Price stabilisation fund may operate via Nafed

Fund proposed in the Budget likely to be used exclusively for vegetable and cereal prices

The Price Stabilisation Fund (PSF) proposed by Finance Minister Arun Jaitley in the Union Budget is likely to be used exclusively for vegetables and cereals.

Informed sources said the PSF will be under the ministry of agriculture and an initial allocation had been sanctioned. Until now, such a facility was available only for oilseeds and pulses. They said the fund would be operated through the National Agricultural Cooperative Marketing Federation of India (Nafed). State governments are to buy vegetables and cereals from the open market and distribute these through Nafed outlets and state cooperatives.

“We have not yet received any formal direction from the government. There are some discussions going on in this regard. We have successfully conducted a price support scheme for pulses, oilseeds and cotton. In case the government wants us to expand into vegetables and cereals, we are ready,” said S K Verma, general manager, Nafed.

Concerned at the recent price rises in onion, potato, green vegetables and supplements, Jaitley allocated Rs 500 crore for establishing a PSF.

The government had already set up a Market Intervention Scheme (MIS) in oilseeds and pulses, operated through states in case of extreme price volatility in these segments. It has done similar exercises for sugar and onions within the past two years.

In the existing MIS scheme, the Centre bears the difference between the procurement and realisation prices.

It might also engage the National Horticulture Board (NHB) for vegetables procurement and distribution.“We are awaiting the government’s direction in this regard. Currently, MIS is operated by the Centre in association with the state governments. Whenever any intervention is required to control price volatility, the state government comes out with a proposal. On accepting it, the Centre allocates funds for procurement. However, we are ready to commence procurement if the government directs us to do so,” said Rajendra Kumar Tiwari, managing director of NHB.

Onion, potato, green vegetables and supplements have seen up to a 60 per cent price rise since the start of June and the delay in monsoon rainfall.

Madan Sabnavis, chief economist, CARE Ratings, said the government would need to establish a distribution channel due to the short shelf life of vegetables. The challenge would be to identify the timing of market intervention.