High taxes in Punjab, Haryana put off pvt traders | chandigarh | Hindustan Times
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High taxes in Punjab, Haryana put off pvt traders

chandigarh Updated: May 10, 2013 01:06 IST
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Despite being among the highest producers of wheat and rice in the country, Punjab and Haryana have been driving out private traders from their markets because of the country's highest tax rate on foodgrain transactions.

This has resulted in farmers becoming more dependent on government procurement agencies for selling their produce at the minimum support price (MSP), which is much lower than the market price offered by private traders who target states where they have to pay less tax.

This information was revealed by the Centre to the Punjab and Haryana high court on Thursday in an ongoing case with regard to the non-availability of enough godowns for storing foodgrains.

The total taxation, including value-added tax (VAT), market fee and other charges on wheat, is the highest in Punjab (14.5%), followed by Haryana (11.5%). The taxation on rice is also highest in Punjab (14.5%), followed by Andhra Pradesh (13.5) and Haryana (11.5%).


The high taxes in Punjab and Haryana have also increased the burden of procurement of wheat and rice on government agencies, since the latter have to procure beyond the government's need for providing necessary MSP to the farmers. The Centre has informed the court that the situation has also created a problem of accumulation of stocks in both states and the constraint of finding suitable storage facilities.

The court has been told that due to over-procurement, stocks have to be managed in covered and plinth (CAP) structures and also in kutcha (non-permanent) structures.

The HC has been informed that the problem of accumulation of huge quantities of foodgrains in Punjab awaiting evacuation is mainly arising due to high taxes imposed by the state government and despite taking up the issue with the latter, a positive response is awaited.

The union ministry of food and public distribution has informed the court that excessive procurement by government agencies not only causes problems of accumulation of old stocks and storage but also results in depletion of availability of foodgrains for consumers in the domestic market. Therefore, the union government has to intervene from time to time by offloading stocks in the open market to maintain the availability of foodgrains and to keep prices under check.

The court has been informed that it is the Food Corporation of India (FCI) that prepares the foodgrain movement plan to move stocks procured above the Targeted Public Distribution System (TDPS) from surplus states, including Punjab, Haryana and Madhya Pradesh, to other states.

State Tax on wheat (%) Tax on rice (%)
Punjab 14.5 14.5
Haryana 11.5 11.5
Madhya Pradesh 9.2 4.7
Andhra Pradesh - 13.5
Uttar Pradesh 8.5 9.0