Govt's bungle on food grains eats into exchequer

Lack of long-term planning on Anna Bhagya scheme leads to a staggering loss of Rs 443.70 crore

The delay in taking decisions and the lack of long-term planning in implementing the Anna Bhagya scheme, meant for supplying free food grains to the below poverty line (BPL) families, have resulted in a staggering loss of Rs 443.70 crore to the State exchequer.

Between November 2013 and March 2014, the Food and Civil Supplies Department had procured 2.17 lakh metric tonnes of paddy from farmers under the Minimum Support Price (MSP) scheme, paying about Rs 350 crore. The per quintal cost was Rs 1,600, which includes Rs 300 incentive per quintal given by the State government.

As per the Food Corporation of India (FCI) rules, paddy procured under the MSP has to be hulled and converted into rice within 90 days. The delay in hulling affects the quality of rice and increases the quantity of broken rice. Normally, the rice procured under the MSP is surrendered to the FCI which, in turn, reimburses the cost of procurement as per the MSP. The FCI also supplies rice to all states at Rs three per kg under the Public Distribution System (PDS).

But the department failed to get the hulling done within three months as rice mill owners went on protest demanding increase in the hulling cost. The department had turned down the demand and even refused to hold talks with them. The FCI had fixed Rs 10 per quintal as the hulling cost, official sources in the department said.

Though time was running out for hulling, the department made little efforts to break the deadlock. In July 2014, the FCI even issued a warning to the department that it will not receive the stock from Karnataka if the hulling was delayed. But the department chose to look the other way. It later decided not to surrender the stock to the FCI and make use of it under Anna Bhagya scheme. The government would have got about Rs 285 crore (at MSP of Rs 1,300 per quintal) if it had surrendered the stock to the FCI, the sources said.

After much bargaining with the millers, the department managed to fix Rs 45 as the hulling price per quintal in December 2014. Then the millers came up with another demand for increasing the percentage of Fair Average Quality (FAQ) from 25 to 35 as it was almost a year since the paddy was stocked. The FAQ is calculated based on estimated damaged grains, weeviled grains, foreign matters, natural drainage and moisture content.

The government, which was under pressure to hull the stock, agreed to the demand. Finally, the millers started hulling in January 2015 and the department got 1.53 lakh metric tonnes of rice. The total expenditure incurred was Rs 489.60 crore (at Rs 32 per kg) on the entire process, including the cost of procurement, storage and transportation costs and interest paid towards the loan secured for procuring paddy. In other words, the department had spent Rs 32 per kg of rice, whereas the FCI’s cost is just Rs three per kg. If calculated at Rs 29 as cost of kg of rice, the total loss to the exchequer is estimated at Rs 443.70 crore, the sources said.

That’s not all. Now the department is in a dilemma as to how to make use of the rice, which is not of good quality. For, the government has since April this year reduced the quantum of rice per person under the scheme from 10 kg per person to five kg and introduced supply of ragi and jowar under the scheme. The monthly quota of rice that Karnataka gets from FCI is more than enough for supplying rice under Anna Bhagya.

When contacted, Minister of State for Food and Civil Supplies, Dinesh Gundu Rao, said the department had no other option as the millers went on protest. “We were also under pressure to procure paddy from farmers. However, the rice will not go waste. We will supply it to the above-poverty- line families,” he stated.