UPSC Prelims 2019 Question:

The economic cost of food grains to the Food Corporation of India is Minimum Support Price and bonus (if any) paid to the farmers plus

Explanation:

• The Food Corporation of India (FCI) was set up under the Food Corporation Act, 1964, to fulfill the following objectives of the food policy
  
  

• Effective price support operations for safeguarding the interests of the farmers.
  
  
• Distribution of food grains throughout the country for the public distribution system.
  
  
• Maintaining satisfactory levels of operational and buffer stocks of foodgrains to ensure National Food Security.
  
  

• The economic cost of foodgrains to FCI is of strategic importance, as it influences not only the food subsidy bill but also the country’s competitiveness in international markets for foodgrains. The increase in the MSPs of rice and wheat, high State-level levies, which account for almost 50 percent of the procurement incidentals for foodgrains, and also the rising trend in distribution costs have contributed to the increase in the economic costs of foodgrains over the years.
  
  
• The economic cost of foodgrains to FCI includes:
  
  

• Procurement incidentals
  
  
• Distribution Cost
  
  
• Economic Cost 
  
  

Therefore, option (3) is the correct answer.

Subject: Economics | Agriculture and Food Management