What is (PSF) Price Stabilization Fund?

The Price Stabilization Fund (PSF) is a scheme launch by the government of India on 11th September 2003. It was registered as a Public Trust under the Indian Trust Act, 1882. Jointly by NABARD and the Department of Commerce, Ministry of Commerce & Industry for a period of 10 years. Further, the trust was re-register for the next 10 years beyond 11/09/2013 to 11/09/2023. The purpose behind the PSF is to provide financial assistance to small farmers of coffee, tea, rubber, and tobacco. To avail benefits of PSF, the minimum land holding requirement was set up to four hectares. When the price of such commodities fell below the price spectrum band, financial relief was provided to the farmers. As the fluctuating nature of international prices and increasing dependence of growers on the export market, it will very beneficial.

The initiate was based on the contributions from the growers and the government depending upon the period. The grower members will require to deposit Rs. 500 (non-refundable) as an entry fee, which will be a part of Corpus Fund (discuss later).

• If the price falls under the normal band, the year will declare as a normal year, and growers, as well as PSFT, will deposit Rs 500 in the PSF saving account (of growers).
• In case, if the price goes above the band, the year will declare as a boom year, where only the grower will deposit Rs 1000 in the account.
• If the price falls below the band, the year will declare as a distress year, where the grower will allow to withdraw Rs 1000 from the respective account.

Objectives of PSF

The main objectives behind the formulation of PSF was:

1. To maintain the buffer stock which further eliminates the black hoarding and fake speculation.
2. It aims to protect customers by ensuring the full supply of such commodities at a reasonable price.
3. To protect direct purchase from farmers at farm’s gate or mandi.

Creation of Corpus Fund for PSF

A corpus of Rs 500 cr. will provide interest-free money as working capital from State Government/Union Territories (UTs). Whereas, the Central Agencies enable the procurement of perishable products. The fund is known as the “Corpus Fund for Procurement and Distribution of Identified Agri-Horticultural Commodities”. A separate bank account must open by Small Farmers Agri-Business Consortium (SFAC) which will act as a fund manager. The funds which are released by the government will keep in this account. SFAC will also maintain separate accounts of receipts and expenditures from Corpus Fund. Although, it will require to report to the Member Secretary (PSFMC) whenever asked without any fail.

Price Stabilisation Fund Management Committee (PSFMC)

The fund will manage by the “Price Stabilisation Fund Management Committee” (PSFMC) to ensure efficient utilization of the fund. It includes the following members:

1. Additional Secretary, DAC (Marketing) – Member
2. AS&FA, DAC – Member
3. Joint Secretary (Consumer Affair) – Member
4. DAC (Crops), Joint Secretary – Member
5. Joint Secretary, DAC (Horticulture) – Member
6. Chairman & Managing Director, Food Corporation of India – Member
7. Managing Director, National Horticulture Board – Member
8. Joint Secretary, DAC (Marketing) – Member Secretary

• PSFMC will invite and approve proposals received from State Government/Union Territories and Central Agency. Also, PSFMC will approve the amount of advance.
• PSFM is also responsible to make decisions regarding the surplus amount from Corpus Fund. Usually, such an amount will further invest in some other banks’ instruments to get a better return.
• PSFMC will meet whenever required to discuss the retail and wholesale prices and will propose required interventions.

Frequently Asked Question