Procurement glut: short bags, full godowns and two reluctant millers
A procurement centre in a rice-surplus district is sanctioned to buy 12,000 MT of paddy in a 25-day window. On day 8, 6,800 MT has arrived but only 2,900 MT has been accepted: the centre's covered capacity is 3,000 MT and the overflow is stacked on an open plinth under tarpaulin. Against an indent for 2.4 lakh jute bags, only 1.6 lakh have been delivered. Two local millers will take paddy for custom milling at 66% outturn, but will lift no more than 200 MT per day each and want delivery at their own gate. The district agency proposes suspending procurement for three days to clear the backlog, while farmers queue with paddy at 17.5-18.5% moisture. A nearby FCI depot has 4,000 MT of covered space free, 140 km away, at a road freight of ₹850 per MT. The MSP is ₹2,300 per quintal and the milling outturn norm is 66%.
1. Quantify the storage and bag gap and evaluate the proposal to suspend procurement for three days.
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The numbers.
- Covered space: 3,000 MT capacity, 2,900 MT used, so 100 MT free.
- Bags: the indent of 2.4 lakh bags matches 12,000 MT at 50 kg per bag. Receipts of 1.6 lakh cover 8,000 MT, leaving a shortfall of 0.8 lakh bags, that is 4,000 MT that cannot be bagged at all.
- Remaining sanction: 12,000 − 6,800 = 5,200 MT. At the current arrival rate of 850 MT a day, that balance arrives in about six days, not seventeen.
- Miller lift: 400 MT a day combined, or 2,800 MT a week.
The binding constraint is bags, not godown space. Even with the covered space completely freed, 4,000 MT of the remaining 5,200 MT has nothing to go into. Three days of suspension would turn away roughly 2,550 MT of paddy and several hundred farmers, would put the sanctioned target at risk, and would not produce a single extra bag or square metre. It treats the queue, not the cause.
Reject the suspension. The defensible sequence is: emergency transfer or local purchase of bags under the rate contract; push 2,800 MT straight to the two millers, which converts paddy into rice at roughly two-thirds of the weight and eases the space problem as well as the bag problem; and divert the remainder to the FCI depot 140 km away. Suspend intake only as a last resort, and then only for grain above the moisture limit, not for all arrivals.
2. Farmers are bringing paddy at 17.5-18.5% moisture. What is the correct decision at the gate, and how does moisture interact with the 66% outturn?
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At the gate. The FAQ moisture for paddy in the kharif marketing season is 17%. Grain above that is outside specification and cannot simply be accepted as FAQ against the MSP. But a flat refusal at the tail of a long queue is neither fair nor practical, and the centre has a role in drying, not only in accepting or rejecting.
- Record moisture for every lot on the gate slip.
- Accept up to the permissible limit, applying the prescribed price cut where the state specification allows a relaxation; do not accept 18.5% grain as if it were FAQ.
- For the rest, offer the drying floor or the millers' driers and accept after drying. The cost of drying is far below the cost of a rejected, heated lot.
- Never bag and stack 18% paddy under tarpaulin. It will heat within two or three days, and the first thing the depot will smell is the loss.
The outturn trap. The 66% outturn norm is a ratio on paddy at the specified moisture. If the centre hands over 100 MT of 18.5% paddy and settles on the wet weight, the dry matter in that consignment is only 81.5 MT, equivalent to about 94.8 MT of 14%-moisture paddy. The miller is therefore being asked to deliver 66 MT of rice out of material that would normally yield 62.6 MT, and will resist, delay or deliver poor-quality rice and bran. Settle on a moisture-adjusted weight, not the wet weight, and the 66% norm remains workable for both sides.
3. Rank these four options and defend your first choice with numbers: (i) suspend procurement for three days, (ii) buy 0.8 lakh bags at a 20% premium under emergent purchase, (iii) divert 4,000 MT to the FCI depot at ₹850 per MT, (iv) push paddy to the two millers on their terms at their gate.
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Ranking: (ii) and (iv) together first, (iii) as the fallback, (i) last.
Why bags come first. The 0.8 lakh bag gap is exactly 4,000 MT of paddy, worth 4,000 × ₹23,000 = ₹9.2 crore at the MSP. The premium on 0.8 lakh bags is a fraction of one per cent of that exposure, and bags are a consumable that would have been bought anyway; the premium is the only incremental cost. It is also the only option that directly converts into usable capacity, and it needs a written emergent-purchase sanction rather than a verbal instruction.
Why the millers come next, but not on their terms. At 400 MT a day they can absorb 2,800 MT in a week, and every tonne milled frees bag and plinth space and returns rice at about two-thirds of the weight. Delivery at their gate shifts the transport cost to the Corporation for no commercial reason; insist on ex-centre delivery, or deduct the freight from the milling charge.
Why diversion is the fallback, not the default. 4,000 MT at ₹850 per MT is ₹34 lakh, about 3.7% of the value of the grain. That is a real cost, but it is insurance against a total loss on a tarpaulin plinth through the monsoon, and it is the right call for whatever remains after bags and millers have been exhausted.
Why suspension is last. It costs the farmer, costs the target, and buys nothing that the other three options do not buy more cheaply.