Govt to broadbase food grain procurement to avoid high taxes

Double whammy for procurement agencies, as on the one hand, they pay taxes and on the other, selling prices remain subdued even below MSP

The ministry of agriculture has asked states to rationalise taxes levied on food grains, and has decided to broad base its procurement of food grains so as to avoid paying excessive taxes levied by some states on the procurement agencies.
 
According to a report prepared internally, the government burden is increasing through such levies as on one hand, the procurement agencies are paying taxes for food procurement from these states and on the other hand, these agencies are not in a position to offload the produce in the market at remunerative prices since the selling prices remain subdued and depressed even below the minimum support price (MSP).

 
Thus, while the states have been benefiting from the food procurement, the government is losing on both counts through procurement in depressed market conditions and payment of excess taxes. The states that levy taxes in the range of 11.5-15 per cent over and above the procurement prices include Punjab, Haryana, Andhra Pradesh and Rajasthan.
 

Currently, procurement agencies have procured surplus cotton from farmers and due to the slump in domestic demand, the government had to ease export norms to facilitate outgo of cotton.
 
Earlier, the ministry of agriculture had asked states to desist from giving bonuses above the minimum support price (MSP) of food grains following such announcements by Chattishgarh and Madhya Pradesh. MSP is the price at which the government buys grain from farmers. Accordingly, it has been decided that procurement will be curtailed from states that offer bonuses above the MSP.

 
FCI has to pay taxes apart from the MSP and bonus, due to which it makes losses. This has resulted in higher subsidies for the government.
 
The consumer affairs ministry has also formed a committee to recommend ways to restructure FCI and reduce the functional and cost inefficiencies in the organisation. The eight-member panel is chaired by Shanta Kumar, BJP Member of Parliament from Himachal Pradesh, and will have the chief secretaries of Punjab and Chhattisgarh as members. The high-level committee will also invite suggestions from public and stakeholders, including private sector firms, on management of food grains.

 
Food Corporation of India (FCI) is the nodal agency for procurement and distribution of food grains and plays a key role in strengthening the public distribution system (PDS). Restructuring FCI will primarily entail separating the procurement, storage and distribution activities of FCI to reduce wastage.
 
It will also suggest measures, within three months, to reorient FCI’s role in minimum support price (MSP) operations and look into efficient storage models, low-cost options of moving grains and upgrading of technology.