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
Answer & explanation
Answer: (c) procurement incidentals and distribution cost
The economic cost of food grains to the FCI is its acquisition cost (the price paid to farmers plus procurement incidentals) plus the cost of distributing the grain. Procurement incidentals and distribution cost together are what is added to the MSP and bonus paid to farmers.
- ✓ (c) The Economic Survey names the economic cost of foodgrains as MSP (and central bonus if applicable), procurement incidentals and the cost of distribution. Procurement incidentals (State levies are a large part of them) form part of the acquisition cost, and distribution cost is added to it.
- ✗ (a) Transport is only one item inside these costs. Leaving out procurement incidentals makes the answer incomplete.
- ✗ (b) Interest is one charge among several, and 'only' makes this option too narrow.
- ✗ (d) Godown (storage) charges are only one part of the picture. Distribution cost is missing, so this option is incomplete.
Remember · FCI economic cost = acquisition cost (price paid to farmers + procurement incidentals) + distribution cost. Food subsidy = economic cost minus Central Issue Price.
Sources
- Ministry of Finance, Economic Survey 2013-14, Ch 8: Economic Cost of Foodgrains to the FCI ↗ “The economic cost of foodgrains that comprises MSP (and central bonus if applicable), procurement incidentals and the cost of distribution, has risen significantly in the last few years”
- Economic Survey 2002-03, Ch 5, FCI's economic cost (indiabudget.gov.in) ↗ “Payment to growers at MSP is the first major cost of procurement incurred by the FCI, besides cost of transporting, handling, storing and distribution and maintaining the prescribed buffer stock.”
- CAG Report No. 31 of 2015, Performance Audit on Procurement and Milling of Paddy for the Central Pool, Ch 1 ↗ “Economic cost of food grains It is the aggregate of acquisition cost of food grains including procurement incidentals, administrative overheads, handlings and shortages etc.”
- Economic Survey 2004-05, Chapter 5: Prices and Food Management, economic cost of foodgrains to FCI ↗ “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 the rising trend in distribution costs have contributed to the increase in the economic costs of foodgrains over the years.”
Question and answer: UPSC's official GS Paper I (2019, Series A) — paper ↗ · answer key ↗. Explanation: Minimalist IAS, checked 1 Oct 2026 (how we verify). ·