Rajasthan, Gujarat and Karnataka are now among a small group of states that allow free trade outside the mandis without levying taxes, paving the way for agricultural trade reform.
Even for direct purchase from farmers, agricultural trade is controlled in most major states, with Uttar Pradesh and Madhya Pradesh issuing licenses and imposing mandi fee. Direct purchase from farmers is not allowed in the Union Territory of Chandigarh.
When the Center enacted the controversial farm laws, one of the main concerns was that it would give farmers the “freedom to sell” anywhere, and that the changes would be opposed by Punjab, Haryana and India. western Uttar Pradesh. However, an examination of the current agricultural trade reveals that a few states have initiated agricultural trade reforms based on now abandoned farm laws. However, in most states there is still a stubborn refusal to embrace reform.
Except in Gujarat and Maharashtra, where the local agricultural produce market committee (APMC) are allowed to set rates that fluctuate from crop to crop between 0.5 and 6%, mandis charge different fees, levies, or user fees, and they are consistent throughout. Traders and businesses are allowed to acquire deregulated products, such as fruits and vegetables, from outside mandis without paying a fee. However, if fruits and vegetables are sold in mandis, most states impose a 1% user fee, which is collected from the customer.
“The Mandi levy is a revenue model for all states that they would never want to give up, even though they are aware that it increases the overall cost of food.” Additionally, due to the location of the mandi, traders who shop at the mandis also sell the goods there, mainly fruits and vegetables, as retailers congregate there. “Mandi fees cannot be levied on deregulated products that is why several states require user fees,” said Anil Dwivedi, dealer at Azadpur mandi from Delhi.
In April-February of this financial year, Chandigarh received 86,082.10 tons of goods in its two mandis, which is more than the entire 2020-21 financial year. Due to the pandemic, arrivals fell by about 40% last year, to 75,752 tons, compared to 2020 levels. A 2% mandi tax is levied by the local government.
Punjab, on the other hand, levies a 6% mandi tax (including development tax) on wheat and non-Basmati paddy, and a 1-3% tax on Basmati, But, cotton, fruits and vegetables. Wheat, paddy, arhar, sesame and green fodder are taxed at 4%, while other products are taxed at 1-3%. All products in Uttar Pradesh are subject to mandi fees/user fees of 1-1.5% (cess included).
While direct purchases from farmers are expected to continue, Hussain believes that states should also collect data on how much produce is traded at what prices to better shape their policies, with the primary goal of helping farmers obtain better prices for their products.