Price Stabilization Fund
Price Stabilization Fund
The purpose of the creation of the Price Stabilization fund is to restrain the prices of agri-horticultural commodities like onion, potatoes, and pulses from the extreme price volatility. The fund is aimed to increase or decrease the low or high prices of such selected commodities by distributing or procuring the commodity to stabilize the price in a range. This fund is distributed through the Department of Consumer Affairs (DOCA), Government of India.
The primary objective of the Price Stabilization Fund are as follows:
- To encourage direct procurement of produces from the farmers at the farm gate/Mandi
- To maintain a safety stock so that hoarding and unscrupulous speculation can be reduced
- To calibrate the release of such agricultural produce for supplying the commodities at reasonable prices to consumers
PSF also extends interest-free working capital advances to the State Government, Union Territories and Central agencies in order to fund their working capital and expenses, which they incur to maintain the safety stock which in turn helps to calibrate the release of the commodities. Therefore, the utilization of the fund ultimately lies with the State government or Union Territories who avail such loans for the same.
Price Stabilisation and Fund Management Committee (PSFMC)
The committee has created an objective of setting aside a corpus fund of Rupees five hundred crores for the purpose of providing interest free advance towards working capital to eligible proposals from Union Territories or State Governments, Central Agencies/Central Public Sector Undertakings/Co-operative organizations as decided by the respective ministry to enable procurement of perishable agriculture and horticulture produce. This fund was initially decided to be utilized for onion, potato and pulses.
Small Farmers Agri-Business Consortium (SFAC) shall open a separate savings bank account in the name of Corpus fund for procurement and distribution of Agri-Horticulture commodities. This account shall be opened in a nationalized bank with a flexible deposit facility. Such account shall be considered as a fund manager where the amount provided by the Government shall be kept and maintained. Small Farmers Agri-Business Consortium is obliged to maintain a receipt and expenditure Account with respect to the Central Corpus Fund and will report the same to the Member Secretary of Price Stabilisation and Fund Management Committee.
There are two types of interest-free working capital advances being provided out of the Corpus Fund.
The State Governments or the Union territories can obtain a one-time interest-free advance for the first proposal with respect to market intervention for price control. Such proposal shall first be evaluated at the State or Union Territory Level Committee. Advance to the State Governments or the Union territories will be provided to a revolving fund account set up for the purpose by the State Governments or the Union territories and the State Governments, or the Union territories are expected to contribute an equal amount. In the case of North-Eastern States, the Committee will contribute 75% of the amount and the North-Eastern States will contribute 25%.
This stream provides an interest-free advance to the Central Agencies, Central Public Sector Undertakings or Co-operative Organizations as deiced by the corresponding Ministries on the basis of their proposal for Market Intervention for price control. This will be set up as a revolving fund.
Common Points with respect to Stream-A and Stream-B Advances
- The amount received from the fund cannot be utilized for any other purpose.
- When the notified Agri-Horticulture produce prices are expected to sustainably increase, then they can be procured from the farm gate or mandi or imports as decided by the Committee.
- If Central Agencies, Central Public Sector Undertakings or Co-operative Organizations incur any loss, such loss will be met out of the Corpus Fund. Losses incurred by the State Governments or the Union Territories will be met by the Corpus Fund to the extent of 50%. In the case of North-Eastern States 75%.
- There will be ploughing back of profits into the Corpus Fund. 100% for Central Agencies, Central Public Sector Undertakings or Co-operative Organizations, 50% for the State Governments or the Union Territories and 75% for the North-Eastern States.
- For determining profit or loss, the expenditure may include – labour, grading, packing, transport, storage, local and mandi taxes, all other statutory levies and service charges.
- Any interest which is earned and yet to be received shall be considered as a part of the fund and will be utilized for the Fund.
- The accounts will be audited by the Comptroller and Auditor General of India.
- 1% of the advance made in the year is the permissible limit for meeting expenditure by the Department / Fund Manager duly approved by the PSFMC.
Funds will be released only upon approval by the PSFMC.
Availing of Working Capital Fund from the Central Corpus fund
In order to avail advances from the central corpus fund, the respective State Government or Union Territory or Central Government agencies or Central Public Sector Units (PSUs) or Cooperative organizations can submit their project proposals to the Price Stabilization Fund Management Committee (PSFMC).
Procedure for Submission of Proposals for Working Capital Loans
- The respective State Government or Union Territory or Central Government agencies or Central Public Sector Units (PSUs) or Cooperative organizations has to set up a nodal administrative department for this scheme
- In case of State Government or Union territory, the proposal is evaluated by the State/Union Territory level committee and then sent to the Member Secretary of the PSFMC.
- In case of Central Government agencies, the proposal is directly submitted to the Member Secretary of the PSFMC.
The agency which has availed such interest-free loans is required to maintain:
- Subsidiary accounts
- Statement of Profit and Loss
- Income and Expenditure Statement
- Detailed physical and financial progress report
- Final statement of the accounts.
The above mentioned has to be provided to the SFAC (Small Farmers’ Agribusiness Consortium) or the Department of Agriculture, Cooperation &Farmers Welfare (DAC&FW). The implementing agency is permitted to charge a service charge up to 2.5% of procurement price that is the net payment paid to the farmers to purchase or the cost of import.
The operation guidelines in inserted below for quick reference:Operating Guidelines