Punjab to reduce levies on Basmati to boost prodn

Written by Sandip Das | New Delhi | Updated: Jun 12 2013, 07:10am hrs
In a bid to switch a portion of the states paddy growing areas to Basmati, the Punjab government is set to unveil a series of tax incentives for the procurement of the aromatic long-grain rice in the state.

The state government is expected to notify abolition of at least two levies rural development and infrastructure development cess of 5% on the procurement of Basmati by traders and exporters. Even in the case of value added tax (5%) levied on grain purchases, the state will soon announce a policy of refunds on VAT to the exporters.

We will be announcing a series of incentives prior to the kharif sowing season so that farmers are encouraged to grow Basmati in place of the common variety of paddy, DS Grewal, secretary, food and civil supplies, Punjab, told FE. He said that a formal notification is expected shortly.

The rationale behind the tax incentives is that farmers shift a chunk of the area under common variety paddy to less water-intensive Basmati, which fetches better price in the global as well as domestic markets. This is expected to boost food processing in the state.

The Punjab government is aiming at increasing the area under Basmati in the state by two to three lakh hectares in the kharif season. At present, around 7.5 lakh hectare of land is under Basmati rice cultivation.

Basmati rice exporters from Punjab recently met CM Parkash Singh Badal to press for lowering of levies on grain procurement, which is currently at 14.5%. These levies include VAT or sales tax (5%), market or mandi fee (2%), Arthiya commission (2.5%) and rural development and infrastructure development cess (5%).

Besides reduction in some of the levies, the state government is set to liberalise the system of grain purchase for Basmati, where exporters or traders could not buy directly from the farmers.

Through reduction in procurement taxes, farmers' realisation from Basmati rice would increase, which would help increase areas under aromatic rice cultivation, a leading rice exporter said.

Rice exporters from Haryana met CM Bhupinder Singh Hooda and asked him to reduce the 11.5% levy on paddy procurement for

encouraging farmers to shift to Basmati. Currently, around 7.5 lakh hectare of total rice area of around 2.75 million hectare in Punjab is used for Basmati cultivation. The state government aims at increasing Basmati acreage to around one million hectare in the next five years.