(a) Minimum support price: It is the pre-announced price at which the government purchases food grains from the farmers in order to create a buffer stock. The minimum support price is declared by the government every year before the growing season. This provides incentives to the farmers for raising the production of the crops.

The rising minimum support prices of rice and wheat have induced farmers to divert land from the production of coarse grains—the staple food of the poor— to the production of these crops. The rising minimum support prices have raised the maintenance cost of procuring food grains.

(b) Buffer stock: It is the stock of food grains (usually wheat and rice) procured by the government through the Food Corporation of India. The purchased food grains are stored in granaries.

A buffer stock of food grains is created by the government so as to distribute the procured food grains in the food-deficit areas and among the poorer strata of society at a price lower than the market price. A buffer stock helps resolve the problem of shortage of food during adverse weather conditions or during periods of calamity.

(c) Issue Price: The food grains procured and stored by the government are distributed in food-deficit areas and among the poorer strata of society at a price lower than the market price. This price is known as issue price.

(d) Fair-price shops: The food procured by the Food Corporation of India is distributed through government-regulated ration shops. The prices at which food materials are sold at these ration shops are lower than the market prices. The low pricing is to benefit the poorer strata of society. This is why these shops are called fair-price shops. Fair-price shops keep stock of food grains, sugar and kerosene oil. Any family with a ration card can buy a stipulated amount of these items every month from the nearby ration shop.