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Record paddy procurement on cards due to higher MSP, headwinds in exports

CHANDIGARH: Federal procurement of paddy is expected to reach a record high this season with lukewarm demand from private buyers forcing farmers to turn to government agencies to sell their produce at the minimum support price (MSP).

Paddy procurement in the current kharif marketing season till Thursday was 1.4 million tonnes higher than a year ago. As much as 23.5 million tonnes of paddy have been procured in the current season in Punjab, Haryana and Uttar Pradesh. The procurement is yet to gather pace in Andhra Pradesh, Telangana and Chhattisgarh, where harvest begins after mid-November.

The government has raised the MSP for paddy this season, which in turn has pushed up the commodity’s price in the local markets. Meanwhile, exporters, who buy paddy and export rice after processing it, aren’t active in the market, as higher supplies from other producing countries have kept prices under pressure in the international markets.

“Government purchase of paddy for the prevailing kharif marketing season is more than last year and the stock of rice is at an all-time high level,” said Ravinder Pal Singh, executive director for procurement at the Food Corporation of India (FCI). He said the federal agency had rice and paddy stocks of 23.1 million tonnes and 19.6 million tonnes, respectively, as of November 1.

The FCI had procured 66 million tonnes of paddy in the 2018-19 marketing season.

India procures paddy at MSP to ensure adequate income for farmers. The central government had increased the MSP of paddy by 3.7% to Rs 1,815 per quintal for 2019-20. For the A-grade variety, it is Rs 1,835.

The ongoing procurement exercise, which began on October 1, indicates a bumper arrival of the cereal, even as the decline in rice exports is dissuading its commercial purchase. Government procurement is set to spike in the southern states too where private buyers usually dominated the market.

“There is not much scope for a revival in exports of non-basmati rice,” said BV Krishna Rao, president of Rice Exporters Association of India, citing higher MSP in India and supplies from other large producers like China, which he said was “dumping its stocks”. “Farmers will have to rely on government procurement as headwinds in exports will thwart private purchase,” he said.

In Andhra Pradesh—a key contributor of rice for the country’s food security programmes and also exports—procurement is expected to increase by about 35%. “Adequate rains and better utilisation of irrigation facilities have resulted in a good crop of paddy, and procurement could rise to 60 lakh tonnes compared to 44 lakh tonnes last year,” said A Surya Kumari, vice chairman-cum-managing director of the Andhra Pradesh State Civil Supplies Corporation. “Procurement is on the rise as rice exports are hit hard, whereas farmers have grown more cereal due to (the higher) MSP,” she said.

In Punjab, a state with the highest government purchase, total procurement is expected to come close to 17 million tonnes, despite a fall in acreage, according to a senior official of the state’s procurement agency.

In Haryana, procurement has surpassed targets by double digits. “The procurement will continue till 30th November and the final tally is expected to be a record high,” a state official said.

In Uttar Pradesh, procurement had crossed 950,000 tonnes till Tuesday, compared with 600,000 tonnes this time last year. An official said government procurement could top the previous record of 4.85 million tonnes, as farmers have grown more paddy in eastern Uttar Pradesh.

Other paddy-growing states such as Telangana and Chhattisgarh too are expected to report higher government purchase this season.

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