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HT Explainer: Crisis of paddy prices in Punjab

punjab Updated: Dec 03, 2015 23:37 IST
Gurpreet Singh Nibber
HT Explainer

While arhtiyas (commission agents) and traders made quick gains by playing on price movements, the government has been found wanting in its response.(HT Photo)

Reeling under crop failure and fluctuating yields in the previous kharif and rabi seasons, Punjab farmers finally had something to cheer about. Paddy production in the current kharif season was good. There was no crop loss due to the vagaries of weather and the procurement also set a record. But a section of small and marginal farmers, especially those who had sown early and late varieties of basmati, are feeling cheated due to sharp price fluctuations. While arhtiyas (commission agents) and traders made quick gains by playing on price movements, the government has been found wanting in its response. Hindustan Times Special Correspondent Gurpreet Singh Nibber gets to the crux of the matter.

Why are the farmers feeling cheated?

Paddy price movement proved a bane for the farmers. When the arrival of aromatic basmati variety PUSA 1509 started in mid-September, almost a fortnight before the state government officially began procurement from October 1, it could not fetch any buyers. The going rate was between Rs 900 and Rs 1,000 per quintal against Rs 3,000 in the previous year. A sizeable number of small and marginal farmers, who did not have holding power, sold their produce. Though the variety is not covered under the minimum support price (MSP), the state agencies later bought PUSA 1509 paddy at the MSP (Rs 1,450 per quintal). The farmers who had sold their crop felt duped.

Why did the government step in?

As prices of basmati varieties were lower than the MSP, there was unrest among farmers. Farmers and their organisations requested the government to buy 1509 paddy at the MSP. State agencies only procure coarse-grain paddy for the public distribution system (PDS) and the price of basmati varieties is determined by the market. When the Centre was requested by the governments of Punjab and Haryana on the farmers’ demand, it allowed the procurement of PUSA 1509 to bail out the farmers.

How did commission agents and traders make a killing?

Arhtiyas and traders picked up 1509 paddy at low prices before the state agencies agreed to buy it at the MSP, fetching quick profit of Rs 400 to 500 per quintal within a few weeks. Reports indicated that an estimated 1.5 lakh tonnes of such paddy was pushed by commission agents and traders to state agencies at the MSP. They made a quick gain of Rs 50 crore or so in a short time, triggering allegations of a scam.

What do the farmers want now?

The farmers are feeling helpless, not knowing how to recover their loss for the produce sold to commission agents and traders. As the state agencies have now decided to sell their 1509 paddy in the open market instead of pushing it into PDS, the farmers who sold their produce to government agencies want a share in profit. Basmati prices have surged in the open market in the past 2-3 weeks and are expected to rise further by January 2016.

Did the state government goof up?

Punjab Mandi Board officials deny any scam in paddy purchase, saying that they have kept a record of every grain purchased by traders and commission agents from mid-September to October 1, the day the state agencies started procurement. Quick gains by commission agents and traders who played on price fluctuations show poor planning and lack of prompt response from the state authorities.

What people say

“An inquiry is needed to find out how 1509 paddy purchased by traders and commission agents went into government godowns. A number of farmers have told me this. Also, farmers must be given share in the profit the government is hoping to make by selling the basmati variety in the open market,” says Balbir Singh Rajewal, president, Bhartiya Kisan Union (BKU-Rajewal).

“We are open to scrutiny. I am sure not a single grain of 1509 variety purchased by traders was offered to government agencies for procurement. There has been no scam,” said Deepinder Singh, secretary of the Punjab Mandi Board.

“We are not ruling out that some traders and commission agents first purchased 1509 variety from farmers at a low price and then offered it to government agencies at the MSP,” said Gurdial Singh, director, agriculture.

“The government must adopt some mechanism so that farmers do not feel cheated and are adequately compensated for their produce,” PS Rangi, consultant, Punjab State Farmers’ Commission.

Quick facts

2015 kharif season

28 lakh hectares Area under paddy cultivation in Punjab

7.5 lakh hectares Area under basmati cultivation

180 lakh tonnes Paddy production, including basmati

158 lakh tonnes Total procurement of paddy

8 lakh tonnes Production of basmati varieties

4.5 lakh tonnes 1509 paddy purchased by state agencies