Over 300 rice mills in Bengal shut as losses rise

Lack of demand for parboiled rice, falling prices and shrinking exports have been key reasons for the deteriorating financial condition

While the West Bengal government has been generously doling out subsidised rice in the state, rice mills are turning out to be a source of bad debts of banks.

According to the recent budget document, the state subsidy support on food grains increased almost 12 times from Rs 516 crore in 2010-11 to Rs 6,000 crore in 2015-16.  

“In the last one year, out of 1,200 rice mills, nearly 320 have closed down, while about 200-250 mills are source of non-performing asset for banks.  The total NPA from rice mills in the state could be around Rs 250 crore-Rs 300 crore,” said  DN Mondol, President of the Bengal Rice Mills Association.

Lack of demand for parboiled rice, falling prices and shrinking exports have been the keys reasons for the deteriorating financial condition of rice mills in the state. At present, rice mills are working at around one-fourth of its capacity.

West Bengal mainly produces parboiled rice, but over the years its consumption has declined substantially as rising income has led a demand shift towards better quality rice. Moreover, earlier, around three million tonnes of rice from West Bengal was exported annually to Bangladesh. This has come down to nearly 700,000 tonnes.

In the rural areas, the key market for parboiled rice, demand for rice from open market has shrunk because of wide availability of rice at Rs 2 per kg under government subsidy schemes.  West Bengal produces 15 million tonnes of rice every year. Of this, the state government procures 4.5 million tonnes through the levy mechanism.  Under the levy mechanism, the government procures paddy from farmers at Rs 1,410 per quintal. The government gives Rs  20 for milling a quintal of paddy. However, the mills complain that the average cost of milling comes at around Rs 80 per quintal.  

Also, while the cost of producing one quintal of rice for mills comes at around Rs 2,100 per quintal, the market price is close to Rs 1,700 per quintal. Thus, every quintal, rice mills incur a loss of around Rs  400 per quintal.

Under the Uday Khadya Sathi scheme, the number of beneficiaries receiving foodgrain at Rs 2 per kg increased from nearly 32 million to over 80 million in West Bengal in the last five years.