Rush to buy wheat in Punjab

Private wheat firms want to avoid paying 11.5 per cent tax.

Private players, including traders, in Punjab are entering into contracts with farmers while the wheat crop is still in the fields, to avoid paying the high tax, which is 11.5 per cent. The tax payment can be avoided if the produce is not purchased at the mandis.

"The high taxes, coupled with high freight cost, can discourage private players from procuring wheat in Punjab and Haryana from mandis," said Raj Sood, a commission agent in Khanna. Sood procures wheat for Cargill and the Australian Wheat Board.

At present, Punjab and Haryana charge 11.5 per cent and 10.5 per cent, respectively, in the form of various taxes, the rates being the highest among the northern states. In Uttar Pradesh it is 8 per cent, in Rajasthan 7.5 per cent, and in Madhya Pradesh 4 per cent (the lowest).

In Punjab, the break-up of the 11.5 per cent is this: 2 per cent to the rural development fund, 2 per cent market fee, 2.5 per cent kaccha arhitya, 4 per cent VAT, and 1 per cent as infrastructure development cess).

So, for a quintal of wheat, including all taxes, buyers have to pay Rs 960 in Madhya Pradesh, and Rs 980 in Rajasthan.

As far Punjab is concerned, the buyer has to pay Rs 1,000. Moreover, compared to other states, the freight cost in Punjab and Haryana is high.

Some farmers in Punjab and Haryana have even taken advance money from companies and private traders and promised to sell to them this season.

A farm source said those who were making contracts with farmers were small-time players. But it could not be ascertained whether they were buying for themselves or for corporate giants.

The companies are offering Rs 950-1,000 per quintal to farmers for their wheat. This is much higher than the minimum support price of the government of Rs 750 plus a bonus of Rs 100, making it Rs 850 per quintal this year.

Commenting on the arrival of wheat this year, Sood said last year 992,000 quintals of wheat arrived at the Khanna mandi, "but this year the hailstorm has damaged the crop, and so we are expecting a shortfall in arrival of 200,000-250,000 quintals."

So if the buyer purchases wheat from Punjab and transports it to Kerala, he has to pay Rs 175 per quintal as freight charges, whereas if he procures it from Madhya Pradesh, he has to pay Rs 115. The charges from Rajasthan are Rs 154 per quintal of wheat.

Last year, of the 992,000 quintals of wheat that arrived at the Khanna mandi, which 919,000 quintals were procured by private agencies and the rest by government agencies.

Also, according to commission agents, last year private players offered Rs 15-20 per quintal more than the government agencies.

"Till date, the companies have not approached us. Punjab is one of the costeliest markets for the big players beacuse of high taxes coupled with high freight cost might prevent the private operators to lift wheat from the mandis," said Akshay Bajaj of Shri Nath Ji Trading, another commission agent in Amritsar, who last year procured wheat for Adani and Cargill.

He added that the ban on future trading of wheat might also discourage the leading players to enter the market.

Besides the corporate companies, the official agencies involved in the procurment of wheat in Punjab are FCI, PUNSUP, Markfed, Pungrain, Punjab Agro.