M A I N   N E W S

The economics of paddy crisis
By Nirmal Sandhu
Tribune News Service

CHANDIGARH: The current paddy crisis can be eased, or its recurrence avoided, if a little economic thinking is done and right technology applied to cut costs, particularly by the Food Corporation of India. The FCI buys paddy at Rs 545 a quintal, or cheaper depending on its quality, and the government resells it at about Rs 900 a quintal through the public distribution system (PDS) — almost at double the minimum support price — covering its huge costs and passing the burden on to the consumer, besides putting the grain beyond the reach of the very poor.

When any commodity is produced in surplus, consumers start paying greater attention to its quality, as is now happening in the case of paddy. Hence, the FCI’s insistence on adherence to quality specifications. Relatively poor quality of paddy and high costs of its production, handling and transportation have made it unviable in the international market. India offers its rice at $ 230 a tonne, while countries like the USA and Thailand quote a much lower price of $195.

An expert’s view Mechanise paddy operations at all levels Give farmers incentives to store foodgrains The FCI must cut add-on costs More silos an urgent necessity. High costs have made Indian rice unviable in the international market

The need, therefore, is to cut the costs at all levels. A farmer brings paddy to the mandi in bulk and unloads it. The FCI provides gunny bags, employs labour to clean up paddy and fill up the bags. According to Mr DP Reddy, Senior Regional Manager, three kinds of bags — of 50 kg, 75 kg and 90 kg capacity — are used for carrying paddy. A 50 kg-capacity bag costs Rs 22. One can well imagine how much money is spent on bags only.

Under a new law passed in keeping with the ILO regulations, only bags of 50 kg capacity should be used. This means lower burden on the labourer and higher cost for the government.

Paddy bags are loaded onto trucks (remember loading charges) and transported (transportation costs) to godowns where the stocks are unloaded. Grain stocks are again loaded, transported and unloaded in wagons for transportation to other states. The whole process is repeated at the other end.

The add-on costs involved are huge and can be significantly reduced if the whole system is technology-driven, asserts Mr Chander Mohan, the technology wizard who scripted the success story of Punjab Tractors Limited.

The world over the system of bulk foodgrain handling is mechanised. He suggests more silos should be constructed and foodgrains moved through ‘‘vacum loading’’. He strongly opposes the use of jute bags. In Punjab there are silos at Mandi Gobindgarh, Jagraon and Moga, but there too foodgrains are ‘‘bagged’’ and ‘‘debagged’’, as Mr Reddy puts it.

Mr Chander Mohan offers to help build machinery — commonly available abroad — which sucks in foodgrains and can fill up or empty silos. For transportation of foodgrains he suggests the use of wagons and tankers carrying petroleum products which go empty on their return journey. Abroad, ships carrying petroleum products are used for transporting foodgrains at much lower costs.

Besides, says Mr Chander Mohan, farmers should be given incentives to build their own storage facilities. The government can fix different minimum support prices for different periods. If the paddy MSP is Rs 540 a quintal in October, the peak period, it can be raised, say to Rs 570 in December, Rs 590 in March and so on. All over the world farmers have their own storage facilities, he adds.