The recent government announcement indicated that the prices of onion, tomato and potato are less expensive compared to the previous year (2020). This is a result of the Onion buffer maintained by the Department of Consumer Affairs under the Price Stabilization Fund (PSF) whose objective is to effectively intervene in the market to stabilize prices.
Understanding the Price Stabilization Fund (PSF)
Established in 2014-15, The Price Stabilization Fund (PSF) is a strategic financial reserve created to absorb extreme market fluctuations in selected commodity prices. The commodities are procured directly from farmers or farmers’ organisations at the farm gate/mandi and are then made available to consumers at a more affordable price. Any losses sustained during these operations are shared between the Centre and the respective states.
How PSF operates to stabilize prices
The funds stored in PSF are typically used for various activities aimed at moderating the high or low prices. Examples include acquiring certain goods and distributing them as and when required to keep the costs within a specified range.
The PSF Loan Scheme
The PSF scheme also provides for the advancement of interest-free loans to State Governments/Union Territories (UTs) and Central Agencies. These loans finance their working capital and other expenses they may incur in the procurement and distribution of such commodities.
Transition of PSF Management
The management of the PSF scheme was transferred from the Ministry of Agriculture & Farmers’ Welfare to the Ministry of Consumer Affairs, Food & Public Distribution on 1st April, 2016.
Fund Management Details
The funds in PSF are centrally managed by a Price Stabilisation Fund Management Committee (PSFMC). This committee is responsible for approving all State Government’s and Central Agencies’ proposals.
Maintaining the Corpus Fund
The Small Farmers Agribusiness Consortium (SFAC), a society promoted by the Ministry of Agriculture and Farmers’ Welfare, maintains the PSF as a central corpus fund. The SFAC links agriculture to private enterprises, investments, and technology.
Related Scheme: Operation Green
A related initiative launched in 2018 by the Ministry of Food Processing Industries is Operation Green (OG). This initiative seeks to build value chains for Tomatoes, Onions, and Potatoes (TOP) based on the “Operation Flood” (AMUL model) for milk. The goal is that a higher share of consumer’s rupee goes to farmers and their prices are stabilized. In the Union budget 2021, the government announced an expansion of Operation Green (OG) beyond TOP to include 22 perishable commodities.
