Vexing VAT piles misery on grain traders

"VAT has turned a vexation for traders. It has resulted in higher taxes on foodgrains. As a result, the traders' margin has fallen sharply. It is hardly between Rs 5 and10 today," says Mysore APMC Secretary M R Satish.

Explaining how VAT and the consequent introduction of free inter-State have affected even grain movement, he says raw paddy itself is now being sent to Kerala from Mysore. This has ground work to a halt in at least 100 rice mills in Mysore.

These mills have turned sick particularly in the last few months without required paddy flow. As a result, even raw material like paddy husk and others are not available in the market, resulting in its by-product scarcity.

"Around 150-200 truck loads of paddy is moving out of Mysore every day. This is owing to the free inter-State grain movement following introduction of uniform VAT across the country," he says.

APMC ex-President N Nagaraj, a commission agent in the APMC, adds because of the free paddy movement to the neighbouring state hardly 3-4 rice mills are presently working in Mysore. They are engaged in producing beaten rice to meet the standard supply in the local market.

Similarly, the normal supply of Andhra variety rice was not coming to the APMC. Rice markets like Siriguppa and Davangere have come to depend on other places instead of local supplies. Consequently, this has resulted in a price-push by around Rs 350 in the last few weeks.

Because of the rising commodity rates, traders have stopped getting individual bulk loads. Four or five traders, wholesalers and retailers, get a truckload and share it among themselves.

Bulk-load supply has fallen particularly in respect of pulses. Pulses have to come to the Mysore market from North India and their rates here depend upon the rates existing there, he says adding that even commission agents have lost business in the APMC. There are about 1,000-1,500 traders in the Mysore APMC, including commission agents.

Nagaraj, who is also a Director of the Mysore Merchants' Co-operative Bank, blames the high taxes imposed on foodgrains for the price spiral. "Particularly, after the introduction of VAT, tax rates have gone up. Now, a trader has to account for every thing, for each and every load," he says.

"Price-rise, higher taxation and other factors have forced small traders out of business because now they need to invest double the amount of what they were doing earlier," adds rice trader S K Mishra.

"Instead of Rs. 2.5 lakh, they have to invest Rs. 5 lakh today. Capital investment is becoming difficult for us," he says. Nagaraj supports Mishra and says, bank loans have become beyond affordable for these small operators because of the high interest rates.