Price Stabilisation Fund (PSF)

Reviewed by Sujaini | Updated on Aug 27, 2020

What is the Price Stabilisation Fund (PSF)?

It applies to any fund created to absorb extreme volatility in selected commodity prices. The sum in the fund is usually used for activities aimed at bringing down/up the high/low prices say, for example, acquisition of certain goods and distribution of the same as and when appropriate, so that costs remain within a range.

Understanding PSF

In 2014-15 the Price Stabilisation Fund (PSF) was established under the Department of Agriculture, Cooperation & Famers Welfare (DAC&FW) to regulate the cost volatility of essential agricultural commodities such as onion, potatoes and pulses.

Such goods will be procured directly from farmers or farmers' organisations at the farm gate/mandi, and made available to consumers at a more affordable price. Losses sustained, if any, between the Centre and the states must be shared in the operations.

Interest-free loans

The PSF scheme provides for the advancement of interest-free loans to State Governments/Union Territories (UTs) and Central Agencies to finance their working capital and other expenses which they may incur in the procurement and distribution of such commodities. Consequently, the actual use of the fund depends on the willingness of the governments/Union Territories of the state to use such loans for these purposes.

Furthermore, the actual identification of the time in which assistance is needed and the implementation of the price support measures are left to the states.

Fund Management

The Price Stabilisation Fund will be centrally managed by a Price Stabilisation Fund Management Committee (PSFMC) that will approve all State Governments and Central Agencies proposals.

Maintaining the Corpus Fund

Small Farmers Agribusiness Consortium (SFAC), a society promoted by the Ministry of Agriculture for linking agriculture to private enterprises and investment and technology, will maintain the PSF as a central corpus fund. SFAC will assume the role of the Fund Manager.