# Agriculture II for UPSC: MSP, Procurement, Buffer Stocks, NFSA & PDS, e-NAM and the WTO (2025-26) Source: https://tracknation.in/story/agriculture-ii-for-upsc-msp-procurement-buffer-stocks-nfsa-pds-e-nam-and-the-wto-2025-26 (TrackNation — free UPSC notes with PYQs) > MSP and food security for UPSC — the 22 mandated crops, CACP and the A2+FL / C2 cost debate, procurement and FCI economic cost, buffer stocks and OMSS, the food subsidy (₹2.28 lakh crore), NFSA coverage (81.35 crore), PMGKAY, ONORC and ePoS reforms, e-NAM, FPOs, PM-KISAN (₹4.09 lakh crore) and the WTO amber-box — with Economic Survey 2025-26 data, practice questions and real PYQs. ## MSP: What It Is, Who Sets It and What It Covers 🎯 **Exam priority: High-yield.** *Agriculture produced 23 Prelims questions in ten years, and the price-and-food block (MSP, procurement, NFSA, PDS) is its most reliable source. UPSC's recent style is a precise fact — which crops have an MSP, who is covered by the NFSA, what the WTO counts as a subsidy — wrapped in a "how many of the above" stem. Mains asks the same topics as evaluation: MSP, buffer stocks, PDS reform.* Every rabi and kharif season the government promises farmers a price and then, for rice and wheat, actually buys the grain. Those promises and purchases explain the grain mountains, the food subsidy and much of the WTO dispute. This note takes them in order: the MSP, the buying and storing, the distribution, and the marketing reforms around them. ## MSP: what it is, who sets it and what it covers - **Minimum Support Price (MSP)** is the price at which the government stands ready to buy a crop from farmers; it is announced before sowing so that farmers can plan. It is a **price floor** (Article 1) — and, unlike a law, it is a **policy**: there is no statute that obliges anyone to pay it, and in practice the government's own purchases (procurement) make it effective, mostly for rice and wheat. - **Who decides.** The **Commission for Agricultural Costs and Prices (CACP)** — set up in 1965 as the Agricultural Prices Commission and an attached office of the Agriculture Ministry — recommends MSPs; the **Cabinet Committee on Economic Affairs** approves them. The CACP weighs cost of production, demand and supply, domestic and international prices, the terms of trade between agriculture and other sectors, and the effect on consumers. - **Coverage.** The Government announces MSPs for **22 mandated crops** — 14 kharif crops (paddy, jowar, bajra, ragi, maize, arhar, moong, urad, cotton, groundnut, sunflower seed, soyabean yellow, sesamum and nigerseed), 6 rabi crops (wheat, barley, gram, masur, rapeseed and mustard, safflower) and two commercial crops (jute and copra). **Sugarcane** is outside this list: its price is the **Fair and Remunerative Price (FRP)**, fixed by the Centre under the Sugarcane (Control) Order, 1966; some States add a higher State Advised Price. - **The cost principle.** **Budget 2018-19** announced that MSP would be at least **1.5 times the cost of production**, and the Survey records that all mandated crops now give a return of at least 50% over the all-India weighted average cost. Cost has several definitions: **A2** (paid-out costs such as seed, fertiliser, hired labour and rent), **A2+FL** (A2 plus the imputed value of family labour — the base the Government uses) and **C2** (A2+FL plus imputed rent and interest on owned land and capital). The **Swaminathan Commission** (National Commission on Farmers, 2006) recommended MSP at **C2 plus 50%** — the benchmark farmer groups still demand. | **Crop (per quintal)** | **2015-16** | **2025-26** | **Rise** | | Paddy (common) | ₹1,410 | ₹2,369 | about 68% | | Wheat (rabi marketing season 2026-27) | ₹1,525 | ₹2,585 | about 70% | | Arhar (tur) | ₹4,625 | ₹8,000 | about 73% | | Ragi | ₹1,650 | ₹4,886 | nearly threefold | *The rise in the support price for nutri-cereals such as ragi is much faster than for rice — a deliberate nudge towards crop diversification and millets (Article 18).* ## Procurement, FCI and Buffer Stocks An MSP means little unless someone buys at it. Procurement turns the promise into purchases — and creates the stocks and the subsidy. ## Procurement, FCI and buffer stocks - **Who buys.** The **Food Corporation of India (FCI)**, set up in 1965 under the Food Corporations Act, 1964, and State agencies buy wheat, rice and coarse grains at the MSP from the mandis; the grain goes into the **central pool**, is stored in warehouses and silos and moved to Fair Price Shops. In **decentralised procurement (DCP)** States procure, store and distribute themselves and the Centre reimburses the cost. Procurement is concentrated in a handful of States; for most other crops government buying is small or absent. - **Scale.** In the rabi marketing season 2025-26 the Government procured **300.35 lakh tonnes of wheat** from about 25 lakh farmers; in the kharif marketing season 2024-25 it procured **832.17 lakh tonnes of paddy** from over 1.18 crore farmers. - **Buffer stock.** The Centre holds foodgrain stocks above quarterly minimum **buffer norms** to meet the PDS needs, to cushion bad harvests and to stabilise prices. When stocks run well above the norms the carrying cost — storage, handling and interest — grows. The Economic Survey's Box VI.5 states plainly that procurement of rice and wheat has grown faster than food-security needs, leading to persistently high stocks and rising carrying costs. - **Economic cost and the food subsidy.** FCI's **economic cost** of grain is what it pays farmers (MSP plus any bonus) *plus procurement incidentals plus distribution cost* (UPSC 2019). The **food subsidy** is the gap between that economic cost and the low **Central Issue Price (CIP)** at which grain is issued to the PDS. The food subsidy was ₹1.99 lakh crore in 2024-25 (actuals), ₹2.28 lakh crore in 2025-26 (revised) and ₹2.28 lakh crore in the 2026-27 Budget — the largest subsidy after fertiliser (Article 9). - **Price stabilisation tools.** The **Open Market Sale Scheme (Domestic) — OMSS(D)** sells FCI wheat and rice in the open market, mostly by e-auction, to cool prices; **Bharat Atta** (launched 6 November 2023) and **Bharat Rice** (6 February 2024) are sold through cooperative agencies at capped retail prices. In 2025 FCI also sold rice to ethanol distilleries (33.06 lakh tonnes up to 18 November 2025). **Stock limits** on traders, retailers and processors under the **Essential Commodities Act, 1955** (for wheat, imposed on 27 May 2025 and revised on 26 August 2025) check hoarding. - **Storage.** FCI and the Centre are building **steel silos in PPP mode** — about 20 lakh tonnes functional under the railway-siding/road-fed model — and a hub-and-spoke network, to cut storage losses that open-air and godown storage cause. ## Food Security: NFSA, PDS, PMGKAY and ONORC The grain is bought to be distributed. The NFSA made that distribution a legal right; technology is now making it leak less. ## Food security: NFSA, PDS, PMGKAY and ONORC - **From universal PDS to targeting.** The Public Distribution System was universal at first; the revamped PDS (1992) concentrated on backward blocks; the **Targeted PDS (TPDS)** of **1997** divided households into BPL and APL; **Antyodaya Anna Yojana (AAY)** in **2000** reached the poorest of the poor — about 2.5 crore households today. - **National Food Security Act, 2013** turned entitlement into a **legal right**. It covers up to **75% of the rural and 50% of the urban population** — about **81.35 crore people** (on 2011 Census numbers), nearly two-thirds of the country. **Priority households** get **5 kg per person per month**; **AAY households 35 kg per household**. The original issue prices were ₹3, ₹2 and ₹1 per kg for rice, wheat and coarse grains. - **The Act's other features:** the **eldest woman** (18 or older) is the head of the household for the ration card (UPSC 2018); pregnant and lactating women get a free meal and **maternity benefit of at least ₹6,000**; children aged 6 months to 14 years get age-appropriate meals; and grievances go to District Grievance Redressal Officers and State Food Commissions. Coverage is by *priority household or AAY category*, not BPL alone. - **PMGKAY.** The **Pradhan Mantri Garib Kalyan Anna Yojana** began in 2020 as a COVID-19 relief measure that gave free grain *in addition* to NFSA entitlements. From 1 January 2023 the Centre made the NFSA grain itself **free**, and the free supply was extended for five years from January 2024; it is fully funded by the Centre and reaches about 80 crore people. - **Fixing leakage.** The Survey (Box VI.6) lists the reforms: **One Nation One Ration Card (ONORC)** — begun in 2019 and now live in **all 36 States and UTs**, covering nearly 80 crore beneficiaries — lets migrants draw rations anywhere; **Aadhaar seeding** of ration cards and beneficiaries (about 99%); **ePoS devices at 99.6% of 5.43 lakh Fair Price Shops** with over 98% of monthly distribution done through digital transactions; and matching of databases (income-tax, GST, PM-KISAN) that flagged 8.51 crore records and led States to remove **over 2.12 crore ineligible beneficiaries**. **Anna Chakra** optimises the supply routes, and a GPS-based Vehicle Location Tracking System follows foodgrain trucks. - **Nutrition.** Food subsidy now aims at nutrition, not calories alone: fortified rice and cereals, and DBT pilots (in Chandigarh, Puducherry and parts of the Dadra-Nagar Haveli and Daman-Diu UT) that give beneficiaries cash and a choice. The Survey notes that cheaper staples free household income for protein, dairy and horticulture. ## Agri-Marketing, Income Support and the WTO Income support and market reform complete the picture. This section also links the whole system to the WTO and to the Survey's new idea — crop diversification funded by the savings from procurement. ## Agri-marketing, income support and the WTO - **Mandis and reform.** Agricultural markets are governed by State **APMC Acts**. The Centre's Model APMC Act (2003) and the Model Agricultural Produce and Livestock Marketing Act (2017) invited reform. The 2020 farm laws — on farmers' produce trade and commerce, price assurance and farm services (contract farming), and changes to the Essential Commodities Act — were repealed in 2021 after prolonged protests, and the legal-guarantee-for-MSP demand continues. - **e-NAM** (April 2016) is a pan-India electronic trading platform that links APMC mandis; each mandi gets ₹75 lakh for hardware and software. By December 2025 it had around **1.79 crore farmers**, 2.72 lakh traders and 4,698 FPOs, covering **1,522 mandis in 23 States and 4 UTs**. - **Farmer Producer Organisations (FPOs).** The 2020 scheme (₹6,860 crore to 2027-28) targeted **10,000 FPOs**, and by 31 December 2025 all 10,000 were registered — collectives that give small farmers bargaining power, aggregation and processing. The **Agriculture Infrastructure Fund** (₹1 lakh crore facility from 2020-21) finances warehouses, cold chains and processing units and has mobilised over ₹1.23 lakh crore. The **Warehousing (Development and Regulation) Act, 2010** underpins warehouse receipts, and the **e-NWR pledge-finance guarantee scheme** lets farmers borrow against stored produce. - **Price and income support beyond MSP.** **PM-AASHA (2018)** supplements MSP with a Price Support Scheme (physical purchase of pulses, oilseeds and copra), a Price Deficiency Payment Scheme (pay the difference between MSP and market price) and a pilot of private procurement. **PM-KISAN** (24 February 2019) gives ₹6,000 a year in three instalments of ₹2,000 to eligible farmer families; over **₹4.09 lakh crore** has been released in 21 instalments. The **Pradhan Mantri Kisan Maandhan Yojana** gives older small farmers a pension (24.92 lakh farmers enrolled by December 2025). - **The WTO angle.** Under the WTO Agreement on Agriculture, **MSP-based procurement counts as 'amber box'** (trade-distorting) support, measured against a **fixed external reference price of 1986–88**, which makes it look larger as prices inflate. Developing countries may give amber-box support up to a **de minimis 10% of the value of production** (5% for developed countries). India has argued for a permanent solution on **public stockholding for food security**; until then, an interim "peace clause" (Bali 2013) shields such programmes from challenge. UPSC asked about WTO and farm subsidies in Mains in 2023 and 2026. - **The Survey's new idea (Box VI.5).** Instead of cutting MSP or procurement, use the *savings* from lower stock-carrying costs to pay **voluntary incentives** for farmers to shift part of their rice and wheat area to pulses, oilseeds and maize — beginning in the east and centre — and, over time, move from physical procurement towards price-deficiency payments and assured offtake. The aim: stay food-secure, cut import dependence in edible oils and pulses, and support ethanol and livestock feed — while keeping support WTO-compatible through area-based, decoupled payments. ## Why this matters for UPSC - Typical Prelims tests: the number and list of MSP crops (and what is *not* covered — sugarcane has an FRP); who recommends MSP; what the NFSA covers and its entitlements; the economic cost of foodgrains; ONORC; e-NAM and the FPO numbers; and amber/green box rules. Typical Mains tests: MSP and farmers' incomes, buffer stocks and their storage, PDS reform, and WTO conflicts. ## Further Reading - NCERT Economics textbooks (Class 11–12), the Economic Survey, the Union Budget documents and RBI publications cited in this note — the primary sources behind every figure above. ## Test Yourself: Practice Questions & PYQs Twelve practice questions on MSP, procurement, the NFSA, PDS reform, marketing and the WTO, followed by real UPSC questions. ## Practice Questions **Q1.** Minimum Support Prices are currently announced by the Government of India for how many mandated crops? - (a) 22 - (b) 35 - (c) 55 - (d) 14 **Answer: (a)** — MSPs are announced for 22 mandated crops — 14 kharif, 6 rabi and two commercial crops (jute and copra). Sugarcane has a separate Fair and Remunerative Price. **Q2.** Which one of the following bodies recommends the Minimum Support Price of agricultural crops? - (a) Commission for Agricultural Costs and Prices - (b) National Bank for Agriculture and Rural Development - (c) Food Corporation of India - (d) NITI Aayog **Answer: (a)** — The CACP recommends MSPs and the Cabinet Committee on Economic Affairs approves them; FCI only buys at the announced price. **Q3.** The Fair and Remunerative Price (FRP) in India applies to - (a) rice - (b) jute - (c) wheat - (d) sugarcane **Answer: (d)** — The FRP is the minimum price mills must pay sugarcane growers, fixed by the Centre under the Sugarcane (Control) Order, 1966; States may add a higher State Advised Price. **Q4.** Consider the following statements about the National Food Security Act, 2013: 1. It covers up to 75 per cent of the rural population and 50 per cent of the urban population. 2. Antyodaya Anna Yojana households are entitled to 35 kg of foodgrains per household per month. 3. Only households below the poverty line are eligible for subsidised grains. Which of the statements given above are correct? - (a) 2 and 3 only - (b) 1 and 2 only - (c) 1 only - (d) 1, 2 and 3 **Answer: (b)** — 1 and 2 are correct. Coverage is by priority-household and AAY categories identified by States, not by the BPL category alone, so 3 is wrong. **Q5.** The 'economic cost' of foodgrains to the Food Corporation of India includes - (a) MSP and bonus paid to farmers, procurement incidentals and distribution cost - (b) only the Minimum Support Price - (c) only the cost of transport and storage - (d) the Central Issue Price paid by the beneficiary **Answer: (a)** — Economic cost = price paid to farmers (MSP plus any bonus) + procurement incidentals + distribution cost. The food subsidy is this cost minus the Central Issue Price recovered. **Q6.** Which of the following is the purpose of the Open Market Sale Scheme (Domestic) for wheat and rice? - (a) To export surplus grain - (b) To sell FCI stocks in the open market so as to moderate prices - (c) To provide free grain to the poor - (d) To pay farmers a price above the MSP **Answer: (b)** — OMSS(c) releases FCI grain — mostly by e-auction — to private buyers, cooperatives and State governments to cool prices; free grain goes through the PDS. **Q7.** 'One Nation One Ration Card' (ONORC) primarily enables - (a) a beneficiary to draw subsidised rations from any Fair Price Shop in the country - (b) a single national price for foodgrains - (c) Aadhaar-free ration cards - (d) a ban on interstate movement of grain **Answer: (a)** — ONORC provides portability of NFSA entitlements — useful to migrants — and is now enabled in all 36 States and Union Territories. **Q8.** Under PM-KISAN, eligible farmer families receive income support of - (a) ₹12,000 a year in four instalments - (b) a 50 per cent subsidy on fertiliser - (c) ₹6,000 a year in three equal instalments - (d) ₹3,000 a year in two instalments **Answer: (c)** — PM-KISAN (2019) pays ₹6,000 a year in three instalments of ₹2,000 by direct benefit transfer. **Q9.** In the WTO Agreement on Agriculture, minimum-support-price-based procurement by developing countries is treated as - (a) a prohibited export subsidy - (b) a blue-box measure - (c) an amber-box measure subject to a de minimis limit - (d) a green-box measure exempt from limits **Answer: (c)** — MSP-based procurement is trade-distorting 'amber box' support. Developing countries may give it up to a de minimis 10 per cent of the value of production; the calculation uses 1986–88 reference prices. **Q10.** Consider the following statements about e-NAM: 1. It is a pan-India electronic trading portal for agricultural commodities. 2. It was launched in April 2016. 3. It replaces the State APMC mandis with private markets. Which of the statements given above are correct? - (a) 1, 2 and 3 - (b) 1 only - (c) 1 and 2 only - (d) 2 and 3 only **Answer: (c)** — e-NAM links existing APMC mandis on one electronic platform (it does not replace them), launched in April 2016. **Q11.** The Swaminathan Commission (National Commission on Farmers) recommended that MSP be fixed at - (a) the paid-out cost (A2) - (b) the market price of the previous year - (c) at least 50 per cent above the comprehensive cost (C2) - (d) A2 plus family labour (A2+FL) **Answer: (c)** — The Commission recommended C2 + 50 per cent. The Government's '1.5 times cost' formula uses A2+FL, which is lower than C2. **Q12.** The Economic Survey 2025-26 suggests that the savings from lower foodgrain stock-carrying costs be used to - (a) raise the Central Issue Price of foodgrains - (b) increase edible-oil imports - (c) fund voluntary incentives for farmers to diversify into pulses, oilseeds and maize - (d) abolish MSP for rice and wheat **Answer: (c)** — Box VI.5 proposes keeping MSP and procurement but using stock-management savings to reward voluntary diversification — without weakening food security. ### UPSC Previous Year Questions (PYQs) *Real UPSC Prelims questions, checked against the official paper and answer key.* **Q1.** (2019) The economic cost of food grains to the Food Corporation of India is the Minimum Support Price and bonus (if any) paid to the farmers plus - (a) transportation cost only - (b) procurement incidentals and charges for godowns - (c) procurement incidentals and distribution cost - (d) interest cost only **Answer: (c)** — FCI's economic cost = the price it pays farmers (MSP + any bonus) plus procurement incidentals (mandi charges, labour, gunny etc.) plus distribution cost (freight, handling, storage, interest). It is this sum — not just MSP — that is the real cost of a tonne of foodgrain. **Q2.** (2023) Consider the following statements: 1. The Government of India provides Minimum Support Price for niger (Guizotia abyssinicia) 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? - (a) Only two - (b) None - (c) All three - (d) Only one **Answer: (c)** — All three statements are true: niger (Guizotia abyssinica) is among the crops with an MSP (the notified oilseeds), it is a kharif crop, and some tribal communities use niger seed oil for cooking. **Q3.** (2025) Consider the following statements about turmeric during the year 2022–23: I. India is the largest producer and exporter of turmeric in the world. II. More than 30 varieties of turmeric are grown in India. III. Maharashtra, Telangana, Karnataka and Tamil Nadu are major turmeric producing States in India. Which of the statements given above are correct? - (a) I, II and III - (b) I and III only - (c) II and III only - (d) I and II only **Answer: (a)** — Turmeric: India is the world's largest producer and exporter (I ✔), more than 30 varieties are grown (II ✔) and Maharashtra, Telangana, Karnataka and Tamil Nadu are major producers (III ✔). **Q4.** (2026) Which among the following is/are the objective(s) of the Rainfed Area Development (RAD) initiative under the National Mission for Sustainable Agriculture (NMSA)? 1. Encouraging monoculture in rainfed areas 2. Increasing rice cultivation in irrigated regions 3. Enhancing productivity and minimising climatic risks through Integrated Farming Systems (IFS) Select the answer using the code given below. - (a) 2 and 3 - (b) 3 only - (c) 1 only - (d) 1 and 2 **Answer: (b)** — The Rainfed Area Development component of NMSA promotes Integrated Farming Systems — crops with horticulture, livestock and agroforestry — to raise productivity and cut climate risk in rainfed areas; monoculture and more irrigated rice are not its aims. **Q5.** (2026) Which of the following is/are the most significant implication(s) of obtaining Oeko-Tex certification for Eri Silk in the global textile industry? 1. It allows Indian exporters to compete in high-end markets that prioritise chemical-free products. 2. It confirms that Eri Silk meets international safety, environmental, and quality standards, enabling its entry into premium eco-conscious markets. Select the answer using the code given below. - (a) 1 only - (b) 2 only - (c) Both 1 and 2 - (d) Neither 1 nor 2 **Answer: (c)** — OEKO-TEX certifies textiles as free of harmful chemicals; for Eri silk it signals safety, environmental and quality compliance and opens premium, eco-conscious export markets. **Q6.** (2018) With reference to the provisions made under the National Food Security Act, 2013, consider the following statements: 1. The families coming under the category of 'Below Poverty Line (BPL)' only are eligible to receive subsidies food grains. 2. The eldest woman in a household, of age 18 years or above, shall be the head of the household for the purpose of issuance of a ration card. 3. Pregnant women and lactating mothers are entitled to a 'take-home ration' of 1600 calories per day during pregnancy and for six months thereafter. Which of the statements given above is/are correct? - (a) 1 and 2 only - (b) 1 and 3 only - (c) 3 only - (d) 2 only **Answer: (d)** — The NFSA covers priority households and Antyodaya households identified by States, not BPL families alone (1 is wrong). The eldest woman of 18 or above is the head of household for the ration card (2 is right). Pregnant women and lactating mothers are entitled to a free meal and maternity benefit, not a 1,600-calorie take-home ration — the Act's nutrition norm is about 600 kcal a day through the anganwadi (3 is wrong). ### Mains Practice Questions Use these to frame full-length answers. You don't have to answer one exactly — they show the angles UPSC tests, so let them guide which points you cover. - What is MSP, who determines it and how does it affect cropping patterns and farm incomes? Why do farmers demand a legal guarantee? - Evaluate the role of buffer stocks and the FCI in food security and price stability. What are the costs of holding stocks far above the norms? - Discuss how the NFSA, PMGKAY, ONORC and DBT have changed the Public Distribution System. What reforms are still needed? - How do WTO rules on public stockholding and domestic support constrain India's farm-price policy? ### UPSC Mains — Previous Years’ Questions on this topic (last 10 years) These are the **actual GS Mains questions** UPSC has asked on this theme — real proof of how, and when, it is tested. Try to write a full answer to each. - 2026 (GS-III): Discuss the different types of subsidies and supports provided by the Government of India to agricultural sector. Examine the related issues pertaining to Agreement on Agriculture of World Trade Organisation (WTO). - 2024 (GS-III): Elucidate the importance of buffer stocks for stabilizing agricultural prices in India. What are the challenges associated with the storage of buffer stock? Discuss. - 2023 (GS-III): What are the direct and indirect subsidies provided to farm sector in India? Discuss the issues raised by the World Trade Organization (WTO) in relation to agricultural subsidies. - 2022 (GS-III): What are the major challenges of Public Distribution System (PDS) in India ? How can it be made effective and transparent? - 2021 (GS-III): What are the salient features of the National Food Security Act, 2013? How has the Food Security Bill helped in eliminating hunger and malnutrition in India? - 2019 (GS-III): What are the reformative steps taken by the Government to make food grain distribution system more effective? - 2018 (GS-III): What do you mean by Minimum Support Price (MSP)? How will MSP rescue the farmers from the low income trap? - 2017 (GS-III): How do subsidies affect the cropping pattern, crop diversity and economy of farmers? What is the significance of crop insurance, minimum support price and food processing for small and marginal farmers? - 2016 (GS-III): Given the vulnerability of Indian agriculture to vagaries of nature, discuss the need for crop insurance and bring out the salient features of the Pradhan Mantri Fasal Bima Yojana (PMFBY).