Several Indian rice mills halt operations as procurement delays lock up storage

Delays in the Indian central government's milled rice procurement are forcing several rice mills in Chhattisgarh to halt operations, as storage remains full and finances remain locked, market sources told Platts, part of S&P Global Energy.

The bottleneck could create a supply gap in the export market and push prices higher if mills remain offline ahead of the Kharif crop, the sources said.

"There's no paddy shortage right now, but no storage with FCI. There's still 4.7 million mt left to be procured by the government, which might take another whole year and then we have the coming Kharif crop also on the way. So, we have requested the government to support MSMEs, and they have provided their assurance," said Mukesh Jain, president of The Rice Exporters Association CG.

Many millers in Raipur and Odisha are currently out of the market because their facilities are still holding paddy meant for government procurement, sources said.

Platts assessed Parboiled 5% at $375/mt FOB Kakinada Aug. 25, $11/mt up month over month due to limited supply in the market.

Beyond El Niño, millers face financial risk

"Currently, El Niño is not the main concern for Chhattisgarh, but the government procurement of milled rice and paddy stocks," a miller based in Chhattisgarh said.

"There's last year November paddy still holding with millers which the government hasn't procured yet. The quality of this 7- to 8-month-old paddy is deteriorating. We have suggested to the central government that if they are having a storage issue, then allow the millers to buy this paddy in an auction," the miller said.

The existing procurement system has tied up storage and working capital, leaving them with limited room to purchase fresh paddy in the coming season, the miller said.

"Central government buys paddy at a higher rate from the state government, but millers could only buy at 21,000-22,000 [rupees]/mt. We also think that instead of buying paddy from farmers, the government should just give a direct subsidy to farmers, and let millers buy paddy in auction. This would reduce a lot of storage, transportation costs to the government," the miller added.

The impact is already visible in Raipur, where several mills have been shut for weeks due to a lack of storage availability.

Another Raipur miller, who requested anonymity, highlighted similar concerns.

"I use the WINGS (Warehouse Inventory Network & Governing System )app to book storage slots for paddy. I get 290 quintals of storage for six lots. Earlier, I handled about 400-450 lots per year, but this time I haven't been able to secure the full six-lot allotment for months," the second Raipur-based miller said.

"Most mills in Chhattisgarh — about 70% — are closed because storage is full and government procurement is slow, which means delayed payments for custom milling. That financial pressure is pushing mills out of operation. To address this, the government should sell paddy directly to millers and pay farmers the differential from MSP. If millers have to hold paddy longer, the quality declines because moisture remains high."

The Rice Mill Association in Raipur is seeking government intervention.

"The date for procurement was given July 31 but the rake movement has been slow. For the 2025-26 season, paddy has already been procured, but millers are now required to deposit milled rice. This process is not supported by timely coordination from FCI/central government rake movement, and in Chhattisgarh, the state has begun buying milled rice locally. However, the central government's rakes for moving rice are delayed, so the intended supply chain is not functioning as planned," said Kantilal Bothra, president of Rice Mill Association.

Bothra said the association has raised the issue with authorities in Delhi and expects some improvement in the coming months.

"We requested the concerned authorities in Delhi to increase rake movement after a meeting with the Hon'ble CM of Chhattisgarh, so we might see a pick up in procurement in September. We are expecting improvement in December, with an estimated ramp-up of around 70%-80%," he said.

The association has also asked the government to take greater control of rice movement to ease the financial strain on millers.

Millers said the delay is affecting paddy quality, with stocks showing signs of discoloration and yellowing.

"Paddy quality is deteriorating — discoloration and yellowing — so further delays will compound the quality risk. The government has not provided firm commitments, but communications indicate that approvals and paperwork are being processed without corresponding operational progress."

The Food Corporation of India and the Ministry of Consumer Affairs, Food and Public Distribution did not respond to requests for comment.

Unless procurement and rice movement improve soon, millers said the sector could face deeper financial stress, reduced milling activity and tighter availability for export markets.

"Millers will have neither storage nor finances to buy paddy for the coming crop, which could impact farmers, leading them to sell paddy below MSP, further impacting export prices," the first miller said.