The government is losing thousands of crores while rice mill owners are raking in the moolah, said the Comptroller and Auditor General (CAG) in its report tabled in Parliament on Tuesday.

The report said mill owners are cashing in on lacunae in the government’s policy on the sale of paddy and rice by-products — such as bran, husk and broken rice — left behind after processing paddy for the public distribution system (PDS).

Keeping in mind the food security scenario, the report, titled “Procurement and milling of paddy for the Central pool,” called for immediate fine-tuning of the scheme.

The CAG report, which covered five years (FY2010-FY2014), said non-revision of milling charges since 2005, under-reporting of purchases by millers and sale of by-products to breweries, and edible oil, textile and cosmetic companies at lucrative prices had massively benefited rice millers in Andhra Pradesh, Punjab, Uttar Pradesh, Tamil Nadu, West Bengal, Odisha, Haryana and Chhattisgarh.

Milling charges Milling charges fixed by the government 10 years ago have not been revised. As a result, millers are paying 2005 charges and selling the by-products at high rates, making windfall gains at the cost of farmers and PDS beneficiaries, the report said.

Under the scheme, when a government agency, say Food Corporation of India (FCI), gives 100 kg of paddy for milling for PDS, the miller gives back 68 kg of parboiled rice or 67 kg of raw rice, and is paid ₹87.

But, the miller does not have to pay a single rupee for the 32–33 kg of by-products, which it then sells to various companies at high rates.

For instance, millers in AP, Chhattisgarh, Telangana and UP got excess realisation of ₹3,743 crore during this period, the report said.

“Delay in revising milling charges and poor control over custody of paddy/rice resulted in not only undue gains to rice millers but also large-scale non-delivery of paddy and rice by them,” the CAG report said, adding that there were also concerns on payment of minimum support prices (MSP) to farmers.

The audit followed a complaint by GS Jain, a whistleblower in Odisha, who alleged that close to ₹10,000 crore of black money was being generated everyday as millers were hiding or under-reporting earnings from sale of paddy by-products.

According to a report in The Hindu dated March 26, 2015, the Prime Minister’s Office had forwarded Jain’s complaint to the CAG in February.

The Food Ministry, however, termed the report as “incorrect”, adding that charges for paddy, to be paid to State agencies, are based on the recommendations of the Tariff Commission. 

After examining the Tariff Commission’s report in 2005, milling charges had been fixed at ₹15/quintal for raw rice and ₹25/quintal for par-boiled rice, including transportation charges, it said in a statement.

Fresh study Another study was done in 2009 and its report received in 2012.

“However, in its report, the Commission failed to make any specific recommendation on upward/downward revision of milling charges due to non-availability of sufficient data,” the Ministry said.

It added that the Tariff Commission is conducting a fresh study, and the report is expected later this month.

comment COMMENT NOW