Analysis, Politics - 04-Jan-2021
MoU With Centre on Paddy Procurement Puts Baghel Government in a Bind
The agreement says that since the Chhattisgarh government is giving "incentives over and above the MSP", the procurement under the MSP will be 'restricted'.

MoU With Centre on Paddy Procurement Puts Baghel Government in a Bind

Raipur: Even as the battle at the gates of Delhi rages on over the farm laws, the perennial tussle between the Centre and states over paddy procurement is playing out in central India. In a communiqué to the state government, the Centre indicated on Sunday that it will not procure rice through the Food Corporation of India (FCI) if the states offer “incentives over and above the MSP [minimum support price]”.

In a Memorandum of Understanding signed between the Chhattisgarh government and the FCI, it was decided that the “Central government procurement is restricted to quantity which was procured in the past without bonus/incentive”. In actual terms, the FCI will procure 24 lakh tonnes of rice from the state which is equal to the quantity procured in Raman Singh’s last year in power in 2018.

The Central communiqué also points out that some states – namely Madhya Pradesh and Chhattisgarh – have been paying more than the MSP, which is in contravention of clause 3 of the understanding with the states. The Centre has made it clear that it will pay only the MSP and any incentive over and above it will fall to the share of the state government. In actual terms, it again means that the Centre will pay only Rs 1,865 (for fine paddy) and Rs 1,880 (for super fine paddy) per quintal, which is the MSP for the Kharif season. When milled roughly, two quintals of paddy makes one of rice.

In the same vein, the Centre has pointed out advertisements put out by the state government have promised Rs 2,500 per quintal under the Rajiv Gandhi Nyaya Yojana. It has in fact pointed out that the entire detailed advertisement was published on December 17, 2020. The Rajiv Gandhi Yojana promises to pay Rs 10,000 per acre which comes to about the same as 2500 per quintal as it procures 15 quintals per acre. This the centre considers a contravention of rules of procurement under the MSP guarantee. Thus it has decided to stick to its pre-decided procurement amount of 24 lakh tonne rice.

A farmer plants rice saplings in a paddy field. Photo: Reuters/Munish Sharma

The state’s target this year is to procure 90 lakh tonnes of paddy. Assuming the FCI will be picking up 50 lakh tonnes of it after milling, the state will still be left with a hefty bill to pay for 40 lakh tonnes of paddy, as well as the difference between the MSP and its promised price, which is about Rs 620 per quintal. The state needs about 25 lakh tonnes of paddy for its own use and the public distribution system (PDS) but it does not have the capacity to store more than 30 lakh tonnes.

It does not stop there. The Centre, through the FCI, has insisted that it will not pick up rice supplied in ‘old’ gunny bags. This is a method to safeguard not only against supply of last season’s produce, but needling the state where it hurts. Gunny bags are always in short supply in Chhattisgarh and jute mills have closed down all across the state. It has to be imported from West Bengal and at present, cost Rs 7 per bag. The state has tried to shift the burden on to the farmers by insisting that they pay Rs 15 for the gunny bag or bring the produce in new bags. How will the farmer, already burdened with other worries, bring ‘new’ gunny bags when the state’s marketing federations have not been able to bulk procure them so far? So, he may end up paying Rs 15 up-front or it will be deducted from the MSP.

State government goes on overdrive

The Baghel government, on the other hand, has gone on an overdrive claiming some sort of victory for signing the MoU for 24 lakh tonnes of paddy. Its press release claims that it was achieved after the chief minister spoke to Union minister Piyush Goyal on Sunday and an understanding was struck for procuring 24 lakh tonnes, ignoring the fact that the Centre will neither pay more than the MSP nor will it pick up more than the last time. It is difficult to understand what Baghel is thanking the Centre for.

Finally, custom milling is another area which will require cash input from the state. The millers are paid roughly Rs 150 for each quintal of paddy milled. There are 1,400 rice mills in the state and they usually take six to eight months to complete the cycle. Most of the mills are now burdened with debt because payments for the last cycle have not arrived or arrived late. At any rate, custom milling and storage is a problem which has persisted for the 15 years, so the Baghel government is unlikely to solve it in a jiffy when the procurement has increased by more than 10 lakh tonnes.

The Rajiv Gandhi Nyay Yojana amount for the last Kharif crop has not yet reached the bank accounts of farmers and payments have begun for this cycle. It’s a difficult act for the Baghel government and the Centre is not making it any easy.

An article by Neeraj Mishra...