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Non-inclusion of byproducts value in fixation of paddy milling charges is not correct: GOI

New Delhi,08/12/2015::Union Food Ministry has clarified that reports regarding non-inclusion of value of by-products in fixation of milling charges for paddy are not correct. The facts are as follows:The Department of Food & Public Distribution fixes milling charges for paddy to be paid to the State Agencies from time to time based on the rates recommended by the Tariff Commission, which takes into accounts the value of by-products derived from paddy while suggesting net rates of milling based on income and expenditure of the rice millers.The Food Corporation of India (FCI) is the Central Nodal Agency for procurement of food grains and it undertakes procurement operations of wheat and paddy/ rice in association with the State Government Agencies (SGAs). In the case of paddy, it is essential that SGAs convert paddy procured from the farmers, as early as possible, and handover resultant custom milled rice (CMR) to the FCI for distribution. Government of India, through FCI, pays cost of CMR to the SGAs including the cost of conversion of paddy into rice. The processing of paddy has to be done in a time bound manner, as shelf-life of paddy is limited, and for this purpose, SGAs engage rice millers under well defined agreements with them.For reimbursement of milling charges to the SGAs, the Department of Food & Public Distribution has adopted a rate structure based on the recommendations of the Tariff Commission. As, it is not practically feasible for the FCI or SGAs to take over the by-products derived from the processing of paddy and market them out, therefore, the basic framework of Tariff Commission formula for milling charges has been arrived at based on the premise that the rice millers will retain the by-products themselves and the value of these by-products will be taken into account by the Tariff Commission while calculating and recommending the net milling charges to be paid to the millers. Following this formula of the Tariff Commission, the Department has been all along reimbursing the milling charges to the SGAs without separately taking into account the value of the by-products arising out of the processing of paddy.The existing rates for milling of paddy were fixed on the basis of recommendations given by Tariff Commission in year 2005. In its report, Tariff Commission had observed that gross milling cost and realization from milling by-product varies from mill to mill and State to State. Similarly, cost towards transportation and forwarding also varies. Therefore, Tariff Commission was of the view that it was not feasible to specify reason/State specific milling charges and based on their study report, and they had recommended fixation of milling charges for raw rice @ Rs. 15.32/qtl. and for Par-boiled rice @ Rs. 25.48/qtl. including the cost of transportation of paddy upto 8 kms. and transportation of rice for the same distance for delivery to the FCI/ SGAs.The report submitted by Tariff Commission was examined by the Department and current rate of milling charges were fixed @ Rs. 15/qtl. for raw rice and Rs. 25/qtl. for Par-boiled rice in 2005, including the charges for transportation of paddy up to 8 km from mandi/stocking point to mills and Rice from mills to FCI storage godowns up to 8 km. However, in case, any of the State Governments arrange transportation of paddy/ rice themselves, then they are paid transportation charges separately and Milling Charges are paid only @ Rs.10/qtl for Raw Rice and Rs.20/qtl for Par-boiled Rice. These rates were made applicable w.e.f. KMS 2006-07 vide Order No. 192(12)/1997-FC A/c dated 04.06.2006.Keeping in view the requests received from some State Governments for revision of milling charges in the light of the increase in milling cost and likely increase in income from the by-products of paddy, Tariff Commission was assigned to conduct another study in year 2009 and their report was received in year 2012. However in its report, Tariff Commission failed to make any specific recommendation on upward/downward revision of milling charges due to non-availability of sufficient data and recommended for maintaining status-quo which was accepted by this Department and it was decided to continue with the existing milling charges.As many State Governments were requesting for upward revision of milling charges on the ground that existing rates were fixed in 2005 and milling costs had increased, the Adviser (Cost), Department of Food & Public Distribution was asked to make a quick review of the situation with. In its recommendations, Team headed by the Adviser (Cost) had analysed both Tariff Commission of 2005 & 2012 and studied the information received from the millers/ State Governments etc. and had recommended that taking into consideration the existing well-defined uniform out-turn ratios and yield and the value of by-products, there was no scope for an increase in the milling charges of raw rice. The Team, further recommended that the existing milling charges be continued. The report of the Committee was accepted with due approval of the then MOS(IC) CA, F&PD on 26.02.2013. This report makes it clear that value of by-products have always been taken into account by Tariff Commission while recommending the normative rates of milling charges to be paid to SGAs.Some news reports say that on the count of value of by-products, Government is losing every year more than Rs. 10000 crore, for which there is no evidence. It talks of the increase in value of by-products of paddy processing over the years, but it does not talk about increases in the expenses of the rice mills. Since most of the States have been demanding an upward revision of the normative milling charges citing that millers are facing hardships and they are not interested in milling the paddy procured by the SGAs, the Department of Food & Public Distribution had moved to Tariff Commission for conducting a fresh study for reviewing the normative milling charges in December, 2013 itself. Tariff Commission is expected to give its report by December, 2015.ConsumerDepartment of Food & Public Distribution has further asked Tariff Commission to conduct a fresh study on milling expenses, value of by-products etc. and make a fresh recommendation about the net milling charges to be paid to the millers. It is expected that Tariff Commission will provide its report by the end of December, 2015 and the Department will take a decision about the revision of rates accordingly.

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