The Centre is likely to save over ₹24,000 crore or more than 12 per cent of this year’s subsidy dues to the Food Corporation of India (FCI) if it is able to check recycling of grains sold through ration shops getting into the central pool through regular procurement channels.

The Centre plans to procure from five major States — Punjab, Haryana, Andhra Pradesh, Telangana and Odisha — nearly 7.2 million tonnes (mt) more rice than their combined marketable surplus of 20.61 mt, according to a Food Ministry source. The marketable surplus of these States varies between 50 and 75 per cent of their respective production in the kharif season.

“Based on the consumption, the marketable surplus is estimated and there cannot be procurement beyond the quantity available in the market. It is a matter of investigation to find out the source of grain even though the government has made it mandatory to pay the farmers through their bank accounts,” the official said.

Plugging leakages

Given the current acquisition cost of ₹32/kg in terms of rice, the total savings would be ₹24,155 crore, the official added.

The leakages can be plugged by reforming the custom milled rice (CMR) system, experts said. In Andhra Pradesh, Telangana, Punjab, Haryana, Odisha, Chhattisgarh, Madhya Pradesh, Tamil Nadu, Maharashtra, Uttar Pradesh and Bihar, paddy is mainly procured by State governments and their agencies. After getting the paddy milled from rice millers, the grain comes to the central pool stock, managed by the FCI.

The Centre has pruned procurement target of rice by about 10 mt for 2021-22 (October-September) after purchasing nearly half the output last year.

Rice production has been estimated at 122.27 mt for 2020-21 crop year (July-June). The procurement in terms of rice touched a record 49.1 per cent of the output in 2020-21, up from 38.1 per cent in 2018-19 amid farmers’ protest against the Centre’s three farm laws which were repealed on Friday.

Already, rice procurement in Telangana has become a political issue as the target for the State has been cut to 4 mt for 2021-22, from last year’s actual purchase of 9.45 mt.

“The biggest drawback of the current procurement system is that it has left out many farmers from receiving the benefits of MSP in States such as West Bengal, Uttar Pradesh, Assam and Tamil Nadu.

The procurement target in these States is below their respective marketable surplus,” said a former FCI Chairman. Balancing the procurement in States is a political exercise as the government has budgetary constraint in increasing the purchases, he said.

As the government shifted liabilities on account of the NSSF loan for FCI to the Budget (for FY22), apart from free distribution of additional foodgrains for eight months, the food subsidy outgo rose to ₹4.23-lakh crore in the RE of 2020-21 from ₹1.16-lakh crore (BE). The food subsidy has been estimated at ₹2.42-lakh crore for 2021-22 (BE), of which FCI alone may require about ₹1.93-lakh crore.