Price stabilization fund

Source-This post on Price stabilization fund is based on the article “Centre brings wheat and rice under price stabilization fund” published in “LiveMint” on 21st March 2024.

Why in the News?

Recently, the government has approved inclusion of wheat and rice under its price stabilization fund (PSF).

About Price stabilization fund

1. About: The Price Stabilization Fund (PSF) was set up in 2014-15 under the Department of Agriculture, Cooperation & Famers Welfare (DAC&FW). The PSF scheme was transferred to the Department of Consumer Affairs (DOCA) in 2016.

2. Regulation of the fund: The fund management is centrally managed by a Price Stabilisation Fund Management Committee (PSFMC) that approves all State Government’s and Central Agencies’ proposals.

The Small Farmers Agribusiness Consortium (SFAC) maintains the PSF as a central corpus fund.

3. Objective: The fund is aimed at increasing or decreasing prices of selected commodities by distributing or procuring the commodity to stabilize the price in a range. The fund is usually used for activities aimed at bringing down/up the high/low prices.

4. Function: a. It helps to regulate the price volatility of important agri-horticultural commodities like onion, potatoes and pulses were also added subsequently.

b. The PSF is utilized for granting interest-free advance of working capital to Central Agencies, State/UT Governments/Agencies to undertake market intervention operations.

c. Apart from domestic procurement from farmers/wholesale mandis, import may also be undertaken with support from the Fund.

d. Under the PSF scheme, interest-free loans are extended to State Governments/Union Territories (UTs) and Central Agencies to cover their working capital and related expenses incurred in the procurement and distribution of these commodities.

UPSC Syllabus: Economy