Fixation of price levels for wheat and rice by the Commission for Agriculture Costs and Prices (CACP) is an example of?
- (a)Administered Price
- (b)Market Price
- (c)Control Price
- (d)Support Price
Correct — D, Support Price. What the Commission for Agricultural Costs and Prices recommends is a minimum support price, a floor announced before the sowing season so that a farmer knows the least he will get if he grows the crop. It supports the producer against a collapse in the market and it does not cap what he may earn if the market runs above it. That one-sided character is what makes it a support price rather than any of the other three names on offer.
- (a)Administered Price — The nearest miss and the reason the item is worth doing. An administered price is one fixed by authority in place of the market for the good as a whole, as petroleum products were under the old pricing mechanism. A support price does not replace the market; it sits under it as a floor, and sales above it go on as normal.
- (b)Market Price — A market price emerges from demand and supply. This one is announced in advance by government on a commission's recommendation, which is the opposite process.
- (c)Control Price — A control price is a ceiling imposed to protect the buyer, of the kind used under essential-commodities powers. Support and control run in opposite directions — one puts a floor under the seller, the other a lid over the buyer.
The support price exists to manage risk. New varieties and heavier input spending only pay if a good harvest does not crash the price, so a floor announced before sowing removes the worst outcome and makes the investment worth making. The commission recommends, the Cabinet Committee on Economic Affairs decides, and government agencies led by the Food Corporation of India make the floor real by buying at it when the market falls below.
The commission was set up in 1965 as the Agricultural Prices Commission and renamed in 1985. Its recommendations are advisory, not binding, and it works from cost concepts that are worth knowing — A2 for paid-out costs, A2 plus family labour, and C2, which adds the imputed rent and interest on owned land and capital. The 2018 announcement of a support price at one and a half times cost was calculated on the A2 plus family labour basis rather than on C2, which is the substance of most of the argument about it. As of the 2020 exam the price was being announced for twenty-two crops in the kharif, rabi and commercial groups, with sugarcane handled separately through a fair and remunerative price. Procurement remains concentrated in wheat and paddy and in a few states, which is why an announced floor and a realised price are not the same thing for most farmers.
- The Commission for Agricultural Costs and Prices recommends minimum support prices; the Cabinet Committee on Economic Affairs approves them.
- The price is announced before the sowing season so that it can influence the sowing decision.
- It is a floor, not a ceiling — sales above it are unaffected, which distinguishes it from a control price.
- Support prices are announced for twenty-two crops, with sugarcane covered separately by a fair and remunerative price.
- The commission's cost concepts are A2, A2 plus family labour and C2, and which of them is used changes the number substantially.
Support and control both involve the state fixing a number, but one protects the seller and the other the buyer.
- Choosing administered price because government fixed the number; the test is whether the market is replaced or merely floored.
- Treating support and control price as loose synonyms for a government-fixed price.
- Assuming an announced support price is a realised price; procurement is concentrated in a few crops and states.
Terminology items reward asking who the measure protects. Support protects the seller, control protects the buyer, and administration replaces the market for both.
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
The same family of terms, separated one step further. It distinguishes the price at which government actually buys from the floor it announces, and puts the ceiling price in the same option list that this question calls a control price.
Which of the following are the objectives of the Commission for Agricultural Costs and Prices (CACP)? I. To stabilise agricultural prices. II. To ensure meaningful real income levels to the farmers. III. To protect the interest of the consumers by providing essential agricultural commodities at reasonable rates through public distribution system. IV. To ensure maximum price for the farmer. Select the correct answer from the codes given below:
- (a) I, II and III
- (b) I, II and IV
- (c) I, III and IV
- (d) II, III and IV
Answer(a) I, II and III
The commission's own mandate, and it explains the word support exactly. Its brief is a remunerative and stable price that also keeps food affordable — never the maximum price the farmer could get, which is what a support floor is not.
- practice — not a real PYQ
The minimum support price for agricultural crops in India is finally approved by
- (a)the Commission for Agricultural Costs and Prices
- (b)the Cabinet Committee on Economic Affairs
- (c)the Food Corporation of India
- (d)the Reserve Bank of India
Answer(b) the Cabinet Committee on Economic Affairs — the commission recommends and its recommendation is not binding.
- practice — not a real PYQ
The Fair and Remunerative Price in Indian agriculture is announced for which crop?
- (a)Cotton
- (b)Sugarcane
- (c)Jute
- (d)Copra
Answer(b) Sugarcane — it is handled separately from the twenty-two crops covered by minimum support prices.