The drained coffers of the Punjab government will get some relief in the form of taxes levied on the union government that has started procuring paddy from the state from October 1.
The state government is expected to make `2,250 crore by the end of the procurement season, and if top officials in the finance department are to be believed, it will give "temporary relief to the state's fatigued economy". The money will help the state clear a month's salary-and-pension bill of `2,000 crore. Some government employees in the past months did not receive regular pay.
The state government has a target of procuring 135-lakh tone paddy in the current kharif season, for which the Reserve Bank of India has sanctioned `23,760 crore as procurement limit. Out of this money, `17,600 crore has arrived already and the rest is expected later this month.
Under the Punjab Agriculture Produce Marketing Act, the state government has imposed 12% tax on the union government for procuring paddy for the central pool. Of the total tax, 5% is purchase tax, 3% infrastructure development (ID) cess and 2% rural development fund (RDF) and market fee.
"The money generated by the tax on procurement will give temporary relief to the state government indeed," state's principal secretary finance DP Reddy agreed. He said the government was earning from the procurement of foods grains for many years, but with increase in the minimum support price (MSP) and the quantity procured from the state, there had come a sudden jump in the tax rates and, with it, addition to the state's finances.
In the current procurement season, the union government has fixed `1,345 per quintal as the MSP of paddy. The five state-level procurement agencies and the Food Corporation of India (FCI), which procure food grain on behalf of the union government, also deduct taxes and transfer to different state departments. Of the 12% tax charged, 5% goes into consolidated fund of the government, 2% market fee to the state agriculture marketing board, and rest to Punjab Infrastructure Development Board (PIDB) and the department of rural development and panchayats.
In the remaining financial year, state finance minister Parminder Singh Dhindsa expects a revenue of `12,000 crore, and tax on paddy procurement to make major quantum of it. "Twice in a year, the state government gets assured income, and the amount is considerable, which will help improve the state's fiscal health," he said.