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RAS question

The Swaminathan Commission (National Commission on Farmers) recommended that MSP should be at least:

Correct answer: (D) C2 + 50% of C2 (i.e., 1.5 times the comprehensive cost).

The Swaminathan Commission recommended that MSP should be at least C2 plus 50% of C2, meaning 1.5 times the comprehensive cost of production.

  1. (A)

    Double the cost of production

  2. (B)

    Equal to the cost of production (A2+FL)

  3. (C)

    10% above cost of production

  4. (D)

    C2 + 50% of C2 (i.e., 1.5 times the comprehensive cost)

Explanation

The National Commission on Farmers, headed by Dr M. S. Swaminathan, submitted its report in 2006. Its MSP recommendation was not merely cost recovery; it said MSP should be at least 50% above the weighted average cost of production. For the Swaminathan Commission recommendation, that cost is C2, the comprehensive cost that includes imputed rent on land and interest on own capital. The formula is therefore MSP = C2 + 50% of C2, or 1.5 times C2. PIB also notes that the government later increased MSPs for Kharif, Rabi and other commercial crops for 2018-19 with a return of at least 50% over cost of production.

Why the other options are wrong

  • (A) Double the cost of production would mean 2 times cost, whereas the Swaminathan recommendation was 50% above the relevant cost, or 1.5 times it.
  • (B) Equal to A2+FL is too low because the Swaminathan recommendation was 50% over C2, not merely parity with A2+FL.
  • (C) A 10% mark-up understates the recommendation, which was at least 50% above the weighted average cost of production.

Concept

Agricultural pricing policy in India depends heavily on MSP calculation and cost concepts such as A2+FL and C2. MSP and official committee recommendations are central to Indian Economy preparation for RAS.

Source

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