Centre won't procure Chhattisgarh's entire rice produce due to its higher MSP

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SME Times News Bureau | 14 Feb, 2019
The Congress party's electoral promise to raise the procurement rate of paddy at Rs 2,500 per quintal in Chhattisgarh is set to put an additional burden on the state treasury. This is because the Centre has refused to procure the entire produce from the state citing violation of the prescribed norms as the state has set a higher procurement price.

As per rough estimates, Chhattisgarh, which last week presented a Rs 91,542 crore budget for 2019-20, would have to shell out another Rs 11,600 crore for paddy procurement - but has budgeted only Rs 5,000 crore.

According to a Food Ministry official, the Chhattisgarh government has been informed that the Food Corp of India (FCI) would procure about 2.4 million tonnes of rice for the public distribution programmes and 2.4 million tonnes of boiled rice - both at Rs 1,750 per quintal - the Minimum Support Price (MSP) fixed by the Centre.

Total paddy production the state is expected to touch 8 million tonnes this year against 7.1 million tonnes last year. The FCI would procure 4.8 million tonnes, which means the state government will have to bear the entire expense for purchasing the remaining 3.2 million tonnes.

In addition, for the 4.8 million tonnes, it will have to shell out the difference between the state announced rate and the central government's MSP, which comes to an additional Rs 750 per quintal.

"We are procuring 2.4 million tonnes of paddy that will be used for the welfare schemes including the National Food Security Mission. Despite the violation of the norms, we have granted an exemption. We will also procure 2.4 million tonnes of boiled rice, all at the MSP of Rs 1,750 per quintal," said the official.

The Chhattisgarh government has allotted Rs 21,597 crore for the agriculture sector in the 2019-20 budget, earmarking Rs 5,000 for paddy procurement. It's unclear where the remaining Rs 6,600 crore will come from.

Apart from the state's own production, a significant chunk of farmers from adjoining states of Odisha, Madhya Pradesh, Telangana and Maharashtra are likely to sell their paddy produce in Chhattisgarh because of the attractive price it offers.

Even if the state government takes care of the expenses, the central government is concerned over the increase in the paddy acreage and challenges from the World Trade Organisation (WTO) for violating multilateral trading rules due to farm subsidy.

"We are trying to divert a part of cultivation to cereal grains as they are nutritious and require less water. The Chhattisgarh government's decision will not just encourage farmers to go for paddy cultivation but it may lead to farmers from the other states seeking higher rates as well," said a source.