Mint farming likely to be hit by mandi tax

Mint farming and processing is likely to be hit with the imposition of ‘mandi tax’ on mint oil by the Uttar Pradesh government, traders said. Traders fear that the additional burden of tax along with the appreciation of Indian rupee could hamper the growth story and squeeze the margin of exporters.

Trading and movement of the commodity has been affected with the state government imposing the tax with retrospective effect from 2004, they said. Mint farming and processing is concentrated in the state of Uttar Pradesh with 95% share in farming and 75% share in processing. India is one of the world’s largest producers of mentha oil and exports nearly 80% of its produce.

“Farmers transporting goods to markets are also penalised and have to prove their credentials. Processors and traders have to spend crores of rupees on retrospective effect,” Aravind Nanda, a prominent processor and trader told FE.

“Mandi tax of 2.5% was initially imposed by the previous government in 2004 but not implemented due to resistance from the trading associations. The tax has been activated by the present government and penalties imposed on traders,” Nanda said. Traders have obtained a stay from the Allahabad High Court on the penalties but do not see any hope on the tax burden.

Nanda bemoans that the additional burden could kill the nascent industry, which brings in forex revenue of more than Rs 1,000 crore. “The appreciation of the Indian rupee has hit the exporting margins by 7% and the additional tax burden will impact our ability to compete with other origins,” he added. While exports of the commodity has gone up during April-February 2007-08 by almost 116% in volume terms, the unit value realisation has suffered and come down from Rs 676.67 per kg in 2006-07 to Rs 615.96per kg during this fiscal.

The industry is valued at Rs 1,200 crore and the mint product exports constitute a third of the total spices exports. The commodity is mainly used in the pharmaceutical industry. A sizeable amount is also consumed in the manufacture of toothpaste, chewing gum, and pan masala.