Price Stabilisation Fund Scheme - Salient Features

SALIENT FEATURES

Background

• Decline in International and Domestic Prices of Tea, Coffee, Rubber and Tobacco during past few years causing distress to the primary growers.
• Commissioned by the Department of Commerce, NCAER submits report in September 2001and suggests various policy options.
• Department of Commerce decides to set up a Price Stabilisation Fund.
• CCEA gives in-principle approval in June 2002.
• Committee constituted to workout modalities of implementation of the Price Stabilisation Fund Scheme.
• CCEA accords approval to the PSF Scheme in February 2003.
• PSF Scheme launched in April 2003.

Objective

• To provide financial relief to the growers when prices of these commodities fall below a specified level.
• Sustained, long-term support to growers in place of adhoc interventions during crisis.
• To alleviate the hardship faced by the growers due to low prices and to safeguard their interests.

Participatory Scheme

• Principle of participation.
• Contribution by Grower and by Government depending on Normal/Boom/Distress Year.
• Small grower to enroll under the Scheme by depositing Entry Fee of Rs.500/-.
• Each grower to open a special PSF SB A/c with any designated Bank.

Period of operation

• Ten Years – 1.4.2003 to 31.03.2013.
• Scheme to be reviewed after five years.
• Coverage of the Scheme
• Initially, 3.42lakh out of a total of 12.77lakh small growers will be covered.
  The most needy of small growers with operational holdings of 4 hectares or less would be covered at first.

Funding of the PSF Corpus

• PSF Corpus of Rs.500 Crores.
• Governments’ contribution – Rs.482.88 Crores.
• Growers’ contribution (Entry Fee @ Rs.500 per grower) Rs.17.12 Crores.
• Corpus Fund will be deposited in the Public Account of Government of India.
• Corpus Fund will not be utilized. Only Rs.40crores per annum, i.e., Interest on Corpus Fund @ 8% per annum will be utilised for the PSF Scheme.

Price Spectrum Band

• A uniform band of 40% for all four commodities will be adopted.
• Price Spectrum Band would be constructed on the basis of Seven Years’ Moving Average of International Prices.
• Lower Band would be (-) 20% and Upper Band would be +20% of the Seven Years Average of International Price.
• Categorisation of year as Boom/Normal/Distress on the basis of relationship of Domestic Price to Price Spectrum Band.
• Boom Year – when Domestic Price is higher then Upper Band.
• Normal Year – when Domestic Price is within the Lower Band and the Upper Band.
• Distress Year – when Domestic Price is low than the Lower Band.

Modality of deposit in PSF SB A/c

• In Distress Year, Government deposits Rs.1000/- per grower. Grower is permitted to withdraw up to Rs.1000/-.
• In Normal Year, Government deposits Rs.500/- per grower, and each grower deposits Rs.500/-. No withdrawal is permitted.
• In Boom Year, the grower deposits Rs.1000/-. No withdrawal is permitted.