The Centre govt has issued an order to the states government to cut the procurement of levy rice from 30-75 per cent of the overall purchase from mills to 25 per cent, from the procurement season beginning October. It is also considering doing away with the levy purchase mechanism in 2015-16. Through this mechanism, states buy paddy from millers for selling it through ration shops, the subsidy burden of which falls on the Centre.

The government’s directive follows its order to limit procurement of grains in states that announce a bonus over and above the minimum support price (MSP) fixed by the Centre from the coming rice procurement season (2014-15) and wheat procurement season (2015-16). The move has been opposed by Madhya Pradesh and Rajasthan, which, in the past few years, have announced hefty bonuses over and above the MSP. Officials said the directive on levy rice would immediately release about 15 million tonnes (mt) of rice in the open market and help cut rising food subsidies. Union Budget2014-15 has estimated food subsidy for this financial year at Rs 115,000 crore, about 25 per cent more than in 2013-14.

Government official involved in this matter said that the government has issued this order last  year but this can not be enforced due to the objections from the state Andhra Pradesh but for  the 2014-15 rice procurement season and 2015-16 wheat procurement season the government  strictly follows this mechanism.

 He added the government’s recent moves to cut procurement of wheat and rice weren’t meant to  hurt the interest of farmers, but help them in the long run, as the step would bring efficiency in  operations and give farmers the freedom to sell their produce to those who paid more.

This is also an act of the centre government to warn the state governments to  transfer their liabilities to the centre.

After the government got its requirement fulfill,it will start distributing it through the Public Distribution System through two mechanisms—custom-milled rice (CMR) and levy rice. Through CMR, the government purchases paddy (husked rice) from farmers and allocates this to mills for processing, for a fixed charge, before buying it back from them.Through the levy rice system, millers are allowed to sell a certain percentage (25-50 per cent in major rice-producing states) of the rice procured in the open market, while the rest (75-50 per cent, called levy rice) is bought by government agencies at the MSP.