Mounting rice stocks raise questions over subsidy-fuelled paddy expansion

As Odisha battles procurement protests and Kerala defends bonuses, mounting rice stocks intensify questions over subsidy-fuelled paddy expansion

Last week, a farmer in Odisha’s Kendrapara district died of a heart attack at his home after allegedly spending four days outside a rice mill attempting to sell his paddy. While an investigation is on, his family said the 53-year-old was distressed by delays in procurement despite having received a token, a digital mechanism used for sales at mandis through primary agriculture cooperative societies (PACS).

 

The incident came to the fore amid sustained protests by Opposition parties alleging widespread mismanagement in paddy procurement across Odisha.  More than 70 per cent of the state’s population depends on agriculture, with paddy accounting for 44 per cent of gross cropped area in 2024-25.

 

After taking office in 2024, the Bharatiya Janata Party (BJP) government implemented a key election pledge to procure paddy at ₹3,100 per quintal, matching neighbouring Chhattisgarh, by providing an input subsidy of ₹800 per quintal. It also promised to abolish katni-chhatni, a local term for the deduction of 7 kg per quintal at state-run mandis on grounds of moisture content and fair average quality norms. The Opposition Biju Janata Dal (BJD) and Congress allege the practice persists.

 

With panchayat elections a year away, the BJD last week organised a state-level farmers’ rally in Bhubaneswar, where Leader of the Opposition Naveen Patnaik accused the government of “systemic exploitation” of farmers. In the Assembly, Chief Minister Mohan Charan Majhi blamed the mandi ecosystem of the previous 24-year regime and vowed justice for farmers.

 

Amid mounting protests, the government has extended the validity of procurement tokens until March 31. Food Supplies Minister K C Patra said more than 1.96 million farmers have registered and procurement this season has crossed 6.4 million tonnes (mt). 

 

Procurement is expected to rise 10 per cent year-on-year this season, K Sudarshan Chakravarthy, managing director of the Odisha State Civil Supplies Corporation Limited, told Business Standard. The state procured 9.3 mt of paddy, equivalent to 6.3 mt of rice, during the kharif and rabi seasons of 2024-25. Of this, 2.8 mt meets the state’s Public Distribution System (PDS) and welfare needs, about 3 mt is lifted by the Food Corporation of India (FCI), and roughly 0.5 mt remains surplus.

 

“It is evident procurement will rise, as higher paddy prices have encouraged farmers to expand cultivation area, even taking up fields previously used for sugarcane and other crops,” said Lingaraj, convener of the Paschim Odisha Krushak Sangathan Samanwaya Samiti.

 

Another farmer leader Ashok Pradhan said: “We sought an increase in the minimum support price (MSP), not a bonus. Political parties announce bonuses over and above MSP for electoral gains.”

 

The debate in Odisha intensifies at a time when the Union Ministry of Finance has asked the Kerala government to review its policy of offering bonuses above the MSP for paddy, citing excess rice and wheat stocks and financial strain. In a letter dated January 9, the secretary (expenditure) urged Kerala to shift incentives towards pulses, oilseeds and millets, aligning with national priorities of nutrition security, self-reliance (atmanirbharta) and sustainable agriculture.

 

The letter has drawn a rare joint response from the ruling CPI(M) and the Opposition BJP in poll-bound Kerala, both seeking its withdrawal. Nationally, India faces a substantial paddy surplus that is creating logistical challenges, as well as exerting pressure on the central budget.

 

As of January 16, 2026, central stocks of rice and wheat stood at 59.45 mt, against a buffer requirement of 21.41 mt, nearly 178 per cent above the requirement.

 

The Commission for Agricultural Costs and Prices (CACP), in its policy report for the kharif marketing season (KMS) 2025-26, said state-level bonuses — direct or indirect — distort markets by limiting private trade participation, discouraging competition and undermining global competitiveness.

 

Kerala, a deficit decentralised procurement state, announced the highest paddy bonus of ₹520 per quintal in 2024-25, albeit lower than the previous year. Other deficit states such as Tamil Nadu, Jharkhand and West Bengal also declared bonuses in 2024-25, the CACP noted. Surplus states including Chhattisgarh and Odisha structured high bonuses as per-acre payments under their respective schemes.

 

Because such assistance is not crop-neutral, the CACP warned it incentivises higher paddy output and hampers diversification. 

 

The commission urged states to promote pulses, oilseeds and millets instead.

 

Kerala Agriculture Minister P Prasad criticised the Centre’s letter, saying it failed to account for state-specific cropping patterns. “This is absurd. When people in many parts of the country struggle for food, they ask us not to cultivate more paddy and wheat or offer incentives. In Kerala, we cultivate more paddy and wheat. They say production is surplus,” Prasad told Business Standard.

 

The state provides an additional ₹6.31 per kg of rice as an incentive. “It is strange that they have written only to Kerala and not other states. We produce only 15 per cent of our paddy requirement; 85 per cent comes from elsewhere. The Centre has yet to clear around ₹1,300 crore in dues to paddy farmers for storage,” he said.

 

Prasad argued that crop culture varies by soil, water availability and climate. “We do not need additional irrigation in most areas because water is abundant. Our fields act as natural rainwater storage bodies. According to estimates, each acre stores up to 600,000 litres annually. Cultivated paddy fields retain more water than fields without paddy,” he said.

 

NITI Aayog member Ramesh Chand said the Centre could persuade states to avoid bonuses beyond the MSP margin, already fixed at 50 per cent above production costs, including family labour. India already has a rice surplus of about 25 per cent, he said.

 

“If you procure rice at MSP, you cannot easily export it. There are some restrictions,” he said at the Business Standard Manthan event last week.

 

Ashok Gulati, professor at the Indian Council for Research on International Economic Relations, said rice cultivation has become disproportionately profitable relative to other field crops. “When states like Chhattisgarh began offering bonuses, paddy even moved across borders from Odisha. Then Odisha followed suit,” he said

 

“Today, even after distributing free rice and wheat to 800 million people and being the world’s largest exporter, thereby pushing global prices down, we still hold buffer stocks at nearly four times the required level. We are buried under rice,” said Gulati and suggested restructuring incentives in favour of nutrient-fixing crops such as pulses and oilseeds.

 

In the 2026-27 state Budget, the Odisha government allocated ₹6,088 crore under the Samrudha Krushaka Yojana to sustain procurement at ₹3,100 per quintal and proposed a ₹5,000 crore revolving fund to ensure timely payments. It also earmarked ₹469 crore under the Crop Diversification Programme to promote pulses, oilseeds and millets.

 

“The government incentivises paddy through subsidies above MSP but struggles to procure what it encourages farmers to grow. It then questions why they persist with paddy,” Lingaraj said, calling for policy recalibration. He added that subsidies for millets introduced under the previous regime have been discontinued.

 

In Chhattisgarh, days after 32 Congress MLAs were briefly suspended during protests over alleged procurement delays, Chief Minister Vishnu Deo Sai transferred ₹10,324 crore as input assistance to 2.53 million farmers under the Krishak Unnati Yojana.

 

Experts say states’ enthusiasm for paddy procurement may be ebbing under the weight of input subsidies. “Having fulfilled electoral promises, policymakers are now considering reductions in Budget allocations. That may explain the waning appetite for procurement. In this context, the push for crop diversification seems like lip-service,” Lingaraj said.

 

With inputs from Shine Jacob & Sanjeeb Mukherjee