Paddy Procurement Crisis in Punjab

October 26, 2024

On October 2024, paddy harvesting in Punjab has slowed. Despite favourable weather, about 90% of the procured crop remains stuck in mandis (grain markets). Private rice millers are refusing to store government paddy, exacerbating the situation. Without immediate intervention, conditions are expected to deteriorate.

About Paddy Procurement

Paddy procurement is a structured process. Each year, the Centre collaborates with state governments and the Food Corporation of India (FCI) to set procurement estimates before the kharif marketing season, which runs from October to September. During this period, state agencies and the FCI buy paddy from farmers at the Minimum Support Price (MSP). The procured paddy is milled, and the resulting rice is stored or distributed under the National Food Security Act (NFSA).

Current Status in Punjab

October 23, 2024, only 37.68 lakh tonnes of paddy has been procured in Punjab. This is lower than the 49 lakh tonnes procured at the same time last year and far below the expected 185 lakh tonnes for the season. The peak procurement period ends in early November. Currently, only 10.55% of the procured paddy has left the mandis, compared to about 50% last year.

Factors Contributing to the Situation

Three main factors are causing the slowdown in procurement:

Lack of Storage Space: Private millers are reluctant to accept government paddy due to insufficient storage in government facilities. This year, Punjab could only move 7 lakh tonnes of the 124 lakh tonnes of milled rice from previous years, leaving little room for new stock.
Controversy Over Hybrid Varieties: Certain privately developed hybrid paddy varieties have flooded the market. Millers report these hybrids yield a lower milling out-turn ratio (OTR), which is below the FCI’s required 67%. The hybrids reportedly yield only 60% to 62%, resulting in financial losses for millers.
Labour and Commission Issues: Arhtiyas (commission agents) are demanding a 2.5% compensation on purchases instead of the fixed Rs 46 per quintal. Mandi labourers are also seeking higher wages. Protests from these groups have further delayed the procurement process.

Impact of Delayed Procurement

The delays have severe consequences:

Only 22% of the paddy crop has been harvested, which is about 20% less than last year. Farmers are delaying harvests due to lack of storage, risking crop quality and market prices.
A shorter window between harvesting paddy and sowing winter wheat could disrupt the agricultural cycle in Punjab. This may increase stubble burning, contributing to air pollution in North India.
Prolonged delays could lead to unrest among farmers, potentially escalating into law and order issues.

Managing the Crisis

To address the crisis, the government must find immediate storage solutions. One option is to utilise the 5,000 rice mills in Punjab. However, this requires addressing millers’ concerns about hybrid OTR trials and seed certification. Improved coordination among procurement agencies, transportation systems, and storage facilities is crucial. Timely payments to arhtiyas and addressing labour demands will also enhance the procurement process. In the long term, Punjab must diversify its crop base to prevent surplus issues in the future.

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