Farmers suffer since FCI can’t store the produce


The CAG audit observations include fraud, misappropriation, violation of rules and regulations, wastage, compromise in quality, inadequate staff, lower than MSP

  • Extra expenditure of  256.73 crore due to shortfall in achievement of procurement targets of paddy by FCI in Punjab and Haryana.
  • Deficiencies in payment of Rs 17,985.49 crore as Minimum Support Price to farmers
  • Doubts about the authenticity of MSP payment
  • MSP certificates not obtained for paddy procured in Punjab, Haryana, Telangana, Andhra Pradesh and Uttar Pradesh
  • Irregular mode of MSP payment by SGAs/FCI
  • Delays in payment of MSP to the farmers
  • Non-Compliance of Food Safety Standards in Punjab and Haryana regions of FCI
  • Issue of 1.84 LMT of old rice without tests for insecticides/pesticides residue
  • Procurement of substandard paddy valuing Rs 9,788.50 crore by SGAs in Punjab
  • Procurement of 191.35 LMT worth Rs 21,115.13 crore paddy without ensuring quality by the Government of Chhattisgarh
  • Procurement of paddy worth Rs 19.56 crore from 2,831 farmers without quality tests in Odisha
  • Payment of Rs 124.23 crore as upgradation charges in Punjab without determining quantities of specified variety of rice and actual expenditure incurred thereon
  • Relaxation in specification without imposition of value cut in Punjab in KMS 2010-11 leading to avoidable subsidy burden of Rs 142.64 crore
  • Inadequate deployment of staff in Mandis to conduct quality checks
  • Storage in open area resulted in damage to paddy worth Rs 179.76 crore in Chhattisgarh
  • Loss due to storage in open area resulted in damage to paddy worth ` 21.28 crore in Bihar
  • Non-availability of adequate and proper storage facilities leading to damage of paddy worth Rs 7.93 crore in Odisha
  • Unsecured paddy worth ` 5,221.09 crore and non-insurance of paddy stock in Chhattisgarh, Odisha, Uttar Pradesh and Andhra Pradesh
  • Prescribed number of staff was not deployed in 617 purchase centres (80 per cent) out of 768 purchase centres. There was an overall shortage of 60 per cent (925 officials were deployed against norms of 2,304).
  • Compensation for standing crops getting damaged which should have been given to farmers by relaxing paddy specifications was actually passed on to the rice millers by relaxing milled rice specifications.



  • As per milling agreements of the respective States, millers are required to furnish security deposit in the form of bank guarantee/post dated cheques/advance rice etc. to the State Governments and paddy is to be given to millers only after obtaining the required security for the paddy
  • The paddy procured at purchase centres were transported to millers’ premises for joint custody to be milled within three days under execution of agreement
  • The District Managers of SGA had not made prior visits to the millers’ premises to ensure adequacy of infrastructure for proper storage of the paddy
  • Separate fencing is required in mills to identify the stock of the respective agency and that of the miller. A prescribed method of First-In-FirstOut (FIFO) of storage should be implemented. Without FIFO, the risk of outward movement of new stock before the old stock resulting in deterioration of food grains because of prolonged storage.
  • If Paddy were to be auctioned from the godowns, it has to be done through proper bidding. Once auctioned, paddy can only be removed with proper authorization/procedure.
  • Procured paddy should be stored by way of Covered and Plinth (CAP), covered with polythene along with provision of drainage at site.
  • Paddy procured by the SGAs need to be safely stored in the premises of the allotted Rice Mills in joint custody with millers. It needs to be ensured that paddy purchased by the SGA is stored and kept under safe custody so that pilferage or damage to stocks is minimised
  • The value cut imposed on paddy is borne by farmers while the value cut on rice is to be borne by SGAs/millers
  • All procurements are to be made by the State Governments/SGAs or FCI as per FAQ specifications.
  • The State Governments/SGAs, however, request from time to time for relaxation in the FAQ specifications due to circumstances arising out of climatic factors/natural calamities like excessive rainfall, flood and drought etc., which adversely affect the quality of food grains produced in a particular region.
  • To reduce hardship to the farmers, relaxations in specifications are agreed for procurement by the GoI on case-to-case basis.
  • Such relaxation for procurement URS are mainly sought regarding the moisture content, color change, percentage increase in broken/damaged grains etc. and depends upon the extent of the crop affected due to natural climatic changes.


Additional Notes:

Every year FCI (Food Corporation of India) and SGAs  (State Govt Agencies) undertake an open-ended procurement of paddy at MSP (Minimum Support price) declared by the GoI for the Central Pool. By this, Government aims to prevent distress sale of paddy/food grains by farmers.

The total mandi arrivals are estimated based on variables like area under cultivation, previous years’ data, etc. In order to facilitate purchases and ensure maximum procurement in mandis, FCI prepares an Action Plan for each KMS. The Action Plan is to help achieve objectives of Procurement Policy, to render effective price support to the farmers and gear up procurement operations.



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