announced for that season.

Answer: C

The description that fits is Always higher than MSP and used by the Government to produce food for deficit regions and vulnerable populations.

Until the mid-1970s the Government announced two prices. The minimum support price was a floor, meant to protect farmers if market prices crashed after a good harvest. The procurement price was the price at which the Government actually bought grain for the public distribution system and buffer stocks, to supply deficit regions and poorer consumers, and it was fixed above the MSP. ('Produce' in the option is used in the sense of procuring food.) The two prices were later merged into a single MSP.

The other options are wrong: procurement prices were not below MSP, and they were fixed by the Government on the advice of the Agricultural Prices Commission, not by private traders or by farmers.