High taxes have made Haryana's farmers poorer. Imposition of higher local and market (mandi) taxes have made them suffer for long as they dissuade private traders in the farm sector. This has resulted in the farmers dependence on government procurement agencies for selling their produce. The minimum support price that they get in the bargain is much less than what they could have earned by selling their crop to private traders.
Moreover, the absence of private players also means lack of modern marketing infrastructure in the state. To compound the issue, even the restrictions under the Agricultural Produce Markets Act are the important factors responsible for poor returns to the farmers in Haryana.
Yet, the state has no policy to encourage private traders in farm sector. Faulty tax policies of the state government with regard to food grain transactions, where the taxes are unjustifiably high, have driven them out from Haryana's markets as these private traders target states where they have to pay less tax. Records show that the purchases by private traders in the state were less than one percent, which put additional burden on the government to procure beyond its need for providing necessary MSP to the farmers. The absence of private traders in the wake of a high tax regime also means problems for the government in accumulating and storing the stock, and also depletion of availability of food grains for consumers in the domestic market.
The Cand public distribution too has acknowledged the problems of the state farmers in the state in the wake of the high taxes charged by Haryana. This is despite the fact that the farmers in Haryana are among the highest producers of wheat and rice in the country. Yet wrong taxation priorities mean they still lack modern marketing infrastructure.
Imposition of higher local and market (mandi) taxes have many other drawbacks too. They have rendered Haryana wheat uncompetitive as states such as Bihar, Uttar Pradesh and Gujarat have raced ahead. These high taxes have also come in the way of the state to benefit from the Centre's scheme to procure food grains from farmers for buffer stocks.
The Commission for Agricultural Costs and Prices, points out that high taxes in Haryana are increasing procurement costs of the Food Corporation of India. The Commission has also criticised Haryana alongwith a few other states for procuring much of the market arrivals (almost 70 percent) of wheat and rice because of the open-ended procurement policy on one hand and high taxes on the other. The Commission feels that this is not a good trend and not in the best interest of the country, it states in its latest report on price policy for Rabi crops.
Haryana follows Punjab in terms of highest total taxation, including value-added tax, market fee and other charges on wheat. The state figures third in terms of high tax rates on rice after Punjab and Andhra Pradesh.
The Associated Chambers of Commerce and Industry of India (ASSOCHAM) too has pointed out that the heavy burden of taxes in the state has significantly contributed to food inflation in the country. While ASSOCHAM has suggested central compensation to Haryana and Punjab as well so as to bring taxes down, it is also imperative that there is an absolute need for a tax rejig in the state and that Haryana rationalises the existing high tax structure to attract private players for marketing of agricultural commodities.