The fund will have an annual allocation of Rs 150 crore for a period of five years, and will be over and above the collections from the cess levied on these items by the tea, coffee, rubber and spices boards for developmental purposes.

The move is aimed at avoiding what a senior commerce ministry official termed as "ad hoc" interventions by the state agencies to bring about price stability in these commodities.

In the case of natural rubber, for instance, the State Trading Corporation has been pressed into action by the government to purchase the commodity and thereby provide relief to the farmers. He explained that the fund will be operated in a manner that farmers are benefitted during periods of bumper harvests and bad crops. In case of the former, farmers will have to deposit extra realisations that are beyond the price levels notified by the government.

But during bad crops, money from the fund will be released to the growers hit by distress sales. The main source of revenue for the tea, coffee and spices boards is by way of cess on these products and through use of the proceeds for developmental activities. In case of natural rubber, an excise duty is levied for the same purpose.

The cess is 30 paise a kg on tea, Rs 50 a quintal on coffee, while the excise duty on natural rubber is Rs 1.50 a kg.