Rise in paddy MSP prompts West Bengal to increase bank guarantee amount for rice mills

There are also loopholes in the system of supplying paddy to the mills, requiring checks, a district controller of food on the condition of anonymity said.

With the Centre increasing the minimum support price (MSP) for paddy at Rs 1,940 a quintal for the current Kharif marketing season (KMS), the West Bengal government’s move to increase the amount of bank guarantee (BG) by 10% for rice millers have put many to a quandary.

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While a section of rice millers says that the increase in BG would put pressure on their working capital, Bengal Rice Mill Association is of the view that the increase wouldn’t matter since the government gives paddy for milling worth much higher than the BG. The 10% increase is commensurate with the higher MSP.

Paddy MSP during the last KMS was `1,868 per quintal and the increase in MSP has been a little over 3%. West Bengal has been giving an additional `20 above the MSP as transport charges, thus leading to an overall increase in the cost of procurement.

According to a state food department official, while the state forked out Rs 8,460 crore for procuring 46 lakh tonnes of paddy last KMS, the state is yet to get 39,000 tonnes of customed milled rice (CMR) out of the total 31.28 lakh tonnes of CMR it is supposed to get from the 1,100 odd rice mills in the state.

The state’s entire procurement is directed towards benefitting the marginal farmers and supplying the food grain to the poor people of the state either at free of cost or at a very low price under various state-sponsored schemes. So, any leakage would hamper the objective. The government during the last KMS had enrolled 72 lakh farmers bringing down each farmer procurement from a maximum of 9 tonnes to 4.5 tonnes. This had allowed more farmers to sell at MSP, which otherwise would have left them to depend on the volatile open market, Rathin Ghosh, West Bengal’s food and supplies minister said.

The state produces around 150-160 lakh tonnes of paddy, of which the state procures between 30% and 34%.
The state during the current KMS (October-September) has targeted procuring 49 lakh tonnes of paddy, which will result in 33 lakh tonnes of CMR. The procurement would cost the state Rs 9,604 crore, a food department official said.

“This means a rice mill getting 5000 tonnes of paddy for milling would get paddy worth Rs 9.8 crore against a bank guarantee of Rs 1.6 crore. So, the 10% increase in BG shouldn’t affect any mill,” Shishir Kumar Choudhury, president Bengal Rice Mill Association, said.

A rice mill receiving paddy of up to 500 tonnes requires to pay a BG of Rs 16 lakh this KMS. Although the average milling capacity of West Bengal rice mills is 40 tonnes a day only mills doing 5000 tonnes and above are considered to be large rice mills. For large rice mills, a 10% increase in BG against a 3% increase in MSP won’t matter but for small mills, it would put a lot of pressure, Sudesh Beriwal, a rice mill owner said adding there are lapses in supplying CMR from the large rice mill owners but the pressure has come on the small ones.

There are contentions over the paddy: rice milling ratio of 68%, which the rice millers in West Bengal have long been demanding at 63%. There are also loopholes in the system of supplying paddy to the mills, requiring checks, a district controller of food on the condition of anonymity said.