Taxes driving away exporters
From K.G. Dutt
Tribune News Service

KARNAL: Basmati exporters from Haryana are facing a serious crisis. The crisis relates not only to the financial crunch but also to the complex taxes levied by the Haryana Government. As a result a number of exporters who earlier had set up their units in Haryana are slowly shifting to other places. The day may come when Haryana might see an exodus of rice exporters from Haryana.

Mr Satya Pal Bansal, a leading rice exporter, who has been in the trade for decades says there is "no support from the state government for promoting rice from Haryana." Instead the state government has levied a number of taxes which has hampered the growth of export trade. There are a number of bottlenecks, which have beset the traders from extending export business in Haryana. Explaining the factors, Mr Bansal says the purchase tax levied by the government is the major bottleneck. Although the Haryana Rice Exporters Association has moved the Supreme Court for removing this tax yet as per the directions of the Apex Court, the Haryana exporters have to pay Rs 150 crore as purchase tax to the state government which has accumulated against them during the past 10 years. This payment has reduced the capital available with the exporters. The tax is levied at the rate of Rs 4 per cent on Basmati. This came to about Rs 1.50 per quintal. This is a big amount which the exporters have to pay. Therefore, the Haryana exporters are naturally at a disadvantage as compared to exporters from Punjab and Uttar Pradesh. Mr Bansal maintains that because of this the rice exporters from Haryana are unable to compete with their counterparts.

It is gathered that the state government has not been fully implementing the directives of the Centre as far as rice export is concerned. According to Mr Bansal, in 1996 the Union Government sent directions to all the states that both paddy and rice should be increased as one commodity but the Haryana Government is considering rice as a separate commodity for the purpose of tax. Both the Uttar Pradesh Government and the Punjab Government have agreed to abide by the directions of the Union Government but so far the Haryana Government has not agreed and is still charging the taxes.

Another major discrimination is that a Punjab exporter who buys paddy from Haryana under Form-H does not have to pay any tax. Because it is assumed that the paddy is being bought for export of rice. But the paddy bought by a Haryana exporter for the same purpose is taxed. While there is a direction of the Union Government that there should be no tax, fees or cess on any item, raw-material or finished good meant for export are to boost the export on the contrary the Haryana Government is acting differently and against the spirit of the direction. For instance, it charges 2 per cent market fee on paddy as raw material and 1 per cent tax on it. These taxes have been removed by the Governments of Punjab, Madhya Pradesh and Uttar Pradesh.

The exporters from Haryana are shifting to other places. The situation has come to such a pass that today the main buyers of paddy from Haryana mandis are the exporters either from Uttar Pradesh or from Punjab. Even the Haryana exporters have set up their shelling units in Uttar Pradesh.

Another major stumbling block in the promotion of rice export relates to Pusa Basmati. This is a hybrid variety which has been conceded as 'Basmati' by the Government of India vide its gazzete notification i.e. 915/E/6-11-89. The Union Ministry of Agriculture wrote to all the States on August 31, 1992 that four types of paddy should be considered as Basmati. These are (a) Pusa-one, (b) Kasturi IET-8500, (c) Basmati-217 and (d) Basmati-370. But surprisingly, the Haryana Government has considered Pusa-one as Non-Basmati Grade-A.

The exporters point out that Pusa Basmati is a popular brand for farmers. It has even been accepted in the international market as equivalent to Basmati. Besides, the rice consumers throughout the country also like it. It has a good yield and also good cooking value. Basically, this could lead to the increase in export of rice from Haryana if this Pusa-one is considered equivalent to Basmati.

A number of exporters interviewed by this correspondent maintained that the Haryana rice exporters were in low spirits as they had to pay 7 per cent taxes. Therefore, they could not stand in the competition market.

Another nagging problem is that as Pusa-one is not considered equivalent to Basmati, the farmers have to sell it at the rates of 'Parmal' which is about Rs 450/- per quintal. But if it is sold as Basmati, it could fetch Rs 1250/- per quintal to the farmers. Naturally the farmers are hesitant to sell their produce on low rates. The exporters allege that the Excise and Taxation Department of Haryana is not keen to boost exports. It seemed as if it is mainly concerned with its own taxes and not the amount of foreign exchange which the export of rice could earn for the Government of India, rued another leading exporter.

The All India Exporters Association and the Haryana Rice Millers Association have approached the government on a number of occasions to consider Pusa-one as Basmati. But so far the state government has given empty assurances and nothing concrete has been done. The exporters are naturally facing a financial crisis and it is difficult to pay to the "Ahartiyas" and millers from whom they buy paddy. The exporters demand that there should be a uniform policy throughout the country for promotion of rice export. Only that will mitigate their problems and lead to export increase.
(To be concluded)