Price Stabilisation Fund (PSF) refers to any fund constituted for the purpose of containing extreme volatility in prices of selected commodities. The amount in the fund is generally utilised for activities aimed at bringing down/up the high/low prices say, for instance, procurement of such products and distribution of the same as and when required, so that prices remain in a range.
Initially, the fund was proposed to be used for market interventions for onion and potato only and pulses were added subsequently.
About the Price Stabilisation Fund Scheme
- In the Union Budget 2014-15, a Price Stabilization Fund with a corpus of Rs. 500 Crore for agricultural commodities was announced to mitigate the price volatility of agricultural produce.
- Accordingly, the Government of India, in May 2015, approved the creation of a Price Stabilization Fund (PSF), Central Sector Scheme, with a corpus of Rs.500 crores for providing interest free advance to State Governments/Union Territories (UTs) and Central agencies to support their working capital and other expenses they might incur on procurement and distribution interventions for such perishable agri-horticulture commodities.
- The fund will be released into revolving fund account set up for the purpose by the State Government/UT.
- Initially the fund was proposed to be used for market interventions for onion and potato only and pulses were added later.
- Procurement of these commodities will be undertaken directly from farmers or farmers’ organizations at farm gate or mandi and made available at a more reasonable price to the consumers.
- The Price Stabilization Fund will be managed centrally by a Price Stabilization Fund Management Committee (PSFMC) which will approve all proposals from State Governments and Central Agencies.
- The PSF scheme was transferred from Department of Agriculture Cooperation & Farmer Welfare (DAC&FW) to the Department of Consumer Affairs (DOCA) w.e.f. 1st April, 2016.
Objectives of Price Stabilisation Fund
- To promote direct purchase from farmers /farmers’ associations at farm gate/Mandi.
- To maintain a strategic buffer stock that would discourage hoarding and unscrupulous
speculation. - To protect consumers by supplying such commodities at reasonable prices through calibrated release of stock.
Difference between MSP & PSF
- In MSP, when the prices of produce fall below the cost of production, government buys or procures the select produce at a predetermined prices from the farmers so as to mitigate the distress sale by the farmer.
- In contrast to MSP, a PSF is generally conceived to be operative in both directions of price movement, subject to prices crossing some threshold level.
Demand for extention of PSF to Oil
In the event of rising oil prices, the government may consider a price stabilization fund (PSF) in the oil sector to control prices of auto fuels like petrol and diesel.
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