Rice mills oppose Karnataka govt's new levy order

Rice mill owners in Karnataka have strongly opposed the recent levy order of the state government stating that it is detrimental to the interests of the industry.

The chambers of commerce have appealed to the government to immediately withdraw the new rice levy order, which allows the government to collect the levy rice quantum from the millers.

The state government recently issued an order, which will come into effect from November 1, 2013, asking the mill owners to supply rice at Rs 22.10 per kg to meet the requirement of rice for supply to below poverty line (BPL) card holders.

The government had introduced its ambitious 'Annabhagya' scheme, under which it supplies 30 kg rice per month at Rs 1 per kg to BPL families. There are 9.83 million BPL cardholders in the state that are eligible to buy rice under the scheme. The state government gets 177,000 tonnes of rice from the Central government, while it intends to procure 1.35 million tonnes from the rice mills in the state.

The rice mill owners have unanimously opposed the levy order and said it is not feasible to accept the government order in its present form.If implemented, each mill owner will incur a loss of at least Rs 10 per kg.

"The mill owners would incur a huge loss in hulling the paddy if they were to give levy as per the new government order. The total loss is likely to be in the order of Rs 500 crore," said R Shivakumar, President, Federation of Karnataka Chambers of Commerce and Industry (FKCCI).

He said there is no logic in enhancing the levy, which was earlier fixed at 200,000 tonnes.

"If the government is committed to provide subsidised rice to poor people, it should procure rice at a reasonable market price from the open market and fulfill its promise rather than harassing mill owners," he said.

The rice mill owners are operating with very meagre margins of 2-3 per cent and this additional burden will make the rice mills left with no money even to buy the paddy. Considering the market price of rice at Rs 35 per kg, this action on the part of the government will hit the rice mill trade and the owners will have to look into alternative business resulting in loss to the state exchequer, Shivakumar added.

There are 1,800 rice mills in Karnataka which have been asked to supply rice at subsidised rates even when the procurement from Chhattisgarh costs Rs 26-27 per kg including transportation.

Karnataka State Rice Millers' Association has stated that the state government did not consult rice mill owners before fixing the levy quantity this year. The government normally consults the mill owners every year before fixing the levy price.

"Most of the mill owners in Karnataka crush Sona Masoori variety, which is sold at Rs 33 a kg in the market with just 2-3 per cent profit margins." Srinivas said.

The government is asking us to supply this superior quality rice through the levy mechanism, which will be a loss making proposition to the industry," said N R Srinivas, secretary of the association.