1. Haryana, Punjab nix FCI rejig

Haryana, Punjab nix FCI rejig

With Haryana and Punjab getting well over Rs 5,500 crore by way of a mandi tax on wheat and rice procured in their state in FY15, both have refused to agree to a key recommendation of the high-level committee (HLC) on restructuring the Food Corporation of India.

By: | Updated: June 24, 2015 1:28 AM

With Haryana and Punjab getting well over Rs 5,500 crore by way of a mandi tax on wheat and rice procured in their state in FY15, both have refused to agree to a key recommendation of the high-level committee (HLC) on restructuring the Food Corporation of India — the Shanta Kumar-led HLC had recommended the mandi tax be made uniform across states and set at around 3-4%, reports Sandip Das in New Delhi.

Mandi taxes range from 2% in Gujarat and West Bengal to 11.5% in Haryana and 14.5% in Punjab — the last two are the ones where the most procurement takes place. Andhra Pradesh levies a 12.5% tax, Odisha 12% and Chhattisgarh 9.7%. Last year, 18.4 million tonnes of wheat and rice were procured from Punjab and 8.9 mt from Haryana.

fci

According to food ministry sources, both Haryana and Punjab have blamed fiscal constraints for their inability to cut taxes.

Even Andhra Pradesh, which got R1,038 crore as taxes from FCI, has refused to cut its levies on paddy procurement.

What is not clear is whether these states will continue to oppose reduction of levies in the future. The HLC had recommended that states which suffered a revenue loss could be given more funds for crop-diversification. So if Punjab encouraged the growing of maize, farmers could be given a per-acre subsidy; the money for this would come from the central government and would equal the lowered mandi taxes in the state.

In the FY16 budget, however, the Centre had provided for just Rs 500 crore for this purpose. The question is whether states will reduce their mandi taxes if the Centre increases this amount in the FY17 budget to compensate them for losses in revenue.

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