Price Stabilization Fund for Tobacco, Coffee, Tea & Rubber

            In order to alleviate the hardship faced by the growers of coffee, tea, rubber and tobacco due to continued low prices of these commodities and to safeguard the interests of the growers of these commodities, the Government has decided to establish a Price Stabilization Fund (PSF) and implement a Scheme for the benefit of the growers of these commodities, and accordingly the Ministry of Commerce and Industry notified a scheme on 24th July, 2003.

Name of the Scheme

            The Scheme will be called the Price Stabilization Fund Scheme.

Objective

            The objectives of the PSF is to provide financial relief to the growers when prices of these commodities fall below a specified level, without resorting to the practice of procurement operations by the Government agencies.

Funding of the Corpus

            The Price Stabilization Fund will be established with a corpus of Rs.500 crores which shall include Rs.482.88 crores as a one time contribution by the Central Government and Rs.17.12 crores as a non-refundable initial contribution by the participating growers @ Rs.500 per grower.  The corpus of the Fund will be kept in the Public Account of the Government of India.  The Interest on the Corpus Fund will be benchmarked to the interest rate as is applicable on the GPF, SDS and similar Funds in Public Account.  The corpus Fund would remain undisturbed and interest earning alone will be utilized for of India operationalising the Price Stabilization Fund Scheme.  The annual interest accruing on the corpus would be released to the Trust Fund to be administered by the NABARD.

            The Trust Fund administered by the NABARD will be audited by the Comptroller & Auditor General of India.

Coverage of the Scheme

            Initially, the Scheme will cover a total of about 3.42 lakh growers of tea, coffee, natural rubber and tobacco, being the most needy amongst those having operational holdings of upto 4 hectares.

Adoption of a Price Band

            A uniform band of 40 percent for all the four commodities will be adopted with a price spectrum band of +/-20% from the seven years moving average of international prices.

Salient features of the Scheme

            The scheme will be based on the principle of contributions from the growers and from the Government depending on normal / boom / distress periods, with a provision for withdrawal by the growers during distress period.

            The contributions of the participant as well as of the Government would be made to an account of the participant grower, opened for the purpose of this Scheme, with any designated Bank.  The contribution of the participant grower / Government to the grower’s account and withdrawal there from would be with reference to the price band specified.

Period of operation of the scheme

            The scheme is operational from April 2003 onward, initially for a period of ten years.  The scheme will be reviewed after 5 years.

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