Price Stabilization Fund (PSF) runs dry
- November 6, 2023
- Posted by: OptimizeIAS Team
- Category: DPN Topics
No Comments
Price Stabilization Fund (PSF) runs dry
Subject :Economy
Section: Monetary Policy
Key Points:
- Department of consumer affairs (DoCA) under the Ministry of Consumer Affairs, Food & Public Distribution plans to approach the Union finance ministry for about ₹5,400 crore for its price stabilization fund (PSF) to procure onion and pulses in the rest of the financial year.
- When prices of vegetables and pulses shot up this year, the department began buying them at steep prices and selling them at cheaper rates.
- Since the department needs to procure more onions and masur (lentil) to enhance the buffer stock, it has decided to move the finance ministry without waiting for a budget allocation.
Setting up of PSF:
- The Price Stabilization Fund (PSF) was set up in 2014-15 under the Department of Agriculture, Cooperation & Famers Welfare (DAC&FW) to help regulate the price volatility of important agri-horticultural commodities like onion, potatoes and pulses were also added subsequently.
- The PSF scheme was transferred from DAC&FW to the Department of Consumer Affairs (DOCA) w.e.f. 1st April, 2016.
- The fund allowed the government agency National Agricultural Cooperative Marketing Federation of India (Nafed) to purchase a food item for which the government foresaw a possibility of high inflation and then sell it at a reasonable rate when the prices go up.
- Nafed procured rabi onions from the open market in March-April of 2016-17 and sold them in July-October when onion prices shot up.
- Some states have used the Public Distribution System and ration shops to distribute certain food items, apart from wheat and rice, at a lower rate than the market.
- The Union government has also directly sold pulses and edible oils through Mother Dairy booths and outlets of government-owned retail stores.
What is the Price Stabilisation Fund?
- Under the PSF, government agencies can even purchase a food item at a price higher than the minimum support price (MSP), and the same can be sold with a reasonable markup or even at a subsidy if the market prices move up in the off-season.
- The PSF is utilized for granting interest free advance of working capital to Central Agencies, State/UT Governments/Agencies to undertake market intervention operations.
- Apart from domestic procurement from farmers/wholesale mandis, import may also be undertaken with support from the Fund.
- 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 will be maintained in a Central Corpus Fund account to be opened by Small Farmers Agri-Business Consortium (SFAC), which will act as Fund Manager.