Why the Kerala govt has failed to disburse paddy procurement price to thousands of farmers

The quantity of rice being supplied by the Supplyco into the state PDS system is considered as part of the state’s share of food grains. Hence, Kerala lifts its foodgrains stock from the Food Corporation of India — a statutory body created and run by the Government of India. It procures, stores, and distribute foodgrains along with agencies of the state governments — only after deducting the supply of rice from the Supplyco.

Price of paddy procurement

The paddy procurement price is declared by the state government. It has two components: first, the minimum support price (MSP) decided by the Central Government as per the recommendation of the Commission for Agriculture Cost and Price; Second, the incentive bonus given by the state government.

Currently, in Kerala, the MSP for one kg of paddy is Rs 20.40 and the state incentive bonus is Rs 7.80 per kg. In the last season of 2022-23, the price of paddy fixed by the government was Rs 28.20 per kg.

The payment system in Kerala

The procurement of paddy begins in September. The state Government can make its claim for the centre’s share of procurement price, i.e. minimum support price, only after the processed paddy is distributed as rice through the PDS network in Kerala, which takes five to six months.

To avoid this delay in the MSP payment, Supplyco has a loan scheme for farmers. The agency issues paddy receipt sheets (PRS) to the farmers at the time of procurement. Farmers can show these receipts with banks to get loans, which are equal to the price of the procured paddy. Ultimately, Supplyco would repay the loan amount with interest when the central government allots its share of MSP to the state.

Why the delay in paying farmers

The centre government has failed pay its share of paddy procurement price to Supplyco. As of now, it owes about Rs 637 crore to the state agency. Due to the lack of funds, Supplyco hasn’t been able to return the loans taken by the farmers. To make matters worse, banks have been reluctant to extend loans to the state entity considering its borrowing limit. Moreover, Kerala’s government has also not been able to provide funds to Supplyco because of budgetary constraints.

Last month, the state government formed a consortium of banks comprising SBI, Federal Bank and Canara Bank, to mobilize the money to pay the farmers. There was a delay on the part of the banks to ensure timely transfer of money to the farmers.

How delay affects farmers

Although Supplyco repays the loans availed by farmers after pledging PRS with the banks, the delay in repayment negatively affects the SIBIL score of farmers. Farmer are also facing a delay in getting money from banks after submitting the PRS. This left many farmers in dire straits, forcing many to keep away from the next season of cultivation.

Supplyco has procured 7,31,184 tonnes of paddy until July 31 this season from 2.50 lakh farmers across the state. They should have been paid a total amount of Rs 2,070.71 crore. However, only Rs 1,820.71 crore has been disbursed so far. Around 23,000 farmers are yet to get the amount of the paddy procured by Supplyco.