4/23/2014 Price Stabilisation Fund Scheme - Salient Features

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PRICE STABILISATION FUND SCHEME
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.
4/23/2014 Price Stabilisation Fund Scheme - Salient Features
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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.