• • Established in 2014-15, PSF is any fund created to absorb extreme volatility in selected commodity prices.
  • Such goods will be procured directly from farmers or farmers'' organisations at the farm gate/mandi, and made available to consumers at a more affordable price.
  • Losses sustained, if any, between the Centre and the states must be shared in the operations.
  • The sum in the fund is usually used for activities aimed at bringing down/up the high/low prices say, for example, acquisition of certain goods and distribution of the same as and when appropriate so that costs remain within a range.
• Provides Loans:
  
  • The PSF scheme provides for the advancement of interest-free loans to State Governments/Union Territories (UTs) and Central Agencies to finance their working capital and other expenses, which they may incur in the procurement and distribution of such commodities.
  • The PSF scheme was transferred from the Ministry of Agriculture & Farmers’ Welfare to the Ministry of Consumer Affairs, Food & Public Distribution w.e.f. 1^st April, 2016.
• Fund Management:
  
  • It is centrally managed by a Price Stabilisation Fund Management Committee (PSFMC) that approves all State Government''s and Central Agencies'' proposals.
• Maintaining the Corpus Fund:
  
  • Small Farmers Agribusiness Consortium (SFAC), a society promoted by the Ministry of Agriculture and Farmers’ Welfare for linking agriculture to private enterprises, investment, and technology, maintains the PSF as a central corpus fund.
• Related Scheme:
  
  • While presenting the Union budget 2021, the government announced that Operation Green (OG) will be expanded beyond TOP to 22 perishable commodities.

Launched in 2018 by the Ministry of Food Processing Industries, Operation Green (OG) aims to build value chains of Tomatoes, Onions, and Potatoes (TOP) on the lines of “Operation Flood” (AMUL model) for milk in such a way that will ensure a higher share of consumer’s rupee goes to farmers and stabilizes their prices.

The significance of the Price Stabilization Fund (PSF) in the context of recent expansion to include of wheat and rice-

• Addressing Inflationary trends : The inclusion of wheat and rice under the PSF marks a significant expansion beyond the previously covered commodities like onions, potatoes, and pulses. This expansion reflects the government’s commitment to addressing inflationary trends across a broader spectrum of essential food items.
• Buffer Stock Management: The PSF is utilized to build up buffer stocks of key food commodities such as wheat and rice. These stocks are strategically released into the market during periods of price surges to stabilize prices and ensure affordability for consumers.
• Subsidy Allocation: The government provides subsidies to agencies like the Food Corporation of India (FCI) for supplying wheat and rice to central procurement agencies. This subsidy support helps in maintaining the affordability of these commodities, particularly under the Bharat brand, which is sold at subsidized prices.
• Inflation Mitigation: The inclusion of wheat and rice in the PSF is aimed at mitigating rising food inflation, which has been a concern ahead of general elections. By intervening in the market through strategic buffer stock management and subsidized sales, the government seeks to curb inflationary pressures and ensure food affordability for consumers.
• Policy Response to Market Dynamics: The decision to expand the PSF reflects a proactive policy response to address market dynamics, particularly concerning rising rice prices. By taking measures to stabilize prices and increase availability through the PSF, the government aims to alleviate the burden on consumers and mitigate potential electoral repercussions associated with food inflation.

The Price Stabilization Fund (PSF) addresses inflationary pressures and aids in maintaining food affordability through several mechanisms:

• Buffer Stock Management: The PSF accumulates buffer stocks of essential food commodities during periods of surplus production or lower prices. These stocks are strategically released into the market during periods of scarcity or price surges. By increasing the supply of commodities during shortages, the PSF helps stabilize prices and prevents excessive inflation.
• Subsidy Provision: The PSF provides subsidies to support the procurement and distribution of essential commodities. These subsidies enable the government to sell commodities at lower prices, making them more affordable for consumers. Subsidies can also incentivize increased production, leading to a greater supply of commodities and further price stability.
• Market Intervention: The PSF allows for direct intervention in the market to address sudden price fluctuations. By purchasing commodities during periods of low prices and selling them during periods of high prices, the PSF helps moderate price volatility and ensures that prices remain within a reasonable range.
• Consumer Protection: By stabilizing prices and ensuring the availability of essential food items, the PSF protects consumers from sudden spikes in food prices, which can disproportionately affect vulnerable populations. Affordable food prices contribute to improved food security and overall economic stability.
• Incentivizing Domestic Production: The PSF incentivizes domestic production by providing a guaranteed market for farmers’ produce at stable prices. This encourages farmers to increase their production levels, contributing to overall food security and helping to mitigate inflationary pressures.

The government is expanding the Price Stabilization Fund to include wheat and rice amid soaring food prices ahead of elections. This aims to manage inflation by subsidizing essential commodities and maintaining buffer stocks.