Telangana’s ₹2,200 Cr Paddy Scam: 8.73 Lakh Tonnes Missing, What Is The Story?

Telangana’s paddy procurement system is facing a major credibility test after the Vigilance and Enforcement Department detected an alleged diversion of 8.73 lakh metric tonnes of government-controlled paddy, estimated to be worth ₹2,200 crore. The investigation, which began with inspections of rice mills in July, has now spread across 26 districts, covering nearly 300 mills. Officials say ₹1,500 crore has been recovered from millers, while 25 people, mostly rice millers, have been arrested.

What makes the case particularly significant is that the alleged diversion was not limited to one procurement or milling operation. It involves two separate channels through which the government handles paddy: Custom Milled Rice (CMR) and government auctions. More importantly, the investigation has also exposed serious questions about how the Civil Supplies Department monitored stocks entrusted to private millers.

According to a report, more than four lakh metric tonnes of the missing paddy was meant for custom milling, while the remaining quantity was earmarked for government auctions. The Vigilance Department reportedly identified shortages worth ₹2,200 crore after conducting raids across the state since mid-July.

How does the paddy procurement system work?

The Telangana government procures paddy from farmers at the Minimum Support Price (MSP) through the State Civil Supplies Corporation. Instead of processing all the procured grain itself, the government allocates paddy to empanelled private rice mills under the Custom Milled Rice system.

The millers are expected to process the grain and return the prescribed quantity of rice to the Food Corporation of India or state Civil Supplies godowns. This rice eventually supports the Public Distribution System (PDS), through which subsidised foodgrain reaches eligible households.

Under the standard milling norm by the government, approximately 67 kg of rice is obtained from every 100 kg of paddy, subject to the applicable specifications. The government also conducts online auctions to dispose of excess paddy stocks, clear inventory and recover procurement-related funds.

The alleged irregularities concern both these arrangements. According to vigilance officials quoted by media, millers allegedly sold government-controlled paddy stocks in the open market instead of accounting for them through milling or auction-related procedures.

How did the investigation uncover the alleged diversion?

The scale of the investigation becomes clearer when compared with its initial findings.

In August, it was reported that officials had identified a shortfall of approximately 2.7 lakh metric tonnes of paddy, valued at ₹680 crore, involving at least 58 millers. The discrepancies emerged when the Vigilance Department compared stock records maintained by millers with government records.

The investigation subsequently expanded to include auction-related stocks, taking the latest reported estimate to 8.73 lakh metric tonnes and ₹2,200 crore. According to the latest report, Suryapet recorded the highest value of alleged diversion at ₹430 crore, followed by Nizamabad at ₹245 crore and Nirmal at ₹230 crore.

The department has reportedly registered 63 FIRs and arrested 25 people during the investigation. Officials have also said that ₹1,500 crore has been recovered against the detected shortfall. 

The bigger question: how did this happen?

While the alleged involvement of private millers is central to the investigation, the findings raise an equally important question about administrative accountability.

The Vigilance Department has reportedly identified deficiencies in physical stock verification, improper registration of stocks, inadequate storage and delays in recovering outstanding dues. Officials have also flagged instances where paddy allocations allegedly exceeded requirements.

A vigilance official quoted by Deccan Chronicle observed that periodic inspections could have prevented pilferage. This raises questions about how government-owned agricultural stocks could remain unaccounted for across hundreds of mills and multiple districts.

The government does not simply transfer ownership of the grain to private millers. It entrusts them with public assets under a contractual arrangement. That arrangement requires regular inspections, reconciliation of stock records, verification of milling output and timely recovery of outstanding quantities or payments. If these checks were inadequate, the problem extends beyond individual millers. It points towards weaknesses in the department’s monitoring and enforcement mechanisms.

The issue is particularly sensitive because the CMR system is directly connected to food security. Any diversion of grain intended for government distribution creates the possibility of public resources being converted into private commercial gains.

Is this only a rice miller problem?

Another development makes the controversy more complicated. In October, the CID arrested 14 millers in a separate investigation into the alleged substitution of fine-quality Sanna Rakam rice with cheaper Doddu Rakam rice in supplies to the FCI.

It was also reported that the potential bonus-related financial implication in that investigation was estimated at ₹242 crore. The CID alleged that some millers diverted fine-quality paddy into the open market and supplied cheaper coarse rice instead.

This is a separate investigation and should not be added to the ₹2,200-crore stock diversion estimate. However, together, these cases highlight vulnerabilities in procurement, milling and quality verification.

Telangana’s paddy procurement system involves thousands of crores in public expenditure and supports both farmer incomes and food distribution. Ensuring that the grain reaches the intended destination is therefore as important as procuring it at MSP. The immediate task for the government is to recover outstanding stocks and establish criminal responsibility. 

If nearly 300 rice mills across 26 districts could accumulate stock discrepancies worth ₹2,200 crore, the question is no longer just who diverted the paddy. It is also who was responsible for checking where it went.

Tags Paddy Scam Telangana Paddy