That ’70s show: ‘Levy rice’ to end in October

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New Delhi | Published: February 26, 2015 12:46:11 AM

The government has decided to dispense with “levy rice”, a mandatory system under which rice millers...

rice, Levy rice, Levy rice dispense, Levy rice govt, Levy rice government, Levy rice october, fciAround 5 million tonnes of rice are procured through levy rice annually from millers out of the total grain purchase of around 31 million tonnes.

The government has decided to dispense with “levy rice”, a mandatory system under which rice millers also undertake rice procurement for the public distribution system by buying paddy directly from the farmers, effective the next marketing season starting October.

The system, introduced way back in 1978, is set to be withdrawn as the government felt that a lack of effective supervision often allowed the millers to avoid paying minimum support price (MSP) to farmers and divert the better-quality grain to the open market, if they actually procured. This defeated the purpose of levy rice, that is, to bridge the capacity deficit with government procurement agencies.

It also reckons that once the mandatory purchase of rice by millers is done away with, state procurement agencies could step up their procurement operations. With a high-level committee observing that only 6% of the country’s farmers benefit from the MSP operations, the government is looking at improving the utility of the scheme, while curtailing costly redundancies and focusing on eastern states where the procurement infrastructure is weak.

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Among the major rice-producing states, Punjab and Haryana abolished the levy rice system two years ago, but it is still prevalent in Uttar Pradesh, Uttarakhand, Andhra Pradesh, Telangana and West Bengal. In the 2014-15 marketing season, a sixth of the total rice procurement for PDS in the country was undertaken by millers.

A recent communication from the food ministry to the states said: “With a view to ensure payment of remunerative prices to farmers at MSP or above and to improve outreach of procurement system to the farmgate for their better coverage, it has been decided now that the State Governments should not impose any levy on rice from the millers from October 1st, 2015.”

Around 5 million tonnes of rice are procured through levy rice annually from millers out of the total grain purchase of around 31 million tonnes. The system, although in the form of a diktat and secured a guarantee from the millers that the rice procured them will be given to the PDS operators, was initially meant to enable the millers to use their installed capacities optimally. The levy rice procured used to be in the range of 30-75% for different states years ago.

According to official sources, after the abolition of the levy, government agencies such as Food Corporation of India (FCI) and state government-owned agencies would entirely adopt the custom milled rice (CMR) mode where they would purchase paddy from farmers directly by paying MSP and the give the paddy to millers for conversion into rice. “Procurement through CMR route would ensure payment of MSP to farmers and reduces chances of irregularities in procurement through the levy route,” a FCI official said.

“It is a step in right direction, finally moving away from controlled system to somewhat free markets. The rice millers will have freedom to sell in the market, which should ultimately help farmers getting a better price,” said Ashok Gulati, former chairman, Commission for Agricultural Costs and Prices.

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