The government procures about 300,000 tonnes of onions every year under the PSF, a scheme aimed at curbing price fluctuations of basic agricultural commodities such as onions, potatoes and pulses, for distribution at a price below the market price.
A study conducted by the Department of Consumer Affairs in collaboration with Arcus Policy Research shows that onion retail price volatility fell by 24%, while consumer prices remained 36-45% below normal market rates during the August-December selling months, even though PSF procures barely 1-2% of national production.
The study analyzed the PSF impact over the five months of sales till December and covers two financial years – FY24 and FY25. The government sold onions to ₹2,500 per cent, while the retail price averaged approx ₹4,557 per quintal — a difference of about 45% — during the five months of liquidation in 2023-24.
The price for liquidation was similar ₹3,500 per cent compared to the average retail price ₹5,473 per quintal — a difference of about 36% — in 2024-25.
The study was submitted to the Ministry of Consumer Affairs earlier this month, which uploaded it to the Ministry of Consumer Affairs website.
The current findings reaffirm that PSF interventions have become more structured and predictable over time, making the fund a central tool in India’s price stabilization framework, two government officials told Mint, asking not to be named.
A PSF has been allocated for the period 2025-2026 ₹4,020 crore under the budget of the Ministry of Consumer Affairs. In 2024-25 (revised estimates), the allocation to PSF was approx ₹7,000 million crowns. The PSF corpus saw a cumulative budget allocation from 2014–15 to 2024–25 of approx. ₹37,489.15 million crowns.
Regarding the relatively lower allocation for FY26, the first of the two officials mentioned above said, “The ministry also earns revenue through the sale of onions and pulses procured under the PSF program and this is used to fund procurement for the next season.
“We are getting enough revenue to procure commodities,” this official added.
The study’s findings suggest that the PSF functions less as a procurement-based system and more as a market signal that shapes the behavior of traders and farmers throughout the value chain.
Onion production was 22,316.87 million tonnes in FY23, 23,302.08 million tonnes in FY24 and 242.12 million tonnes in FY24.
Onion prices were subdued in November due to abundant rabi stocks and the onset of the fresh kharif crop. However, prices are expected to rise due to the delayed kharif harvest and lower yields. Analysts said this reinforces the need for calibrated buffer releases during lean periods.
“Prices may see some strengthening, likely supported by estimated lower kharif production and improvement in export momentum, especially with renewed imports from Bangladesh and steady demand from Sri Lanka, Singapore, Kuwait and Vietnam,” said Pushan Sharma, director of Crisil Intelligence.
Reforms, including faster payments to farmers, two-season procurement, long-distance rail transport and wider disposal channels, have changed incentives across markets, the study says. Farmers received prices 3-19% higher than mandi rates and were paid within three days of purchase, improving liquidity and reducing distress sales, the company said.
“The payment cycle for farmers has been reduced from 10 days to 3 days, the procurement price offered under the scheme has been 11% higher and the farmers’ share of the consumer rupee has increased by 9%,” the ministry’s evaluation report said. The program directly benefited 18,773 farmers and created an estimated 670,000 indirect beneficiaries across the value chain.
The growth metrics of PSF’s onion operation show a sharp expansion in scope and impact. Onion purchase has increased from 0.14,000 tonnes in 2018 to 300,000 tonnes in 2025. The number of farmers benefiting from the scheme has also increased significantly. In 2018, only 578 farmers benefited directly and 380,000 indirectly. For consumers, the crackdown resulted in retail prices being about 40% lower than prevailing market prices during liquidation operations.
The government through the National Agricultural Cooperative Marketing Federation of India Ltd (NAFED) and the National Cooperative Consumers’ Federation of India Ltd (NCCF) has procured about 300,000 tonnes of onions for the bumper crop in 2024-25. As of mid-2025, the two agencies have procured over 200,000 tonnes of rabi onion, mainly from Maharashtra, towards a target of 300,000 tonnes in FY26. The procurement is under the Price Stabilization Fund (PSF) programme.
Mint had earlier reported on November 27 that due to the increase in tomato prices in the retail market, the government had started selling discounted tomatoes at ₹52 per kg when market prices rose to ₹80 per kg.
Similarly, in 2024, the government intervened twice to curb rising tomato prices. The first operation took place in July when retail rates were touched ₹80–100 per kg, with discounted tomatoes sold at ₹60 per kg. A second round of interventions followed in October, with average market prices hovering around ₹100 per kg and subsidized tomatoes were available at ₹65 per kg.
Earlier, in 2023, tomato prices had surged by ₹250 ₹250 marks, prompting the government to sell tomatoes for ₹90 per kg in August. As market prices later cooled, the subsidized rate was reduced to ₹40 per kg.
According to the report, the introduction of longer-distance rail transport cut onion delivery times in half, reduced transport losses by 10% and reduced transport costs by 17%. The use of data and digital tools further improved operations, with onion recovery rates increasing by 17% and inventory at consumer centers becoming more predictable.
The PSF scheme now covers 20 states where it has liquidation operations, with distribution channels diversified across e-commerce platforms, retail stores, Kendriya Bhandar stores and mobile vans.
However, the PSF framework is not new. The Price Stabilization Fund was introduced in India in 2003 for plantation crops (tea, coffee, rubber, tobacco) by the Ministry of Commerce and later expanded to include agro-horticultural commodities (onions, pulses, potatoes) in 2014–15. These commodities are to be procured from farmers/farmer associations at harvest time and stored for regulated release during the lean season to help bring down their prices.
The PSF scheme has now been merged with other components of the Ministry of Agriculture and Farmer Welfare scheme. Therefore, PSF is now one of the components of the umbrella scheme of PM-AASHA (Pradhan Mantri Annadata Aay Sanrakshan Abhiyan).
However, the PSF program will continue to be managed by the Ministry of Consumer Affairs for price stabilization interventions and day-to-day price monitoring.
PSF-financed procurement of pulses has been repeatedly used to restrain the prices of tur, urad and khan during supply shocks, creating a second large reserve alongside onions.
Economists said the results of the onion assessment are consistent with global evidence that small, predictable interventions can help stabilize volatile agricultural markets.
“The concept of an Agricultural Price Stabilization Fund is very similar to market making. This stabilizes prices for consumers and ensures stable prices for farmers and even higher returns from production. Evidence from various markets across commodities and instruments clearly shows that the market economy applies to agriculture as well. So the results are not surprising,” said Aditya Sesh, Chartered Accountant, Economist and Farmer, Ministry of Agriculture, Member of the Expert Committee on Agriculture.
“The next step should be for the government to legalize, regulate and encourage market creation by private organizations and individuals so that the entire burden does not fall on the government,” Sesh added.
