The revision in the minimum support price of wheat has helped the farmers of Punjab, but put the state’s wheat processing units in a bind. Punjab has over 70 roller flour mills.
However, most units are operating below capacity. Naresh Ghai, president of the Roller Flour Millers’ Association of Punjab, said most units were running at 30-40 per cent capacity, adding that to remain viable, they needed to utilise at least 50 per cent of their capacity.
The state government imposed a purchase tax of 4 per cent on wheat in 2005, from which it collects Rs 10 crore in revenues. This is an insignificant amount for the state government, but substantial for the small and medium entrepreneurs who run the flour mills.
In no other state of India is a purchase tax of 4 per cent imposed on flour millers, Ghai added. Only the Union Territory of Chandigarh follows Punjab’s example and levies a 4 per cent purchase tax on wheat.
Millers are allowed to procure wheat in the open market, but this option is available for only two months of the year — April and May. Approvals from the Punjab Mandi Board are mandatory for the flour millers to buy directly from the market, but rampant corruption in the board takes its toll on the SMEs’ margins.
“The Board’s unnecessary delays in granting permission drains our energy and time,” said one flour mill owner on condition of anonymity.
The Open Market Access Scheme of the Union government, under which flour millers are allocated wheat, is not of much help, as wheat was available at Rs 1,420 per quintal between October and December. The millers did not buy at this price, which they considered unviable.
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The price was slashed to Rs 1,230 per quintal in January and this gave them some respite.
Since Punjab is a major wheat growing state, no attention is paid by the Union government to the issue of availability of wheat. Most of the wheat produced is procured by government agencies, leaving the farmers with little marketable surplus, and the millers in difficulties.
The state’s flour mills sent a proposal to the Union government that the Open Market access Scheme be kept open for a larger part of the year, but it was not accepted.
In order to evade the high incidence of taxation (4 per cent purchase tax, 2.5 per cent kaccha arhti commission and 1 per cent pucca arhti commission) and the high cost of wheat in Punjab (Rs 1,100 per quintal), some millers have resorted to importing wheat from Delhi and western Uttar Pradesh.
Wheat is available at a discounted price of Rs 950 per quintal in UP, allowing millers to save on cost even after paying freight charges and inter-state tax.
The quota earmarked for flour mills for fortified atta under the Public Distribution System since December 2009 has helped the flour mills in Punjab to push their capacity utilisation to 40 per cent.
But while flour mills in states such as Gujarat and Madhya Pradesh are in expansion mode, they are living a precarious existence in Punjab — the wheat bowl of India.