Overflowing godowns, unhappy millers: paddy procurement crisis in Punjab

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Last Updated26/10/2024

Despite favourable weather conditions, the pace of harvesting has slowed down due to almost 90% of the procured crop being stuck in mandis, and private rice millers refusing to store government paddy.

The paddy procurement process in Punjab has faced significant delays and mismanagement this year. Despite favorable weather conditions, harvesting has slowed as nearly 90% of the procured crop remains stuck in mandis, with private rice millers unwilling to store government paddy. This situation, due to logistical, bureaucratic, and political factors, is likely to worsen without prompt intervention.

The Central Government, in consultation with state governments and the Food Corporation of India (FCI), finalizes procurement estimates annually before the kharif marketing season (October to September).
State agencies and the FCI purchase paddy from farmers for the central pool at the Minimum Support Price (MSP). After milling, the rice is transported to government storage facilities, maintained for buffer stock or further distribution under the National Food Security Act (NFSA) and other welfare schemes.

As of October 23, only 37.68 lakh tonnes of paddy has been procured by the FCI from Punjab, significantly below last year's 49 lakh tonnes at the same time and far from the expected 185 lakh tonnes for the season. The peak procurement season ends in the first week of November.
The slow movement of procured paddy from mandis is the biggest concern, with only 10.55% (or 8.7 lakh tonnes) of the paddy leaving the mandis, compared to about half last year.

Three primary factors explain the current procurement challenges:
Lack of Storage Space: Private rice millers are reluctant to accept government paddy due to limited space in government storage facilities. This year's issue stems from the previous year when only 7 lakh tonnes of the 124 lakh tonnes of milled rice were moved out of government go-downs.
Controversy Surrounding Hybrids: Certain privately-developed hybrid varieties have flooded the market, resulting in a lower milling out-turn ratio (OTR) than FCI standards. Millers report that these hybrids yield an OTR of only 60% to 62%, leading to losses of approximately Rs 300 per quintal.
Labour and Commission Agent Demands: Arhtiyas (commission agents) are demanding a 2.5% compensation on crop purchases, contrasting with the fixed remuneration of Rs 46 per quintal. Mandi laborers also seek higher wages, similar to their counterparts in Haryana, further hindering the procurement process.

Only 22% of the paddy crop has been harvested so far, approximately 20% less than last year. Farmers are deliberately delaying harvesting due to the lack of storage space, risking weight loss and quality deterioration of the paddy.
Delays threaten the agricultural cycle, with farmers needing to sow winter wheat in November. A smaller window for this transition could increase stubble fires, exacerbating air pollution in North India.
Prolonged issues may lead to unrest among farmers, potentially resulting in law and order problems for the state.

To address the crisis, the government must urgently find temporary storage solutions, such as utilizing 5,000 rice mills in Punjab. This requires addressing millers’ concerns regarding OTR trials for hybrid varieties and stricter seed certification regulations.
Improved coordination among procurement agencies, transportation networks, and storage facilities, along with timely payments to arhtiyas and addressing labor demands, will enhance the procurement process.