Pawar urges states to cut levies

Agriculture and Food Minister Sharad Pawar today urged the governments of Punjab and Haryana to reduce mandi charges and other levies on wheat purchases, but gave a factually incorrect argument to support his plea.

The minister said in a press conference that if the state levies, which aggregate to more than 10 per cent in Punjab and Haryana, were abolished, the farmers would get around Rs 95 per quintal higher than the minimum support price (MSP) of Rs 850 a quintal for wheat.

Analysts, however, point out that the levies are not paid by the farmers but by the purchasers. The farmers get only the price paid to them by a private purchaser or an official procurement agency. The abolition of the levies, therefore, will benefit the buyers and not the farmers.

Since, the bulk of the market arrivals in Punjab and Haryana are picked up by the Food Corporation of India (FCI) or state agencies on behalf of the FCI, the levies are paid by these agencies. This, in a way, tantamount to transfer of resources from the Centre to the states.

Any reduction in the levies on wheat would result in loss of revenue for state governments and a gain for the Centre because of reduction in overall procurement costs.

Pawar's comment had come in response to the demand by Punjab Chief Minister Parkash Singh Badal that the Centre should further increase the procurement price of wheat by Rs 100 a quintal for the. Similar demand had come from some farmers' unions as well.

The issue of reduction in state levies has been discussed with the state governments in the past as well but they have invariably expressed their reluctance to take on the revenue cut unless the Centre was willing to reimburse them.

The practice of announcement of bonus, instead of an increase in the procurement price, is also not appreciated by the states as some of the levies and other charges are calculated on the basis on the MSP and not MSP plus bonus.

The farmers can gain from the reduction in the levies only if a policy decision is taken to pass the benefit of the reduction on to the farmers by way of higher prices or increased bonus,analysts feel.