Punjab's problem

The Shiromani Akali Dal-Bharatiya Janata Party Government's ham-handed actions have only helped add to the effects of Punjab's worst paddy crop disaster in years.

PRAVEEN SWAMI
in Chandigarh

RUST-BROWN fields filled with paddy stalks that are battered and rotten are the only remaining signs of Punjab's worst crop disaster in years. The rain that hit North India from mid-September is believed to have wiped out upwards of one million tonnes of paddy throughout the State, which is a twelfth of the harvest that was expected. However, the rains were not the only reason for the disaster. Large-scale price rigging by grain traders, aided by a corrupt and inefficient State procurement apparatus, enabled the plundering of desperate farmers. Worst of all, policies put into place by the Shiromani Akali Dal-Bharatiya Janata Party alliance in Punjab seem certain to aggravate the hardship for both farmers and consumers.

At the heart of the paddy crop disaster was a remarkably transparent scam. Procurement of paddy at the mandis (grain markets) began on September 15, a fortnight earlier than usual. Much of the paddy harvest is purchased by the Food Corporation of India (FCI) and State Government organisations, mainly the Food and Supplies Department, the Punjab Warehousing Corporation, Markfed, Punsup, and the Punjab Agro Industries Corporation. These agencies are obliged to purchase all the stocks brought to the mandis at the minimum support price (MSP) fixed by the Union Government. This year, the MSP for high-grade varieties has been pegged at Rs.470 a quintal and for ordinary paddy at Rs.450. The MSP compels private traders to offer higher prices for the produce.

However, as clouds began to build up at the beginning of the procurement season, the procurement agencies held back. Procurement officials failed to show up in mandis all over Punjab. A State Government survey of 24 mandis in Ferozepur district (carried out by the Secretary of the Mandi Board, P.S. Aujla) found that State procurement agencies had not participated in bidding for paddy on half the working days before October 16. At the Kharar mandi, State agencies had picked up just over 100 bags of paddy by October 27 - one in a thousand of those that had arrived. The rain provided the officials with a further excuse. Individual lots of rain-damaged paddy were rejected on the grounds that they did not meet quality standards.

HARDIP PURI
Last fortnight at the Kharar mandi, where individual lots of rain-damaged paddy were rejected on the grounds that they did not meet quality standards.

Conditions at the mandis added to the farmers' desperation. Although the mandis charge a 4 per cent fee on each transaction, very little of that revenue has been invested to create adequate storage facilities. Chandigarh's grain market, for example, has no concrete flooring. When it rained, the mandis were flooded, and this ruined the paddy that was stored. Mandis that had proper floors did not have enough tarpaulin covers. Most of the mandis do not have any kind of drainage. Worse, farmers who had not harvested their crops now faced heavy expenses. Labour contractors began to charge up to Rs.1,500 an acre - three times the normal amount - to harvest rain-sodden fields. Combine harvester owners similarly moved in for the kill, citing the slush on which their machines had to operate as grounds to raise charges.

Large private traders and rice mill owners were the real beneficiaries of the procurement agencies' lethargy and the pathetic state of the mandis. Desperate farmers, who were alarmed at the build-up of clouds before the second round of rain in mid-October, were willing to sell at any price. "The State agencies were nowhere to be seen," said Jaspal Singh, a local farmer. "Although our crop was not damaged, we were willing to sell for what we could get." For four weeks beginning September 15, prices dropped to as low as Rs.300 a quintal. "We have debts to pay," said Jaspal Singh, "and need cash to buy seeds and fertilisers for the next crop." Aujla's survey found that private purchases constituted the bulk of trade, with State agencies standing by. Despite the farmers' complaints, the State Government did not take any action.

Although 24 State procurement officials were suspended and the licences of 128 grain brokers revoked, price manipulation continued to be rampant. At the Kharar mandi on September 27, procurement officials refused to bid for paddy brought by a local farmer, Nek Singh. The pile of paddy appeared identical to others that had been purchased. When this correspondent asked why Nek Singh's paddy was not bought, procurement officials said first that it had been purchased and then that it was "too dirty". Further questioning was met with silence. Until late that evening, the farmer's crop had not been sold. "No records are kept about why individual piles of paddy and wheat are rejected," said Punjab University economist H.S. Shergill. "This is an invitation to corruption, since no official's decision can be challenged."

Corruption of this kind has been a routine procurement season enterprise. This year, however, the individual interests of field officials appear to have coincided with their institutional interests. In 1997, Prime Minister I.K. Gujral sought to expand his political base in Punjab by ordering an unprecedented relaxation in the quality standards of paddy to be procured, again in the wake of rain damage. Where the rules mandated that rice that is 20 per cent broken, 3 per cent damaged and 3 per cent discoloured may be purchased by the FCI from millers, the Gujral Government raised the threshold to 30 per cent broken, 4.5 per cent damaged and 5 per cent discoloured. As much as 340,000 tonnes of what was politely termed "Relaxed Specification Rice" purchased last year by the FCI came from Punjab, enabling millers to profit from rice that would otherwise have commanded poor prices.

HARDIP PURI
Near Ludhiana, a field of damaged paddy that has not been harvested. Rain since mid-September is believed to have wiped out upwards of one million tonnes of the crop throughout the State.

Gujral got his votes, but the rice found few takers. Kerala, West Bengal, Tamil Nadu, Karnataka and Jammu and Kashmir refused to buy the relaxed specification rice from Punjab. Kerala, for example, insisted that its grain needs for the public distribution system (PDS) be met with rice from Andhra Pradesh. Sources told Frontline that enraged over being supplied poor-quality stocks, the northeastern States had refused to buy rice from Punjab years ago. The Central rice pool was thus stuck with huge stocks of rice that could not be sold. The relaxed specification rice took up a large amount of storage space in Punjab, leaving both the FCI and the State procurement agencies under pressure this season. Procurement agencies were, therefore, in no mood to take risks with damaged rice again.

However, as pressure began to build up, the governments of Punjab and Haryana demanded reintroduction of the relaxation that was granted last year. On October 28, Union Food and Civil Supplies Minister Surjit Singh Barnala announced that farmers could bring in paddy with 8 per cent damage for procurement. The quality standards for paddy, which have a direct bearing on the quality of milled rice, currently allow the procurement of stocks that are up to 2 per cent damaged and 3 per cent discoloured and have a moisture content of 18 per cent. Although Barnala's notification had not been formally implemented at the time of writing this article, State procurement agencies in some areas of Punjab and Haryana were reported to be relaxing the quality standards.

In many senses, the Union Government's decision is perplexing. For one, Barnala's decision does not spell out clearly what 8 per cent damage means. Besides, it is a startling deviation from the existing standards. FCI sources told Frontline that if implemented, the notification would lead to the production of rice that would be unfit for consumption. Further, the notification makes no reference to discolouration and moisture content, adding to the confusion. Worst of all, it discusses only paddy, not rice. If the existing rules for rice quality were to stay, as the notification seems to suggest, the paddy that the State procurement agencies will now buy will not be worth processing. "We simply can't relax our procurement norms on the basis of this order," an FCI official said. "It doesn't make any sense."

HARDIP PURI
At the Kharar mandi, where procurement officials refused to bid for paddy brought by Nek Singh (far right), despite the fact that the grain appeared identical to those in other lots that had been purchased.

For their part, millers are alarmed. Seventy per cent of their rice must be sold back to the FCI as a mandatory levy; the FCI sells this to the States for distribution under the PDS. Arthiyas or rural brokers, who provide farmers with credit and negotiate paddy sales, are particularly concerned. "If the quality standards of rice are not relaxed," said Kharar Arthiya Association president Jaswinder Singh, "millers will not be able to sell the paddy they have bought." He said: "We only pay farmers when we are able to sell our stocks. If the FCI refuses to buy our rice, there will be a glut in the market. Prices will collapse, and so will the relationship between the arthiyas and farmers." He said: "In fact, low prices this year will make everybody's life difficult. If the farmers don't get money, they won't pay back their loans or raise money to buy fertilisers. We (arthiyas) loose out on our commissions also. The entire economy has been disrupted."

Although several mandis have gone on strike to press their case, large millers, who are politically influential, see things differently. The Punjab Government has already exempted grain meant for export - a business dominated by fewer than a dozen of the State's largest millers - from being levied for the Central pool. The move, which was made with the stated purpose of boosting demand from millers for damaged paddy, has raised more than a few questions. Many observers believe that it will in fact lead to millers putting back poor quality rice for sale on the market. Conversely, a relaxation in the standards of rice will enable millers to sell rice at relatively higher prices than the FCI's prices, although they would have purchased it at prices well below the MSP. There are also fears that large-scale exports and hoarding, read in the general context of a below-expectation crop, could contribute to a sharp increase in rice prices. Punjab contributed 4.22 million tonnes of rice to the Central pool in 1996-1997, some 38.4 per cent of its entire stock. Large-scale levy evasion by millers could also have serious consequences for consumers of PDS rice nationwide.

Put simply, the SAD-BJP Government's handling of the paddy crop disaster holds out the prospect that millions of PDS-dependent people will buy poor quality rice at high prices while exporters will sell good quality rice at high profits. Curiously, the Union Government appears to have made little effort to consider other options. Economist Abhijit Sen, who is the Chairman of the Commission of Agricultural Costs and Prices, believes that one possibility may be to provide farmers with compensation for damaged crops rather than to relax the standards of quality. Then, poor quality rice held by the FCI could be made available at nominal prices instead of forcing reluctant States to buy it. Whatever economists might say, the fact that large stocks of rice are rotting in grain stores is ethically repugnant.

In the longer term, the crop disaster has focussed attention on the need for long-term solutions such as crop insurance. Farmers in Punjab have also been hit by successive failures of the cotton crop, brought about by worm infestation. More critically, productivity in other rice-growing States needs to be improved in order to ensure that a problem in one region does not lead to a generalised crisis. But most important, this year's crisis has illustrated the fact that food is too serious a business to be left to the market. Without effective state intervention in the acquisition and distribution of food, it is evident that both farmers and consumers will have no defence against the powerful business players who dominate the agrarian market.

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