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Friday, December 2, 2022

Communists – rice procurement, ‘managing’ inflation & policy hypocrisy

Theoretically, Communist governments should see virtually zero inflation because prices for almost all goods and services were set by state agencies and changed only rarely. In Kerala, they have taken the art of inflation to the next level. They are teaching Keralites how a few capitalists and crony communist leaders can easily fleece the ‘highly literate’ Marxists who voted them to power. The weapon of choice is rice, synonymous with Malayalees and a staple of each Keralite home worldwide. 

It is well-known that rice consumption increases the risk of developing diabetes compared to wheat. A high literacy rate in Kerala does not translate to health literacy. Kerala is the diabetes capital of Bharat, with a prevalence as high as 20% ─ double the national average of 8%.

Notably, 80% of diabetic patients die from heart disease. Diabetes affects not only blood sugar but also our blood pressure and explains why Kerala has the highest rate of heart disease in Bharat, a rate double that of the US and six times higher than Japan and China. That does not prevent the average Keralite from consuming rice thrice and sometimes four times daily.

Media reported that rice prices in Kerala are unlikely to cool anytime soon despite the efforts of the administration to procure more quantity from outside the state. Even as the supply of ‘Jaya’ variety rice from Andhra Pradesh will get delayed by another five months, other varieties will likely arrive in the Kerala markets after a month. The Jaya variety is widely consumed, and it is doubted that its rates per kilo will hit a century soon.

Communists vs. Farm Laws

In the past, we have seen the price of some food items rise dramatically, for example, onion prices recently. We have also seen that such inflation affects Bharat as a whole. Communists have joined with anti-nationals and protested violently. Their cyber wing has unleashed cheap trolls aimed at the central government. 

This time, nothing of that sort is happening in Kerala against Pinarayi Vijayan and his crony ministers. Notably, the rice rates are not rising anywhere else in Bharat currently. Kerala also has acres of rice cultivation, but we still cannot provide enough for local consumption. But why?

GR Anil, Kerala Food and Civil Supplies Minister, has ‘stepped in’ and is now in Andhra Pradesh to procure rice and chili directly. The Civil Supplies corporations of both states have reached a pact to start the supply of other rice varieties, including ‘Surekha,’ besides grocery items like Bengal gram, red cow pea, coriander, dried red chili, and Kashmiri chili from next month onwards.

Reportedly the AP minister informed his Kerala counterpart that both states signed an agreement regarding the same. Even if rice rates remain high after the five months are over, AP will supply rice as per today’s agreed rates. Kerala demanded that both states keep intermediaries out of this whole deal. Does this entire farm trade sound familiar?

In simple terms, what Andhra and Kerala have agreed to do is contract farming. Two parties sign an agreement: X farms and sell his produce to Y on a future date. Kerala does not want mediators. Isn’t this the same policy that the central government tried its best to introduce as a farm bill? 

Back then, the Congress, communists, the radical Popular Front of India (PFI) in Kerala, and the local parties in Andhra Pradesh and Telangana vehemently opposed the farm bills. Wasn’t their protests the reason why PM Modi withdrew that bill? Well, it was not just the ideological differences but monetary too. Farmers now understand, but the damage has been done. 

Jaya Rice Variety

Interestingly, after meeting with Anil, Andhra Pradesh Civil Supplies and Consumer Affairs minister VK Nageswara Rao said that Andhra does not cultivate the rice brand (Jaya) anymore. (In fact, they have never farmed Jaya since 1965!). He added that AP will resume the cultivation of ‘Jaya’ and has procured the seeds. Kerala’s demand for supply of 3,840 tons a month will be met only after the harvest five months from now. 

Jaya, Surekha, and Jyothi account for most of the rice consumed by the people in Kerala. At least 50 percent of rice sold is the Jaya variety. Jyothi is supplied from neighboring Tamil Nadu and Karnataka. So what is being sold as Jaya in Kerala currently, and that too at almost 70 rupees per kilo? Anil evaded a direct reply when asked this question.

In late-July 2017, a week after an in-principle agreement between AP and Kerala, leftist media claimed ‘confusion’ over the supply of Jaya variety of rice. Newly elected communists led by then Kerala civil supplies minister P. Thilothaman had visited AP to procure rice for the Onam festival in September. Special Chief Secretary (Agriculture, Civil Supplies) B. Rajasekhar said, “Jaya is an ancient variety. It is not being cultivated now. What they (Kerala) refer to as Jaya could be MTU 3626. (Bondalu in local parlance). We asked them to send a few samples to compare it with the rice grown here.” 

Cultivation of Jaya, a variety from the International Rice Research Institute (IRRI), was introduced in 1965. It was discontinued long ago, and many other high-yield types were introduced. The samples turned out to be Bondalu, and Bondalu rice has minimal demand.

However, Andhra Pradesh Rice Millers Association (APRMA) and Upland Area Rice Millers Association (UARMA) disagreed. APRMA president Gummadi Venkateswara Rao and UARMA president Valluri Suribabu continued to contend that “Jaya variety of rice is being sent to Kerala.”

Back then, the media might have been confused, but the communists and analysts had no doubts about what had happened. It does not take an economist to determine that middlemen were at play. Now, let us look at what has happened over the last few months regarding rice cultivation and harvesting in Kerala. 

In early September, 79,225 farmers registered for Kerala government paddy procurement through Supplyco, and 55,269 were from Palakkad. Supplyco is a Government of Kerala-owned company that procures farm produce directly from farmers at the Minimum Support Price declared by the Government of Kerala. Supplyco then gives the procured paddy to contracted rice mills for milling and packing. The resultant rice is supposed to be distributed through the Public Distribution System in the state. 

Local Self-Government Minister and former speaker MB Rajesh promised that Kerala would pay Rs 28.20 per kg of paddy and claimed that Tamil Nadu is offering only Rs 21 to its farmers. Rajesh comfortably failed to mention that private mill owners were yet to sign the agreement. The last date for signing the contract was August 30.

Communists vs. Farmers

Muthalamthode Mani, state general secretary of Desiya Karshaka Samajam, was blunt in his assessment. While harvesting the first paddy crop had begun, the mill owners were coming up with lame excuses, he said. Backroom deals between the communists and the morally corrupt mill owners have been going on for many years. He lamented that the government conspires with the private mill owners and ration dealers.

Unlike in other states where sizeable cold storage service providers provide several distinct temperature zones ranging from -30°C to +30°C, Kerala still has none. Farm bills would have incentivized big players to create this much needed agro-infrastructure, but that’s another story. Local farmers do not have places to store harvested paddy. They keep the paddy in sacks in the fields and helplessly watch as rain brings moisture and germination.

Delaying the procurement announcement forced the paddy farmers to sell their produce at Rs 16 to Rs 18 per kilogram to the same mill owners instead of the procurement price of Rs 28.20 announced this season. Supplyco too lifted paddy with excess moisture but at throwaway rates. Liquor barons, too, allegedly swooped down like vultures and made a killing.

Banks pay the paddy farmers for the procurement based on Paddy Receipt Sheets (PRS) issued by Supplyco. Banks record this payment as a loan given to the farmer. When Supplyco withholds payment to the banks, the loan becomes a farmer’s debt. Supplyco has arrears worth Rs 954.46 crore and Rs 2,046.84 crore towards banks in the financial years 2020-21 and 2021-22, respectively. It also owes 8.5 percent as interest to the banks.

These arrears are affecting the CIBIL scores of the farmers, and they cannot avail of new loans. Supplyco was supposed to procure one kg paddy at Rs 28.20. Of this, Rs 19.40 has to be given by the union government and Rs 8.80 by the state government. But for two years, both funds have remained mismanaged and unallocated.

About 72 percent of the farmers in Kerala are reeling under a debt burden, per a survey conducted by an independent farmers organization – Kerala Independent Farmers Association (KIFA). The average debt of a farmer in Kerala was estimated to be Rs 5.46 lakh in August. Kerala is a state whose ‘off-budget’ borrowings average around Rs.150 crores each day.

In June, the state Government informed the State Assembly that the cumulative debt, as of March 2022, stood at ₹3,32,291 crore. This figure was a giant leap from ₹1,89,768.55 crore in 2016-17. An interim report found that salaries, pensions, and interest payments form around 70% of the total revenue expenditure of the state. The report, prepared by the team led by Centre for Development Studies director Sunil Mani, has found that the average salary of a state government employee has almost doubled over the last seven years, from Rs 25,458 per month in 2011-12 to Rs 49, 657 per month in 2018-19.

Yet, the communist government that lists and borrows through Masala Bonds at the London Stock Exchange does not have the finances to settle dues of local farmers! Having failed local farmers, communist ministers are now state-hopping to procure rice. 

Communists Vs. Mill Owners

Mill owners and the communist government reached a ‘settlement’ in late October. Mill owners demanded that the government compensate them for the losses suffered during the 2018 flood when water first entered the godowns of Kalady rice mills. 75% of the rice growers are in Palakkad, and the rice mill lobby in Kalady calls the shots. Representatives of the Kerala Rice Mill Owners Association (KRMOA), KK Karnan, Varkey Peter, and Pavizham Antony, participated in the talks.

These mill owners wanted more time to be ready to provide 68% of the paddy procured as rice after processing it to the government. Mill owners say they will return only 64%, but the ratio was enhanced to 68% following a High Court order. It is 68% all over Bharat. Another apparent demand was to reverse the 5% GST on handling charges and they wanted the government to release the amount of ₹15.37 crore due to them as processing charges.

A resolution to the rice crisis is nowhere to be seen. In the meantime, crony capitalists and Marxists in Kerala will bring out the products purchased at Rs.16 per kilo and sell them for Rs.100. They might even throw in a ‘free’ food kit to placate their communist cadre. Bondalu will also arrive soon from Andhra and will be sold as Jaya. Long live democracy, secularism and federalism!

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