Unpaid paddy procurement dues leave Kerala farmers in dire straits
Dearth of bank credit has placed many farmers in a precarious financial situation, leading several of them to abstain from participating in the upcoming cultivation season. Representational image shows paddy farmers in Kerala | iStock

Unpaid paddy procurement dues leave Kerala farmers in dire straits

Mounting debt of Rs 637 crore of state civil supply corporation delays payment to farmers; banks shy away from extending credit

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The Kerala government is in the dock – over its failure to pay farmers after procuring paddy from them.

On August 28, at the Kalamassery Karshikotsavam (agriculture festival) in Ernakulam, Malayalam actor Jayasurya sparked a huge row by publicly expressing his criticism of the state government.

He pointed out the government's failure to compensate the farmers for their paddy procurement, using his actor friend Krishnaprasad, who is also a thriving farmer, as an example.

"I would like to bring to the minister's attention the challenges that farmers are confronting. My friend Krishnaprasad depends on farming for his livelihood. He handed over the rice he cultivated to Supplyco five or six months ago but hasn't received payment yet. As a symbol of solidarity, the farmers are currently staging a hunger strike during Onam. I'm speaking on their behalf," he said.

When Jayasurya made these remarks while sharing the stage with agriculture minister P Prasad and industries minister P Rajeev, it stirred up a commotion.

Massive row

Although Rajeev, who spoke after the actor, clarified the state government's position by highlighting that the actual problem lies in the delay of funds from the Union government, his explanation did not gain as much attention as Jayasurya's speech, which rapidly spread through traditional media and social platforms.

The opposition parties rallied behind the actor and started pushing the government into the dock. Farmers organisations who were already on strike joined the fray, prompting the government to address Jayasurya's concerns.

The following day, the agriculture minister clarified that there were no outstanding payments left for Krishnaprasad, the actor-farmer whom Jayasurya cited as an example. Krishnaprasad's dues had been settled in June 2023.

"It wasn't really about me, to be honest. There are hundreds of farmers who still haven't received their procurement payments. Jayasurya might have been addressing their plight. Even though I have received the amount, it came through a government-facilitated loan. This isn't how it should ideally work," remarked Krishnaprasad.

The appearance of these actors was viewed as a conspiracy by the state government and the leftist parties. They noted that Krishnaprasad and his family had affiliations with the BJP and that his brother was a municipal councillor of the BJP.

“Actor Jayasurya was acting out on a script but it flopped,” the agriculture minister said.

Minister’s admission

However, according to a statement made by Civil Supplies Minister GR Anil in the Assembly, there was an outstanding amount of Rs 433 crore owed to paddy farmers in the state as on August 10.

He explained that paddy amounting to Rs 2,070.71 crore had been acquired and, as of July 31, Rs 1,637.73 crore had been distributed.

Since 1997-98, the paddy procurement has been in operation in Kerala as a collaborative effort between the Central and state governments.

The State Civil Supplies Corporation (Supplyco) directly acquires paddy from farmers and deposits the payment into their bank accounts. Subsequently, the agency processes the paddy into rice, which is distributed through the Public Distribution System (PDS) or ration shops.

The quantity of rice supplied by Supplyco to the state's PDS system is considered part of the state's allocated food grain quota. Consequently, Kerala obtains its food grain supplies from the Food Corporation of India (FCI), a government-established and operated body.

Kerala procurement

This procurement, storage and distribution of food grains by the FCI and state agencies occur after accounting for the rice supplied by Supplyco.

“The paddy procurement rate comprises two elements, the minimum support price (MSP), established by the Central government based on the Commission for Agriculture Cost and Price's recommendations, and secondly, the bonus incentive provided by the state government.

“Presently, in Kerala, the MSP for a kilogram of paddy stands at Rs 20.40, with an additional state incentive bonus of Rs 7.80 per kilogram. During the previous 2022-23 season, the government set the paddy price at Rs 28.20 per kilogram. No other state in the country gives this incentive to the farmers, explained agriculture minister P Prasad.

“The state government can request the central government's portion of the procurement price, namely the minimum support price, only once the processed paddy is disbursed as rice through Kerala's PDS network, a process that typically spans five to six months,” added the minister.

According to the minister, the Union government has not fulfilled its obligation to provide its portion of the paddy procurement price to Supplyco. At present, it has an outstanding debt of Rs 637 crore to the state agency.

Bank issues

This lack of funds has prevented Supplyco from repaying the loans taken by farmers. Compounding the issue, banks have been hesitant to grant additional loans to the state entity due to concerns about its borrowing limits.

Furthermore, the Kerala government has also been unable to allocate funds to Supplyco due to budgetary constraints.

The opposition parties do not buy into this explanation. The KPCC president, who came in support of actor Jayasurya, blasted the state government for inefficiency.

“The state government was providing false information to the public regarding payments to paddy farmers. The government's assertion that the Centre owes Kerala a significant amount of money as its portion of the procurement price as untrue,” he said.

“The Centre typically disburses its share when the state submits the season's final details which this government failed to provide,” he added.

Congress charge

He said that once the state furnishes the information for the previous season, the Centre will release the corresponding amount. When farmers in the state were struggling, the government was engaged in extravagant spending, alleged the Congress leader.

“Kerala has failed to furnish essential project reports to the Centre, detailing how the allocated funds have been utilized and the advantages experienced by farmers,” said Sobha Karandalaje, the Union minster for state for agriculture.

The minister contended that the absence of transparency was exacerbating the concerns of farmers in the state.

To circumvent the MSP payment delay, Supplyco has introduced a loan program for farmers. When farmers deliver their paddy for procurement, the agency provides them with paddy receipt sheets (PRS). These receipts can be presented to banks to secure loans equivalent to the paddy's purchase price.

Eventually, Supplyco reimburses the loan amount with interest once the Central government allocates its share of the MSP to the state.

“In the previous month, the state government established a consortium of banks, which included SBI, Federal Bank and Canara Bank, to pool funds to compensate the farmers. However, there was a delay on the banks' part in ensuring the punctual transfer of funds to the farmers,” admitted the minister.

Left complaint

“The banks did not act in a fair way as they had promised,” added the minister.

While Supplyco ultimately settles the loans acquired by farmers by using their PRS as collateral, it is a fact that the delay in repayment has an adverse impact on the credit scores of these farmers. Additionally, farmers are experiencing a delay in receiving funds from banks after presenting their PRS.

This has placed many farmers in a precarious financial situation, leading several of them to abstain from participating in the upcoming cultivation season.

After the government’s intervention in the matter, the banks have disbursed Rs. 72.37 crores among 2,830 famers in the last couple of days. This was after a fresh agreement signed between the consortium of banks and Supplyco.

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