The Food Corporation of India (FCI) has paid more than R7,500 crore in the last fiscal to states as taxes or levies on the grain procurement.
According to a statement submitted in Lok Sabha by food minister Ram Vilas Paswan on Tuesday, the corporation paid more than R3,567 crore and R1,796 crore as taxes to Punjab and Haryana respectively in 2013-14. These two states contribute the highest amount of foodgrain mostly consisting of rice and wheat to the Centre’s procurement drive.
The government agency also paid taxes or levies worth of R1,038 crore to Andhra Pradesh and R334 croe to Chhattisgarh government in last fiscal.
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As per the food ministry data, FCI had paid R6,109 crore as taxes or levies to states in 2011-12.
In the five largest grain-producing states with a surplus — Punjab, Haryana, Andhra Pradesh, Chhattisgarh and Odisha — these levies account for 10-15% of the minimum support price (MSP) given to farmers.
The highest taxes imposed on grain procurement are in the states such as Punjab (14.5%), Andhra Pradesh (12.5%), Haryana (11.5%), Odisha (12%) and Chhattisgarh (9.7%).
Terming that high rate of taxes or levies on grain procurement leads to rise in procurement costs of FCI, Paswan said “time to time we have requested state governments for reduction of taxes being imposed by them and since theses taxes or levies are statutory in nature, it is not possible for the government to take any unilateral decision on the matter.”
The Commission for Agricultural Costs and Prices (CACP) in its price policy for rabi crops for the marketing season 2014-15 had stated that “the Centre needs to review its open ended procurement policy and take a policy decision to limit procurement from states that imposes taxes and levies beyond 5% of MSP”.
“This is necessary step to bring about rationality in pricing, contain the food subsidy bill and getting the markets right,” CACP had observed in its report.
However, Ashok Gulati, former chairman of CACP told FE that “the higher taxation and levies drive out the private players from grain purchase and distort the market, impacting processing and value-added industry”.
A food ministry official said that the state government needs to reduce high state-level taxes in a phased manner as these levies are also adding to the country’s food security bill. “But we also acknowledge that these taxes on procurement are the key sources of revenue specially for Haryana, Punjab and other states,” the official noted.
