The Hindu Business Line : Lower wheat procurement: Central team visiting UP

Possible reasons
High incidence of off-mandi transactions likely
Farmers may be holding on to produce hoping better price
Actual purchases have so far been at 1.79 lt against targeted 15 lt

New Delhi May 23 With wheat procurement in Uttar Pradesh turning out much below expectations, a Central team is visiting Lucknow on Thursday to investigate allegations of large-scale evasion of taxes by the private trade.

The team comprising the Additional Secretary in the Department of Food and Public Distribution, Mr Vivek Mehrotra, and nominees from the Ministry of Home Affairs and the Food Corporation of India (FCI) will visit mandis in the State to "get a first-hand picture of the situation and take appropriate action", official sources told Business Line.

The Centre had targeted to procure 15 lakh tonnes (lt) of wheat from UP in the current 2007-08 rabi marketing season (April-June), whereas actual purchases have so far been just 1.79 lt.

Mandi arrivals

Moreover, progressive arrivals in mandis till Tuesday, at 7.74 lt, have been lower than even the 8.03 lt during the corresponding period of 2006-07.

"For a State expected to produce 255 lt (over a third of the country's estimated output of 735 lt) and all reports suggesting a bumper crop this year, such low arrivals are a mystery. This means either farmers are not selling now in anticipation of higher prices or there is high incidence of off-mandi transactions," the sources said.

While the Centre has no issue with farmers holding on to their crop ("it is their right"), this is not so, however, with respect to off-mandi transactions.

"The rules stipulate that any purchase by traders or flour millers has to be done through mandis. And if that is the case, the concerned buyers are liable to pay the 2.5 per cent mandi fee and 4 per cent sales tax levied by the UP Government," they noted. But in reality, transactions are happening outside the mandis, leading to evasion of taxes.

`Not a concern'

For the Centre, tax evasion per se is not a concern, as the revenues from sales tax or mandi fees accrue to the State Government and "it is they who are losing out".

But the problem comes when FCI and other agencies buying wheat for the Central pool are required to fork out these taxes, placing them at a disadvantage vis-à-vis the private trade.

"The taxes work out to over Rs 55 per quintal. While we can only give the official procurement price of Rs 850, the traders can offer a better rate to farmers by evading the taxes," the sources pointed out.

At the same time, the sources acknowledged that the tax-evasion issue was "tricky" because there is a federal dimension involved. Neither does the current political situation allow the Centre to take on a newly elected State Government.

Meanwhile, total wheat procurement for the Central pool has touched 99.72 lt, against the targeted 151.5 lt, with the corresponding figures being 63.83 lt (75 lt) in Punjab, 31.06 lt (45 lt) in Haryana, 1.79 lt (15 lt) in UP, 874 tonnes (10 lt) in Bihar, 19,209 tonnes (three lt) in Madhya Pradesh, 2.81 lt (two lt) in Rajasthan, 1,489 tonnes (one lt) in Uttarakhand and zero (50,000 tonnes) in Gujarat.