States' views sought on uniform tax levy on wheat, rice

The Centre has sought the views of the states on uniform taxes on wheat and rice collection in the country to curb market distortions, an official said.

"We have written to state governments to give their views on levying uniform taxes on wheat and rice procurement," a senior Food Ministry official told PTI.

High taxes in some rice and wheat producing states have discouraged private traders' participation, resulting into higher procurement by the central and state agencies, the official said.

"There has to be rationalisation of taxes. If there is uniformity of taxes, private traders will not wait for open market sale scheme (OMSS) of the Centre to purchase wheat. They will purchase from farmers directly," the official said.

Bulk consumers like biscuit makers and flour millers especially wait for OMSS to buy wheat at subsided rates.

Currently, taxes on wheat and rice vary from state to state. The taxes include purchase fee, sales tax, market fee, arhtiyas' commission and other charges.

According to official data, taxes on wheat procurement in Punjab is highest at 14.5%, followed by Haryana at 11.5%, Madhya Pradesh at 9.2% and Uttar Pradesh at 8.5%, as per the official data.

Similarly taxes on rice purchase in Punjab is maximum at 14.5%, followed by Andhra Pradesh at 12.5%, Haryana at 11.5% and Madhya Pradesh at 4.7%.

The official further said higher procurement creates temporary storage problem and escalates the Centre's food subsidy bill.

Also, market gets distorted even when some states announce bonus over and above the support price, the official said.

"When states announce bonus on wheat, private traders are also compelled to pay that amount and this increases the purchase cost of wheat," he added.

In the absence of private trade participation, the FCI and state agencies's wheat procurement had increased by 36% to 38.1 million tonne in 2012-13, while their rice purhases rose 14.6% to 40 million tonne in the same period.