Draft guidelines issued for onion, potato price stabilisation fund

The central government’s price stabilisation fund for potatoes and onions proposes to take on only half of any losses incurred by agencies of state governments in this regard, such as civil supply corporations.

The draft guidelines for the Fund, creation of which was announced in the 2014-15 Budget by Finance Minister Arun Jaitley,  say if any central government agency (such as Nafed or SFAC, the Small Farmers Agri-Business Consortium) suffers a loss in undertaking a market intervention programme, the Centre will bear the entire loss from the fund.

In the case of state governments and agencies, this would be 50 per cent. For the northeast states, it will be 75 per cent.

It will apply only for onions and potatoes; later, it could be extended to other vegetables. The fund will be operational for three years starting 2014-15, with an option to extend.

By the proposed guidelines, the fund will be maintained in the department of agriculture, whose secretary will be the chairman of a committee constituted to monitor it. It is to be named the Price Stabilisation Fund Management Committee.

This will provide money to state governments and central agencies in the form of an interest-free working capital advance. For this, a separate savings account has been created in the SFAC.

State governments and Union Territories have to present a proposal for market intervention in the event of a sudden and sharp fall in prices or a sudden spike. The committee will vet this. Profits on interventions will be entirely ploughed back in the case of central government agencies and half of this in the case of state government agencies.

“No diversion of either the corpus fund or the interest accrued thereon is permitted. The accounts of the Fund will be subject to audit by the Comptroller and Auditor General,” the guidelines said.

The administrative, monitoring and other expenses would be limited to one per cent of the advances made in a year, duly approved by the PSFMC.

“PSFMC will invite, appraise and approve proposals received from agencies. It will approve the amount and period of advance and also lay down the schedule for repayment,” the guidelines add.