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In summary
The Price Stabilisation Fund (PSF) is a Government of India mechanism used to moderate sharp price fluctuations in selected agricultural commodities.
- The 2015 PSF was approved with a Rs. 500 crore corpus for market interventions in perishable agri-horticultural commodities.
- The scheme initially focused on onion and potato, with pulses later included in its interventions.
- The government can procure commodities, build buffer stocks, and release stocks in a calibrated manner when prices rise.
- PSF can also provide interest-free working-capital advances to eligible government agencies for approved market interventions.
The PSF is different from an investment fund. It is a government price-stabilisation mechanism designed around commodity markets and consumer and producer interests.
What is the Price Stabilisation Fund?
The Price Stabilisation Fund is a government mechanism designed to reduce extreme price volatility in selected commodities. In India, the PSF has been used for agricultural and horticultural commodities such as onions and pulses.
The Government of India approved the 2015 PSF as a Central Sector Scheme on 27 March 2015 with a corpus of Rs. 500 crore. It was initially intended for perishable agri-horticultural commodities, beginning with onion and potato. Source: Press Information Bureau, 27 March 2015.
The scheme was later transferred to the Department of Consumer Affairs from the Department of Agriculture, Cooperation and Farmers Welfare with effect from 1 April 2016. The Department of Consumer Affairs currently manages PSF-related price-stabilisation interventions. Source: Department of Consumer Affairs, Price Monitoring Division.
The government also maintains a separate historical PSF framework from 2003 that supported plantation crops such as tea, coffee, rubber, and tobacco. That earlier scheme should not be confused with the 2015 agricultural commodity PSF.
How does the Price Stabilisation Fund work?
The PSF works by supporting government intervention when prices of selected commodities become excessively volatile. The intervention can operate when prices fall sharply and farmers need market support, or when prices rise and consumers face higher costs.
The main mechanisms are procurement, buffer-stock creation, and calibrated release of stocks.
- Procurement: Government agencies can purchase selected commodities from farmers, farmer organisations, or wholesale markets.
- Buffer stocks: Procured commodities can be stored so that they are available for later intervention.
- Calibrated release: Stocks can be released when market conditions warrant intervention, increasing supply and helping moderate prices.
- Market intervention: Imports or other approved measures can also support the government's efforts when required.
The Department of Consumer Affairs states that PSF buffer stocks of pulses and onions are maintained and released in a regulated manner to moderate price volatility. Source: Department of Consumer Affairs, Price Monitoring Division.
Which commodities does the PSF cover?
The 2015 PSF initially focused on onion and potato. Pulses were subsequently brought within its price-stabilisation interventions.
The commodities covered can change with government policy and market requirements. Current government information identifies onion and pulses as important commodities supported through PSF buffers. Source: Department of Consumer Affairs, updated 10 March 2026.
| Commodity | How PSF intervention can work |
|---|---|
| Onion | Procurement and buffer creation, followed by calibrated release |
| Pulses | Buffer creation and regulated release to improve availability |
| Potato | Included in the initial 2015 PSF framework |
For example, during 2026-27, the government set a procurement target of 2.00 lakh tonnes of rabi onion for the PSF buffer. Procurement began on 15 May 2026, and around 1.21 lakh tonnes had been procured by 26 August 2026. Source: Press Information Bureau, 26 August 2026.
Last updated: September 2026
How does PSF support farmers and consumers?
PSF interventions can serve both farmers and consumers, but their effects depend on market conditions and the type of intervention.
When prices fall sharply, procurement can provide an additional market for farmers. When prices rise sharply, releasing stocks can increase market availability and help moderate prices for consumers.
The government describes PSF as a consumer-oriented scheme aimed at protecting consumers from extreme price volatility while supporting market interventions that can provide farmers with better price realisation. Source: Department of Consumer Affairs.
PSF should not be confused with the Minimum Support Price (MSP). MSP is a price-support mechanism, while PSF is used for market intervention and price stabilisation. The two mechanisms can operate within the government's broader agricultural policy framework.
What are interest-free advances under PSF?
PSF can provide interest-free working-capital advances to eligible State governments, Union Territories, central agencies, and other approved entities for market-intervention operations.
These advances can support activities such as procurement, storage, and distribution. They are not personal loans or investment products for individuals.
The Department of Consumer Affairs states that State-level PSF arrangements can receive interest-free advances from the PSF corpus. The Centre-State contribution to a State-level corpus is generally 50:50, while the ratio is 75:25 for North-Eastern States. Source: Department of Consumer Affairs.
The terms “pre-shipment finance”, “credit guarantee fund”, and “export packing credit” should not be described as types of PSF loans. They are separate financial facilities and do not form the core mechanisms of the Price Stabilisation Fund.
Who manages the Price Stabilisation Fund?
PSF involves several government bodies and agencies. Their roles can differ depending on the commodity and intervention.
The Price Stabilisation Fund Management Committee (PSFMC) oversees proposals for market interventions. The Department of Consumer Affairs manages the scheme for price-stabilisation operations, while designated agencies can undertake procurement, storage, and distribution.
The Small Farmers' Agribusiness Consortium (SFAC) has historically managed the central PSF corpus. State-level PSF arrangements can also involve State governments and agencies.
The exact agency responsible for a particular procurement or distribution operation depends on the government's approved intervention.
How is PSF different from an investment fund?
A Price Stabilisation Fund is not a mutual fund, investment fund, or savings product. Its purpose is to support government intervention in commodity markets.
An investment fund pools money to invest in financial assets for investors. PSF uses government-supported resources for approved market interventions, such as procurement and buffer-stock operations.
This distinction matters because the PSF does not offer individual investors units, investment returns, or capital appreciation.
If you are researching financial investments, you can compare mutual funds or explore SIP investments separately. The Bajaj Broking website provides access to mutual fund investment information, which is separate from the government's PSF mechanism.
What is the history of the Price Stabilisation Fund?
India has used PSF mechanisms in different periods for different commodities. The earlier 2003 PSF was aimed at plantation crops facing low international prices.
The 2015 PSF had a different purpose. It was created with a Rs. 500 crore corpus to address volatility in perishable agricultural and horticultural commodities. It initially focused on onion and potato, with pulses subsequently included.
In 2016, the scheme moved from the Department of Agriculture, Cooperation and Farmers Welfare to the Department of Consumer Affairs. More recently, PSF has been integrated with other components under the Pradhan Mantri Annadata Aay Sanrakshan Abhiyan (PM-AASHA), while continuing to support price-stabilisation interventions. Source: Department of Consumer Affairs, 2024 Year-End Review.
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Understanding PSF
Understanding PSF interventions
What does PSF stand for in finance?
PSF stands for Price Stabilisation Fund. In the Indian government context, it refers to a mechanism used to moderate extreme price volatility in selected agricultural and horticultural commodities. It works through measures such as procurement, buffer-stock creation, and regulated release. It is not a financial investment product and does not provide individuals with investment returns.
How is PSF calculated?
There is no single PSF calculation or formula for consumers or investors. The government decides the scale of intervention based on factors such as commodity prices, availability, market conditions, and the need for procurement or release. The fund supports approved market interventions rather than calculating a fixed price for every commodity.
Does PSF benefit farmers?
PSF can support farmers when commodity prices fall sharply by enabling approved procurement operations. Buying from farmers or farmer organisations can provide market support during periods of weak prices. However, PSF is not the same as MSP and does not guarantee a particular price to every farmer. Its intervention depends on government decisions, commodity conditions, and the approved scheme framework.
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