Price stabilisation scheme for agro commodities extended for another six months

New scheme will take time to get approval; market price fluctuations of commodities and currency movements necessitate policy in interim

The ministry of commerce has decided to extend the price stablisation fund trust scheme (PSF) in its existing form for another six months ending September 30, 2012.

According to officials, the new modified scheme proposed by the ministry will take time to get the cabinet approval. In the meantime, due to fluctuations of the domestic currency and prices in the global market of various commodities, the government has decided to continue with the existing scheme for next six months. The decided was taken last week.

The scheme was launched in 2003  to provide financial relief to the growers of various agricultural commodities when their prices fall below a specified level as a long term support  rather than adhoc interventions during crisis. These primary commodities are tea, coffee, tobacco and rubber.

The scheme was rolled out for ten years which expired on March 2013 and it covers most needy small growers  with operational holdings  of four hectares  or less.

In its original form, the  usual corpus is Rs 500 crores with 96% of government contribution and rest from growers. In distress year,  grower is permitted to withdraw Rs 1,000  while in normal  year of productivity of a certain crop, Rs 500 is deposited by the government and the grower each. In boom year, the grower deposits Rs 1,000 with no withdrawal.

Meanwhile, reportedly,  the commerce ministry  is in the process of preparing a Modified Price Stabilisation Fund (MPSF) scheme for the plantation sector covering tea, coffee, rubber, tobacco and cardamom.

The scheme  apart from its  original features  envisages an evaluation of the performance of the scheme by an independent agency in the fourth year and depending on the findings further extension of the scheme would be considered.

All the grower members of the scheme would be eligible to join the MPSF scheme without paying any entry fee. The respective commodity boards would certify the landholding details of the growers.

The Price Spectrum Band (PSB) would be determined on the basis of the preceding five years’ (including the price of the year under consideration) moving average of the international price of the commodity.

As per the new modified scheme, no compensation will be paid in a normal or boom year. Only during distress years, eligible member growers would be compensated to the tune of Rs 12,000 per hectare of operational landholding up to 10 hectares subject to a ceiling of Rs 60,000.

In case of consecutive distress years, the level of compensation would be enhanced by 15% of normal compensation. No claim bonus of Rs 12,000 per hectare subject to a ceiling of Rs 60,000 is payable if there is no distress in any of the five years of operation of the scheme.

The growers will be provided with ATM-cum-photo debit cards as a means to remove banking bottlenecks of the existing PSF scheme.