New Delhi: Amid the raging protests against the disputed agrarian laws passed by the Centre, a far more widespread and deeper controversy has emerged over the taxes levied across state agricultural markets.
Members of the ruling Bharatiya Janata Party have been criticising the Agricultural Produce Market Committee tax in an effort to counter the protests, and endorsing the newly enacted laws with the claim that they will do away with such a tax.
Alleging that only farmers from Punjab are involved in the protests, senior BJP leader and Rajya Sabha MP Sushil Modi recently said, “The mandi tax in Punjab is 8%, which is good income for the state government as well as middlemen but the farmer suffers. The new agricultural laws of the Centre make a dent in this system, which is why middlemen and some state governments are instigating the farmers (to continue their stir) in order to tarnish the Prime Minister’s image.”
While Sushil Modi believes that the state government and middlemen are profiting from the mandi tax, official documents obtained by The Wire reveal that the Union Ministry of Finance had justified such a tax imposed in the mandis and the Union Agriculture Ministry had supported it too. The ministry had said that this amount is collected for services offered at the mandis.
In its recommendations, the National Farmers’ Commission, also known as the Swaminathan Commission, set up in 2004 to address the agrarian crisis, asked the states to urgently improve the APMC system.
Also read: Reality Belies Modi Govt Claims of Implementing Swaminathan Commission’s Report
In this regard, the Commission had also said, ‘Levy of market fees as a regular tax on agricultural produce as in model APMC Act/Rules may be reviewed and if necessary, States may be encourages to shift to a service charge on the basis of use of services by farmers instead of compulsory levy. This will go a long way to ensure single national market.’
Giving preference to this recommendation, the then government included it in the 201 recommendations of the ‘National Farmers Policy’ in 2007, which the Ministry of Agriculture had planned to implement. However, the documents show that the Ministry of Finance had said that the recovery of such amounts in the mandis is justified because in return, facilities are offered to people there.
The finance ministry, in its letter to the Ministry of Agriculture and Farmers Welfare, said, “Market fee is not a tax and the concerned APMC provides facilities in mandis in exchange for the amount.”
The department also said that the government is considering tax reform in the form of GST, under which a provision will be made to levy uniform duty on agricultural products across the country. Since the introduction of GST, such charges have also reduced.
Interestingly, the Ministry of Agriculture and Farmers Welfare had supported this provision and, on these lines, model APMC rules were issued to the states in November, 2007.
These rules make a provision to levy market duty on agricultural products. Based on it, 16 states amended their APMC Act while four states made partial amendments. Seven states do not have an APMC Act.
The Swaminathan Commission, in its third report submitted on December 29, 2005, said, “The government needs to abolish the market price on agricultural products and the charges levied on many services such as loading, unloading, weighing, etc. Instead, there should be only one service charge to use all facilities in the market.”
The Commission argued that due to different charges the same product is taxed twice many a times. This creates a disruption in trade not only between two states but also from one market to another within the state itself.
Also read: What Will the End of the Road for APMCs Look Like?
Mandi tax across states
A major misconception being spread against mandi tax is that till now farmers had to pay tax to sell their produce in the mandis, but the new law will grant them respite from it.
However, this is not true. In the mandis, only traders (government and private) have to pay market fees or mandi charges, rural development fees and commissions to middlemen (known as the arhatiya commission).
According to the Food Corporation of India, an agency of the government of India, market tax is charged at 8.5% in Punjab and 6.5% in Haryana. Of this, Punjab charges 3% market fee, 3% rural development fee and 2.5% commission.
In Haryana, the figure is 2% market fees, 2% rural development fees and 2.5% commission.
Similarly, during wheat procurement this year, a market tax of 3.6% was levied in Rajasthan. In addition, arhatiya or society commission of Rs 27 per quintal of wheat purchased was also paid.
There was a market tax of 2.5% for wheat procurement in Uttar Pradesh and 2.2% in Madhya Pradesh.
Similarly, market tax levied during paddy procurement in Punjab and Haryana was 8.5% and 6.5% respectively.
Photo: Commission for Agricultural Costs and Prices
Meanwhile, during paddy procurement in the previous year (2019-20), market tax of 2.5% was imposed in Uttar Pradesh, 2.2% in Madhya Pradesh, 2.2% in Chhattisgarh, 1.05% in Maharashtra, and 1% in Andhra Pradesh. Along with this, a society commission of around Rs 32 per quintal of paddy is also to be paid to the trade board in these states.
Mandi tax was the lowest in Kerala at 0.07%. In Karnataka, agricultural products attract a 3.5% commission charge.
Photo: Commission for Agricultural Costs and Prices
In protest against three controversial farm bills passed by the Central Government – Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Bill 2020, Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Act, 2020 and Essential Commodities (Amendment) Bill 2020 – farmers have been holding demonstrations at the borders of Delhi for the past one month.
Farmers fear that with these laws the government is destroying the established system of providing MSP, and once it is implemented, farmers will be at the mercy of traders.
The Modi government, on the other hand, has repeatedly denied these allegations, and instead, has been describing the new laws as ‘historic agriculture reforms’. It has been claiming that they have been creating an alternative system for the sale of agricultural produce.
According to the newly enacted laws, no tax will be paid on trading outside the APMC mandis. However, the farmers assert that the private markets will impose their own tax despite exemptions provided by the government, which will most likely profit the trader and private companies.
Following the farmers’ agitation, the Ministry of Agriculture has offered that the states may be allowed to impose taxes on private markets outside the APMC.
Translated from the Hindi original by Naushin Rehman.