FCI Custom Milling Rice (CMR) Outturn Reconciliation for Millers

A mid-tier rice miller in the western Uttar Pradesh belt closes its Kharif Marketing Season on 30 September with 10,000 MT of paddy received from the State Food and Civil Supplies Corporation of Uttar Pradesh (SFC UP) under a Custom Milling Rice contract, a mandated delivery of 6,700 MT of raw rice to the Food Corporation of India within a three-month window from the Delivery Order date, a per-consignment acceptance test at the FCI depot on broken grains, damaged grains, foreign matter, and moisture, a milling charge invoice to SFC UP at the state-notified rate on the paddy handed over, a Section 194C code 1023 TDS deduction at 2 percent on that milling charge (job-work with material supplied by the payer), and a by-product retention book that must close the paddy inward weight against rice delivered plus husk sold plus bran sold plus broken rice sold plus processing loss within a 100 percent weight-closure tolerance. This is FCI custom milling rice CMR outturn 67 percent 68 percent reconciliation at the operating scale of a single-mill unit, and the discipline that keeps the miller’s security deposit intact, the Rice-Milling Industry (Regulation) Act 1958 permit unimpaired, and the Form 26AS TDS credit clean is what separates a well-run CMR miller from one who spends the next off-season under a shortfall recovery notice.

Quick reference

The reconciliation in one paragraph

A registered rice miller operating under an FCI Custom Milling Rice contract with a state procurement agency runs a four-hop reconciliation chain. Hop one is paddy inward from the state agency to the mill against the Delivery Order — quantity received in the mill weighbridge must match the Delivery Order quantity within a moisture-normalised variance band. Hop two is the mill’s shift-level milling operation — paddy consumed by variety and stream (raw or parboiled), rice produced, and by-products (husk, bran, broken rice) captured shift by shift, with the aggregate outturn tracked against the 67 percent raw or 68 percent parboiled floor for the CMR account. Hop three is CMR delivery to the FCI depot — each dispatch consignment matches to an FCI Acceptance Note carrying the depot’s acceptance-test result (broken, damaged, foreign matter, moisture) with any value cut or rejection applied per the FCI Uniform Specifications. Hop four is the milling-charge invoice cycle — the miller invoices the state agency at the state-notified per-quintal rate on the paddy handed over, the state agency deducts TDS under Section 8 Sl. 4 code 1023 at 2 percent (the job-work-with-material-supplied code, because the state agency is supplying the paddy), and the miller reconciles the TDS credit against Form 26AS at its PAN in the following quarterly cycle. Alongside the four-hop CMR chain, the miller runs an open-market by-product sale ledger — husk to biomass and briquette plants, bran to solvent-extraction plants for rice bran oil recovery, and broken rice to breweries, EBP-programme ethanol distilleries, and starch and flour mills — which must reconcile in aggregate weight against paddy inward within a 100 percent closure tolerance.

What the scenario looks like in India

The Custom Milling Rice programme is the operational backbone of the public distribution grain supply. State procurement agencies buy paddy from farmers at the CACP-notified Minimum Support Price — Rs 2,300 per quintal for Common Grade paddy in KMS 2024-25, Rs 2,320 per quintal for Grade A paddy, with any state bonus notified separately — and, because paddy cannot be moved into the FCI godown as such (FCI godowns are rice-only storage), the state agency hands the paddy to registered private millers for conversion to rice on FCI account. The miller receives paddy against a Delivery Order, mills it into rice at the mandated outturn ratio, delivers the rice back to a nominated FCI depot within the KMS delivery window, and earns a milling charge from the state agency for the service.

Illustrative brands and cooperatives operating at scale in the Indian rice milling ecosystem — some operating under CMR contracts, others in the open-market or export segments, some across both — include the private branded processors (LT Foods running the Daawat brand, KRBL running the India Gate brand, Kohinoor Foods, Chaman Lal Setia running the Maharani basmati brand); the cooperative and state-agency-affiliated milling networks in Punjab, Haryana, Uttar Pradesh, and the Krishna and Godavari deltas of Andhra Pradesh and Telangana; and the large basmati export-oriented mills in Karnal, Amritsar, and Sonipat. The Krishna delta and Nellore belt in Andhra Pradesh, the Godavari delta in AP and Telangana, and the Sangrur and Bhatinda belts in Punjab account for a disproportionate share of the CMR contract network in the coastal and northern rice belts. Registered rice mills operating in Bulandshahr, Balrampur, Muzaffarnagar, and the Sitapur belt of Uttar Pradesh feed the SFC UP and Provident Cooperative Fund (PCF) UP procurement networks under the CMR framework.

The state procurement agency counterparties on the paddy-supply side include SFC UP and PCF UP in Uttar Pradesh, PCF Punjab and MARKFED Punjab, HAFED and Markfed Haryana, TDCCOL and Civil Supplies Corporation in Telangana, the AP Civil Supplies Corporation in Andhra Pradesh, and equivalent state marketing federations in Chhattisgarh, Odisha, and West Bengal. Each state agency runs its own Delivery Order, milling-charge, and TDS remittance discipline against a broadly common CMR framework notified by the Department of Food and Public Distribution.

The regulatory overlay — CMR framework, Section 194C code 1023, and the Rice-Milling Industry Act

Three regulatory anchors govern the CMR mill’s reconciliation surface, and each carries a specific compliance consequence.

The Custom Milling Rice framework itself, notified season by season by the Department of Food and Public Distribution (DFPD) and implemented through FCI’s CMR agreement with the state procurement agency and the registered mill, mandates the outturn ratio (67 percent raw, 68 percent parboiled), the delivery window (typically three months from Delivery Order date), the FCI Uniform Specifications at acceptance, and the security-deposit regime. Under-delivery against the outturn ratio triggers recovery from the security deposit at the paddy-equivalent MSP value. Repeated shortfall over successive seasons exposes the miller to cancellation of the milling permit issued under the Rice-Milling Industry (Regulation) Act 1958 by the state Directorate of Food and Civil Supplies. The mill’s reconciliation discipline is therefore not a bookkeeping preference — it is the direct condition of the mill’s continuing licence to operate in the CMR ecosystem.

Section 8 Sl. 4 code 1023 of the Income-tax Act 2025 (the successor taxonomy to legacy Section 194C for job-work with material supplied) governs TDS on the state agency’s milling-charge remittance. Code 1023 applies where the material required to carry out the work is supplied by the payer — the state procurement agency is supplying the paddy, so the milling charge falls squarely within the code 1023 definition. TDS at 2 percent applies where the miller is a company, partnership firm, LLP, or any resident other than an Individual or HUF; TDS at 1 percent applies where the miller is an Individual or HUF proprietor (the concessional job-work rate under the same code family). Code 1024 — job-work without material supplied — does not apply to CMR because the paddy is supplied. Code 1002 — the general contractor code at 2 percent — should not be used because the more specific job-work-with-material-supplied code takes precedence. The reconciliation surface for the miller is a monthly Form 26AS extract at the miller’s PAN, matched to the state agency’s TAN and its 194C code 1023 remittance schedule. Mis-classification of the deduction under code 1002 or code 1024 by an agency finance officer is the most common Form 26AS anomaly on CMR millers’ returns and typically surfaces at the mill’s annual statutory tax audit. A related surface is the TDS payment code 1031, Section 393 Sl. 8 purchase of goods code, which applies at the miller’s own end if the miller purchases inputs (fuel, spares, packaging) from any single supplier crossing the 194Q threshold — a separate reconciliation surface downstream of the CMR job-work chain.

Section 43B(h) of the Income-tax Act 1961 governs the state agency’s own income-tax deduction discipline on payments to MSME-registered millers. Where a miller holds MSME registration in the micro or small enterprise category, the state agency’s payment to the miller must be made within the Section 15 MSMED Act window — 45 days from acceptance of services where a written agreement exists, 15 days where no agreement exists. Payments beyond that window are disallowable as a deduction at the paying agency’s income-tax computation and are allowable only in the year of actual payment. The reconciliation exposure sits at the state agency’s end, but the miller’s own reconciliation is what feeds the MSMED delay claim — a running-balance ledger of invoice raised, TDS deducted, and net remittance received, with each remittance dated against the acceptance-of-service date so that any delay beyond 45 days is visible for a Section 16 MSMED interest claim by the miller (or, if the miller elects not to claim, at least a disallowance signal for the state agency’s own audit).

A worked example — a 10,000 MT UP paddy CMR contract at KMS close

Illustrative — the following figures represent the operating pattern of a mid-tier rice mill running a single-agency CMR contract under the SFC UP or PCF UP framework in the western Uttar Pradesh belt. State bonuses, milling charge rates, and by-product realisations vary by state and by season; cross-verify against the current CMR agreement and the state-notified milling charge for the season before action.

A mid-tier rice mill in the Bulandshahr belt signs a CMR contract with SFC UP for the Kharif Marketing Season, contracted for 10,000 MT of paddy (Common Grade) at the CACP-notified MSP of Rs 2,300 per quintal — an underlying paddy value of Rs 23 crore at MSP. The Delivery Order is issued on 1 November and the delivery window is set at three months, closing 31 January. The state-notified milling charge for the season is Rs 250 per quintal of paddy handed over, giving a gross milling-charge realisation of 10,000 MT × 10 quintal/MT × Rs 250 = Rs 2.5 crore across the CMR agreement.

Under the mandated 67 percent raw rice outturn ratio, the mill must deliver 10,000 MT × 67 percent = 6,700 MT of raw rice to the nominated FCI depot within the three-month window. The mill’s own shift-level milling register at end of month one (30 November) shows paddy consumed of 3,400 MT and rice produced of 2,280 MT — an interim outturn of 2,280 / 3,400 = 67.06 percent, tracking on the floor. By end of month two (31 December), aggregate paddy consumed of 6,900 MT yields rice produced of 4,620 MT — aggregate outturn 66.96 percent, below the floor by 0.04 percentage points. The mill’s control room flags the tracking shortfall and adjusts the paddy blend into the milling stream (a small share of the higher-outturn Grade A lots blended in) to lift the aggregate outturn back above the floor for the closing four weeks. Final CMR delivery by 31 January totals 6,712 MT of raw rice — outturn 67.12 percent, within the mandate.

By-product retention across the same 10,000 MT of paddy consumed produces approximately 2,250 MT of husk (22.5 percent), approximately 700 MT of bran (7.0 percent), and approximately 250 MT of broken rice (2.5 percent) — aggregate by-products 3,200 MT. The mill sells husk at a realised price to two biomass power plants in the Meerut belt, bran to a solvent-extraction plant in the Muzaffarnagar belt for rice bran oil recovery, and broken rice to an EBP-programme ethanol distillery for grain-based ethanol under the OMC (Indian Oil, Bharat Petroleum, Hindustan Petroleum) tender-lifted supply chain. Aggregate CMR delivery 6,712 MT plus by-products 3,200 MT plus processing loss (moisture, dust, drying) approximately 88 MT closes to 10,000 MT paddy inward, within the 1 percent weight-closure tolerance.

FCI depot acceptance across the 6,712 MT of delivered rice records the following outcomes on the 141 consignments dispatched over the delivery window:

The rejected consignment is reprocessed by the mill (redried and reblended) and re-dispatched under a fresh consignment number, accepted at full price on the second attempt. Nine consignments carrying an aggregate value cut against the settlement price show up as a milling-charge realisation shortfall on the state agency’s monthly running-bill reconciliation; the mill’s finance team reconciles each value-cut consignment against the FCI Acceptance Note and the state agency’s remittance advice to isolate the cut amount for internal quality-control root-cause analysis.

The milling-charge invoice cycle across the four months of the CMR contract runs at approximately Rs 62.5 lakh per month on average (Rs 2.5 crore / 4 months). The state agency deducts TDS under Section 8 Sl. 4 code 1023 at 2 percent (the mill is a partnership firm, not an Individual or HUF), remitting approximately Rs 1.25 lakh per month on the mill’s PAN. Aggregate TDS across the CMR contract: Rs 5 lakh. The mill’s Form 26AS at end of quarter reconciles the credit against the state agency’s Form 26Q filing; the mill’s own annual statutory audit cross-references the code 1023 credit against the milling-charge revenue line in the profit-and-loss statement.

Common reconciliation breakages

Five breakages recur across CMR mills in the UP, AP, Telangana, Punjab, and Haryana belts, and each maps to a specific control failure.

• Outturn tracking-shortfall discovered too late. A mill that runs shift-level milling registers only for internal cost tracking, and reconciles outturn against the 67 or 68 percent CMR floor only at the end of the delivery window, discovers a shortfall of 0.3 or 0.5 percentage points when the recovery period has already begun. Recovery from the security deposit at the paddy-equivalent MSP value on a 10,000 MT contract at 0.5 percent shortfall is 50 MT of paddy at Rs 2,300 per quintal, or Rs 11.5 lakh — a direct hit to the mill’s operating margin. Discipline requires daily or weekly outturn tracking against the CMR-floor with an alert threshold set 0.5 percentage points above the floor, so blend adjustments are possible before the window closes.

• TDS mis-classification under code 1002 or code 1024 instead of code 1023. State agency finance officers occasionally apply the general 2 percent contractor code (1002) or the job-work-without-material code (1024) instead of the correct code 1023. Where the effective rate is the same (2 percent under either 1002 or 1023), the mill’s cash impact is nil, but the Form 26AS entry codes to the wrong nature of payment, and the mill’s Form 26Q reconciliation and statutory audit both flag the mismatch. Under code 1024 the rate is also 2 percent (or 1 percent for Individual/HUF), so cash impact is likewise nil, but the classification is technically wrong because the paddy is supplied by the payer. Discipline requires the mill’s finance team to confirm the code at the point of invoice raise and follow up with the state agency’s TDS cell where the deduction reflects the wrong code on a subsequent 26AS extract.

• By-product weight closure not run — undiscovered paddy diversion. A mill that fails to reconcile aggregate by-product weight (husk plus bran plus broken rice) against paddy inward within a 100 percent tolerance leaves an undiscovered diversion window — paddy diverted from the CMR account to open-market rice sale, with the CMR delivery filled from a different paddy source (or under-delivered). Weight-closure discipline surfaces the diversion within the same reporting cycle rather than at a state-agency inspection or a Rice-Milling Industry Act audit.

• FCI value-cut leakage not reconciled to milling-charge realisation. Value cuts applied by the FCI depot under the Uniform Specifications schedule reduce the mill’s milling-charge realisation from the state agency (because the state agency’s own realisation from FCI is cut). Mills that reconcile only against the CMR delivery quantity, not against the value-cut adjusted realisation, under-book the milling-charge revenue and misread the mill’s actual per-quintal realisation. Discipline requires the value-cut register to feed the milling-charge revenue line so the per-consignment quality-cost is visible in the operating margin analysis.

• Section 43B(h) MSMED delay not tracked at the miller end. Where the mill holds MSME registration in the micro or small enterprise category, delays by the state agency beyond the Section 15 MSMED Act 45-day window trigger a Section 16 interest claim available to the miller (at bank rate plus 3 percent, compounded monthly). Mills that don’t track the acceptance-date to remittance-date interval at invoice level leave the interest claim un-invoiced and lose realisable revenue. The same delay is a Section 43B(h) disallowance at the state agency’s income-tax computation, and while that is the agency’s exposure rather than the mill’s, it is the mill’s data that surfaces the delay for both sides.

How a reconciliation platform handles this

A purpose-built CMR reconciliation platform for the rice-milling ecosystem ingests the state agency’s paddy Delivery Order register, the mill’s shift-level milling register, the FCI depot’s Acceptance Note stream (or the mill’s dispatch note reconciled to a manual Acceptance Note capture), the mill’s own by-product sale invoice register to biomass, solvent-extraction, and distillery counterparties, the milling-charge invoice register to the state agency, and the mill’s Form 26AS extract at PAN — and produces a per-Delivery-Order CMR-agreement view that closes the loop from paddy inward to milling-charge realisation. The platform runs the outturn ratio calculation shift by shift against the 67 or 68 percent floor and surfaces tracking shortfall with early-warning alerts before the delivery window closes; it maps FCI value-cut consignments to the milling-charge realisation adjustment automatically so the per-consignment quality-cost is visible; it keys every milling-charge invoice to Section 8 Sl. 4 code 1023 for TDS reconciliation against Form 26AS; it closes by-product weight against paddy inward within tolerance; and it tracks Section 43B(h) MSMED delay at the invoice-to-remittance level for interest-claim visibility. Match rate improvement of 51 to 88 percent on the paddy-to-CMR-delivery reconciliation chain, combined with an ISO 27001:2022 posture and DPDP Act 2023 aligned data handling, is what makes the platform an infrastructure investment for a mid-tier rice miller running multi-agency CMR contracts across successive Kharif Marketing Seasons rather than a spreadsheet substitute.

Cross-cluster bridges and where to read next

The CMR chain in this article is one operating case within the broader rice sub-cluster of Agro Processing. For the export-side counterpart where a rice miller runs the DGFT basmati chain against the Minimum Export Price and the RoDTEP remission-rate schedule, read Basmati rice export reconciliation MEP and RoDTEP and the branded-processor walkthrough in KRBL India Gate basmati mandi procurement reconciliation. For the branded-processor export cycle at LT Foods scale, LT Foods Daawat basmati export reconciliation covers the shipping-bill to e-BRC settlement discipline. The dairy-side cornerstone of the Agro Processing cluster that establishes the multi-hop procurement reconciliation template is Dairy reconciliation fat plus SNF milk procurement India. The overall sub-vertical map is at Agro processing reconciliation — nine sub-verticals master. The commercial pillar for the entire Agro Processing sub-cluster is Agro processing reconciliation software India; the broader authority is reconciliation software India.

The five FAQs below address the operational questions Indian rice mill controllers and CMR-agreement finance leads ask most often when implementing structured paddy-to-delivery reconciliation under the FCI Custom Milling Rice programme.

Terra Insight Editorial Team Reconciliation Infrastructure

Content authored by practitioners with experience at Amazon India, Intuit QuickBooks, and the Tata Group. Meet the team →

Published 12 July 2026

Domain expertise

TDS Reconciliation GST Input Credit Platform Settlements NACH Batch Matching Bank Reconciliation Form 26AS Matching ERP Integrations Enterprise Finance Ops

Reviewed by

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Navin Krishnan

Managing Director & Founder — Terra Insight

Ex Amazon India · Intuit QuickBooks · Tata nexarc

ISO 27001:2022 Patent Pending Incorporated 2024