Lending hand for commodity growers soon

The Rs 500 crore price stabilisation fund (PSF) scheme for tea, coffee, rubber and tobacco growers is slated to become operational in a couple of months.

Established by the Union commerce ministry, the objective of the fund is to provide financial relief to growers during adverse price movement of commodities.

Initially, the scheme will cover about 3.4 lakh needy growers having operational holdings of four hectares or less. It will be operational for 10 years, subject to a review after five years.

"The scheme is participatory in nature. It seeks to bring about price stabilisation for tea, coffee, rubber and tobacco without resorting to procurement operations by government agencies," N Srinivasan, chief general manager, National Bank for Agriculture and Rural Development, said.

Growers of tea, coffee, rubber and tobacco have been buffeted by random price fluctuations in the past few years. Domestic as well as international prices have been extremely discouraging.

Growers of these commodities have been particularly affected owing to the substantial reduction in unit value realisation for each of these crops, often falling below their cost of production.

Under the scheme, each participating grower makes a non-refundable initial contribution of Rs 500 to the fund and opens a PSF (savings bank) account with either a public sector bank, regional rural bank or a co-operative bank.

The Centre too pitches in and makes a matching contribution into this account.

The corpus of the fund will remain undisturbed and interest earnings alone will be utilised for meeting the growers needs.

Growers desirous of participating in the PSF Scheme are required to apply to their respective commodity boards.

According to Srinivasan, the government will announce a price band for each commodity based on the seven-year moving average of international prices as the mid point, with the lower and upper bounds as minus 20 per cent and plus 20 per cent respectively.

When the average price fall below the lower bound of the price band, the central government will contribute up to Rs 1000 every year to the subscriber-grower's account as a measure of support in a distress situation.

In the years when the average price pierces the upper bound of the price band, the grower will be required to contribute Rs 1,000 a year to his own account, while the government will not contribute any amount.

In normal years when prices remain within the price band, the subscriber-grower will be required to deposit Rs 500 each year into his account. The government will also contribute up to Rs 500 to the member's account.

During years when the average market price falls below the lower bound of the price band, the grower will be permitted to withdraw Rs 1,000. However, in a normal year, that is, when prices remain within a price spectrum band, the grower subscribing to the scheme is not allowed to withdraw any amount from the account.

"As the corpus in the subscriber-growers account grows, they could be allowed to withdraw anywhere between 60 per cent and 75 per cent of the outstanding amount in times of distress," Srinivasan said.