agriculture sector subsidy & food processing section 10 MCQ Questions & Answers Detailed Explanation

Answer: (a)

A pilot Coconut Palm Insurance Scheme (CPIS) was introduced in 2009-10 for the benefit of coconut growers in major coconut growing states like Kerala, Karnataka, Tamilnadu, Goa, AP, West Bengal and Maharashtra.

In this scheme, coconut plants of the age from 4th year to 60th year are covered.

Insurance coverage is provided for total loss/death/becoming useless of the plant. Fifty per cent subsidy in premium is provided by the Government of India and twenty-five per cent by the concerned State Government.

Answer: (b)

Answer: (c)

In India, commercial banks have the highest share in the disbursement of credit to agriculture and allied activities.

The commercial banks disburse around 60% credit followed by cooperative banks around 30% and RRB and others.

Answer: (c)

Let us understand with an example:

Suppose the imported LPG cylinder price (i.e. international market price) is Rs. 800/cylinder. And govt announced that it will give Rs. 300/cylinder as a subsidy through Direct Benefit Transfer (DBT).

So, the consumers will purchase the cylinder from Oil Marketing Companies (OMC) like IOCL/BPCL at Rs. 800/cylinder and government will transfer Rs. 300/cylinder in consumers account.

Now, if the international price increases to Rs. 900/cylinder, then there are three options:

1. Consumers pay Rs. 900/cylinder and government transfer Rs. 400/cylinder in the account as DBT. But it will increase the overall subsidy bill of the government, which government don’t like
2. Consumers pay Rs. 900/cylinder and the government still transfer Rs. 300/cylinder in consumers account, but it will increase the price per cylinder by Rs. 600 (=Rs. 900 - Rs. 300) to the consumer from the earlier price of Rs. 500 (=Rs. 800- Rs. 300). For political and social reasons, govt. may not like this also.
3. Government forces OMCs (LPG cylinders are supplied through OMCs) to sell the cylinder still at Rs. 800/cylinder (a kind of forced regulation), So consumers pay Rs. 800/cylinder and they will get Rs. 300 in account from Govt. This will not increase govt. subsidy bill and consumers will also be happy. But it impacts the finances of OMCs.

If the government will choose the 3) option, then for OMCs it is a loss of Rs. 100/ cylinder. And this is called "Under-recovery" per cylinder.

Generally, because of political and social compulsions govt. uses this 3) option leading to huge under-recoveries by OMCs. Till the time price of crude/gas is benign/moderate, the under-recovery may be very less or nil but when it increases, the under-recovery of OMCs increases.