State govt rejects Centre’s composite MSP proposal
Wednesday, 02/01/2013
http://www.tribuneindia.com/2013/20130102/punjab.htm#1
Chandigarh : The Punjab Government has rejected the Centre’s proposal to introduce composite minimum support price (CMSP), which is MSP plus taxes, for procurement of foodgrain for the central pool.
The Centre has proposed 5 per cent taxes and other levies over and above the MSP fixed by it for wheat and paddy procured for the central pool.
At present, Punjab imposes about 15 per cent taxes and levies, the highest in the country, on the foodgrain procured for the central pool or purchased by private parties and traders. These include 5 per cent VAT, 2 per cent market fee, 2 per cent rural development cess, 3 per cent infrastructure development cess and 2.5 per cent commission paid to arhtiyas or commission agents.
The Centre says that these taxes have not only increased the subsidy burden but are also keeping away private traders from purchasing foodgrain.
The Centre has proposed a fixed commission for agents, which will remain unchanged even if the MSP is revised. The Centre, in fact, wants to do away with the arhtiya system.
“If the MSP is raised to help the farmers, arhtiyas should not benefit by it”, says Centre’s letter to Punjab. However, the state government has rejected the Centre’s proposal for a fixed commission for arhtiyas.
However, the Chairman of the Punjab Mandi Board favours appropriate steps in this regard.
In a letter addressed to the Director, Ministry of Consumer Affairs, Government of India, Punjab's Principal Secretary, Finance, Satish Chandra, has pleaded that any reduction in taxes and levies to 5 per cent would cause the state an annual loss of Rs 3,000 crore.
Justifying the taxes and levies, the state government has stated that it has created a huge infrastructure, such as a road network and market yards for marketing foodgrain and funds were required to maintain the infrastructure with the Centre not providing any help for the same.
On arhtiyas, the state government has written to the Centre that the system of commission agents was a well-established one and it was not possible to eliminate it altogether. Cautioning the Centre, it has requested the Centre not to tinker with the system as this could jeopardise national food security.
The government has argued that being a border state, Punjab had no industrial base and taxes on foodgrain remained one of its main revenue sources. Hence, any reduction of the taxes could undermine the state’s finances. The Centre wants that the arhtiyas be paid a fixed commission of Rs 27 per quintal on paddy and wheat.
The Centre-State Clash
The Central Government has proposed 5 % levies over and above the MSP for wheat and paddy
Punjab imposes about 15% taxes and levies on foodgrain procured for central pool, the highest in the country
State government says that any cut in the levies will undermine the state's finances
It has asked the Centre not to tinker with the well-established arhtiya system
It has also rejected the Centre’s proposal for a fixed commission for arhtiyas
