Price Stabilisation Fund (PSF)

A Price Stabilization Fund (PSF) is a governmental mechanism designed to curb extreme price volatility of essential commodities, primarily agricultural and horticultural produce, to protect both consumers and producers from sharp price fluctuations.
INVEST NOW
Price Stabilisation Fund (PSF)
INVEST NOW
3 mins read
Aug 20, 2026

The Price Stabilisation Fund (PSF) is a government mechanism designed to reduce sharp price fluctuations in selected commodities and protect farmers and consumers from extreme price movements. The PSF full form in finance is Price Stabilisation Fund. India has used PSF mechanisms in different forms over time, including the 2003 scheme for plantation crops and the 2015 scheme for perishable agricultural and horticultural commodities. The 2015 scheme was created with a Rs. 500 crore corpus and initially focused on onion and potato, with pulses added later. It supports measures such as procurement, buffer-stock creation and market intervention to moderate prices. Understanding the price stabilisation fund helps explain how the government responds when essential commodity prices rise or fall sharply.


In summary

The price stabilisation fund helps moderate extreme commodity price volatility; the PSF full form in finance is Price Stabilisation Fund, and the 2015 scheme was created with a Rs. 500 crore corpus.

  • Establishment: The 2015 PSF was approved by the Government on 27 March 2015 as a Central Sector Scheme.
  • Corpus: The scheme had a Rs. 500 crore central corpus for market interventions.
  • Commodities: It initially covered onion and potatoes, with pulses added subsequently.
  • Governance: The Price Stabilisation Fund Management Committee (PSFMC) approves proposals, while SFAC maintains the central corpus and acts as fund manager.
  • Loan support: State governments, UTs and central agencies can receive interest-free advances for procurement and distribution operations.
  • Two PSF eras: The 2003 PSF supported plantation crops such as tea, coffee, rubber and tobacco, while the 2015 scheme focused on perishable agri-horticultural commodities.

Mutual Fund investments are subject to market risks, read all scheme related documents carefully.

Explore mutual fund investment options on the Bajaj Broking website and start your SIP from Rs. 100, subject to applicable terms and conditions.

What is the price stabilisation fund (PSF)?

The price stabilisation fund was created to moderate sharp price fluctuations in essential commodities; the 2015 PSF had a Rs. 500 crore corpus and was established by the Government on 27 March 2015 under the Department of Agriculture, Cooperation & Farmers Welfare before being transferred to the Department of Consumer Affairs (DOCA) in 2016.

PSF (Price Stabilisation Fund) — ObjectiveMechanismBeneficiary
Moderate price volatilityProcure commodities, create buffers and release stocks when requiredConsumers
Support market interventionProvide interest-free advances for procurement and distributionStates, UTs and central agencies
Reduce extreme price movementsEnable intervention in commodities such as onion, potatoes and pulsesFarmers and consumers

The PSF scheme corpus fund India framework of 2015 differed from the 2003 PSF, which focused on plantation crops such as tea, coffee, rubber and tobacco.


Some historical context of price stabilisation fund (PSF)?


In India, the price stabilisation fund was first established in 2003 for plantation crops such as coffee, tea, rubber, and tobacco. Since these commodities were facing low prices in the international market, the PSF was launched to safeguard the interests of growers.



Key Statistics of Price Stabilisation Fund


  • The PSF Scheme commenced its operations in April 2003 with an initial tenure slated for a decade, extending until March 2013.
  • It was administered by the Ministry of Commerce
  • It intended to cover a total of about 3.42 lakh growers (having operational holdings of up to 4 hectares) of:
    • Tea
    • Coffee
    • Natural rubber, and
    • Tobacco,

Later, in 2014-15, a new PSF was announced in the Union Budget to mitigate volatility in the prices of agricultural commodities. This new PSF scheme also provided for the advancement of interest-free loans to:

  • State Governments
  • Union Territories (UTs) and

  • Central Agencies


Also read: Compare mutual funds

How does the price stabilisation fund work?

The Price Stabilisation Fund controls commodity price volatility through three main mechanisms: procurement, buffer-stock creation and price regulation through calibrated market intervention. The 2015 PSF framework supports essential commodities such as onion, potatoes and pulses.

  1. Procurement at farm gate or mandi: Central agencies can purchase commodities directly from farmers or farmers’ organisations at the farm gate or mandi. This helps provide market support when intervention is required.
  2. Create buffer stocks: Procured commodities can be stored as strategic buffers and released in a calibrated manner when prices rise sharply. The scheme has supported buffers for onions and pulses.
  3. Provide interest-free advances: State governments, UTs and central agencies can receive interest-free advances from the PSF to meet working-capital and other expenses related to procurement and distribution.
  4. Undertake market intervention: Stocks can be released to moderate prices and discourage hoarding and speculative activity. Imports may also be undertaken when required.

How does PSF support onion and potato prices?


The 2015 scheme initially focused on onion and potatoes. States and central agencies can undertake approved procurement and distribution operations using PSF support to help moderate price fluctuations.

Understanding how the PSF works can help you see how government intervention can influence essential commodity prices.


Interest-free loans under price stabilisation funds

The PSF extends interest-free loans to State Governments/Union Territories (UTs) and Central Agencies. This financial assistance is usually given to cover their operational expenses, which are particularly incurred during the procurement and distribution of commodities.

These interest-free loans serve as crucial support for governments and agencies and help them in:

  • Effectively managing price fluctuations
  • Maintaining market stability
  • Ensuring that essential goods remain accessible to consumers at reasonable rates.

The different types of loans offered by the PSF scheme include:

  • Pre-shipment finance (PSF)
  • Credit guarantee fund for Micro & small enterprises, and
  • Export Packing Credit (EPC)

Also read: SIP investments

Fund management of Price Stabilisation fund

The management structure of a price stabilisation fund involves various entities functioning at various levels. Let’s have a look at them:



Government authorities

Ministry of Consumer Affairs, Food and Public DistributionState governments
  • This ministry is usually responsible for formulating policies related to price stabilisation
  • It also oversees the functioning of the PSF and provides overall direction and guidance.
  • State governments play a significant role in the implementation of price stabilisation measures at the regional level.
  • They help in:
    • Contributing to the corpus fund,
    • Coordinating procurement activities, and
    • Facilitating the distribution of buffer stocks

 

Price stabilisation fund board

  • A governing board or committee is set up.
  • This board is often chaired by a:
    • Government official or
    • Representative from the Ministry of Consumer Affairs, Food and Public Distribution,
  • The board oversees the operations of the PSF and:
    • Sets policies
    • Approves budgets, and
    • Monitors the fund's performance

Procurement agencies

  • The agencies, such as the Food Corporation of India (FCI) and State Agricultural Marketing Boards, are responsible for procuring essential commodities from farmers when prices are low.
  • They also ensure the availability of buffer stocks for the purposes of price stabilisation.

Maintaining the corpus fund

The primary source of funding for the PSF is government allocations from the central budget or state budgets. These allocations are earmarked specifically for price stabilisation activities and are utilised to build and maintain the corpus fund.

Additionally, PSF also generates revenue through the sale of commodities from its buffer stocks. These revenues are often reinvested into the corpus fund to:

  • Replenish stocks or
  • Fund future stabilisation activities.

Conclusion

The Price Stabilisation Fund (PSF) is a crucial mechanism implemented by the Indian government to safeguard the interests of both producers and consumers, particularly in sectors such as agriculture.

The fund operates through a well-defined management structure. From monitoring market conditions to implementing intervention strategies like procurement and maintenance of buffer stocks, the PSF aims to stabilise prices and maintain market equilibrium.

If you wish to start your investment journey, visit the Bajaj Broking website and compare 4000+ mutual fund schemes. Use the lumpsum calculator and the SIP calculator to better plan your investments and earn inflation-beating returns.

Essential tools for mutual fund investors

Mutual Fund CalculatorStep Up SIP Calculator

Frequently asked questions

What does PSF price mean?
PSF price refers to the stable price range maintained for certain commodities. This is usually achieved through interventions funded by the Price Stabilisation Fund.
What is PSF in India?
PSF in India refers to the Price Stabilisation Fund. It is a mechanism managed by the government to stabilise prices of essential commodities, especially agricultural products.
How is PSF calculated?
PSF calculations involve assessing market conditions, production costs, demand-supply dynamics, and international prices to determine the appropriate interventions needed to stabilise commodity prices.
Why is price stabilisation important?
Price stabilisation is crucial to prevent sudden fluctuations in prices, which can negatively impact producers, consumers, and the overall market stability.
How does Price Stabilisation Fund (PSF) benefit farmers?

The Price Stabilisation Fund (PSF) can benefit farmers by supporting procurement when commodity prices fall sharply. This may help farmers achieve better price realisation and reduce losses caused by sudden price declines. By promoting price stability for selected commodities, PSF can also create more predictable market conditions.

Show More Show Less

Related videos

Bajaj Finance app for all your financial needs and goals

Trusted by 50 million+ customers in India, Bajaj Finance App is a one-stop solution for all your financial needs and goals.

You can use the Bajaj Finance App to:

  • Apply for loans online, such as Instant Personal Loan, Home Loan, Business Loan, Gold Loan, and more.
  • Invest in fixed deposits and mutual funds on the app.
  • Choose from multiple insurance for your health, motor and even pocket insurance, from various insurance providers.
  • Pay and manage your bills and recharges using the BBPS platform. Use Bajaj Pay and Bajaj Wallet for quick and simple money transfers and transactions.
  • Apply for Insta EMI Card and get a pre-qualified limit on the app. Explore over 1 million products on the app that can be purchased from a partner store on Easy EMIs.
  • Shop from over 100+ brand partners that offer a diverse range of products and services.
  • Use specialised tools like EMI calculators, SIP Calculators
  • Check your credit score, download loan statements and even get quick customer support—all on the app.

Download the Bajaj Finance App today and experience the convenience of managing your finances on one app.

Do more with the Bajaj Finance App!

UPI, Wallet, Loans, Investments, Cards, Shopping and more

GET THE APP

Disclaimer

Bajaj Finance Limited (“BFL”) is an NBFC offering loans, deposits and third-party wealth management products.

The information contained in this article is for general informational purposes only and does not constitute any financial advice. The content herein has been prepared by BFL on the basis of publicly available information, internal sources and other third-party sources believed to be reliable. However, BFL cannot guarantee the accuracy of such information, assure its completeness, or warrant such information will not be changed. 

This information should not be relied upon as the sole basis for any investment decisions. Hence, User is advised to independently exercise diligence by verifying complete information, including by consulting independent financial experts, if any, and the investor shall be the sole owner of the decision taken, if any, about suitability of the same.

Disclaimer:

Bajaj Finance Limited ("BFL") is registered with the Association of Mutual Funds in India ("AMFI") as a distributor of third party Mutual Funds (shortly referred as 'Mutual Funds) with ARN No. 90319

BFL does NOT:

(i) provide investment advisory services in any manner or form:

(ii) carry customized/personalized suitability assessment:

(iii) carry independent research or analysis, including on any Mutual Fund schemes or other investments; and provide any guarantee of return on investment.

In addition to displaying the Mutual fund products of Asset Management Companies, some general information is sourced from third parties, is also displayed on As-is basis, which should NOT be construed as any solicitation or attempt to effect transactions in securities or the rendering any investment advice. Mutual Funds are subject to market risks, including loss of principal amount and Investor should read all Scheme/Offer related documents carefully. The NAV of units issued under the Schemes of mutual funds can go up or down depending on the factors and forces affecting capital markets and may also be affected by changes in the general level of interest rates. The NAV of the units issued under the scheme may be affected, inter-alia by changes in the interest rates, trading volumes, settlement periods, transfer procedures and performance of individual securities forming part of the Mutual Fund. The NAV will inter-alia be exposed to Price/Interest Rate Risk and Credit Risk. Past performance of any scheme of the Mutual fund do not indicate the future performance of the Schemes of the Mutual Fund. BFL shall not be responsible or liable for any loss or shortfall incurred by the investors. There may be other/better alternatives to the investment avenues displayed by BFL. Hence, the final investment decision shall at all times exclusively remain with the investor alone and BFL shall not be liable or responsible for any consequences thereof.

Investment by a person residing outside the territorial jurisdiction of India is not acceptable nor permitted.

Disclaimer on Risk-O-Meter:

Investors are advised before investing to evaluate a scheme not only on the basis of the Product labeling (including the Riskometer) but also on other quantitative and qualitative factors such as performance, portfolio, fund managers, asset manager, etc, and shall also consult their Professional advisors, if they are unsure about the suitability of the scheme before investing.


Disclosure: Bajaj Finance Limited (BFL) is a distributor of Mutual Funds with ARN - 90319 and distributes mutual funds of Bajaj Finance Asset Management Limited (BFSAMC). BFL receives commission towards distribution of mutual fund products. BFSAMC is a group company of BFL, carrying business on arm’s length basis without any conflict of interest and in accordance with the prevailing law / regulation.