Incentives to basmati millers to continue in Punjab

Chandigarh, September 30, 2014: In a move aimed at getting more buyers to enter Punjab's market to purchase basmati for safeguarding the interests of the basmati cultivators on one hand and encouraging crop diversification in the state on other, the Punjab Chief Minister Parkash Singh Badal today allowed the incentives given to the Basmati Millers during 2013-14 to continue, besides slashing both the Market Fee (MF) and Rural Development Fee (RDF) by one percent in order to motivate the buyers from outside Punjab for the purchase of basmati.
Disclosing this here today a spokesperson of the Chief Minister’s Office said that this decision has been taken by the Chief Minster after series of deliberations with the representatives of farmers, millers and the officials of the State Government.
It may be recalled here that the Punjab Government had waived Mandi Fee (2%), Rural Development Fee (2%) and Infrastructure Fee (3%) on  purchase of basmati for milling in Punjab during 2013-14. Such a measure was taken to encourage farmers to grow more basmati paddy instead of common paddy which is considered to be water guzzling. Basmati paddy consumes less water and is a short duration crop. It also fetches more money to the farmers. The promotion of basmati is part of the State's Diversification Plan to reduce area under paddy cultivation.
Earlier, the basmati exporters were required to pay these fees/ charges and claimed refund thereof because taxes on export of goods were zero rated as per the policy of the Government, but the millers of Punjab claimed difficulties in refund of fees/charges paid by them, as a result a large chunk of their working capital used to get stuck in transit, rendering the milling in Punjab uncompetitive. With a waiver of fees, the government provided procedural comfort to the millers to encourage not only more cultivation of basmati paddy but also to promote investment in rice milling industry. This has resulted in an addition of 90 MT of fresh milling capacity of Basmati Paddy and projects worth Rs. 700 Crore approximately which were firmed up during the Progressive Punjab Agriculture summit held in February 2014, were in the pipeline. Apart From this the traditional Basmati rice shellers have also upgraded their mills to enhance their milling capacity.
During 2013-14, paddy was sown in about 28.51 lac hectares, of which basmati paddy was sown in about 5.5 lac hectares. Given the drought like conditions in the State, the area under paddy has come down to 28.13 lac hectares during kharif 2014. However, area under basmati paddy has increased to 8.6 lac hectares. The last year's basmati production was about 22 lac MT, whereas the anticipated production during current season is about 34 lac MT.
Given the increase in basmati production, there are apprehensions that market price of basmati would be lower than the previous year as a result, the Government needs to encourage more buyers of basmati so as to ensure remunerative prices to the farmers. The Chief Minister, Punjab has been concerned about the farmers' interest in this regard and he has taken a number of meetings with the representatives of farmers, millers and the officials of the State Government along with Punjab Agriculture Minister, Tota Singh and Food and Supplies Minister Adesh Partap Singh Kairon. After comprehensive discussions, the Chief Minister, Punjab has decided that the incentives given to Punjab millers would continue. However, to encourage other buyers also to enter Punjab markets to purchase basmati, the Market Fee and Rural Development Fee would be charged at 1% each against 2% each charged earlier.
Giving these details, a spokesman further clarified that as on today Value Added Tax (VAT) is zero rated for all exporters of basmati who purchase basmati paddy from Punjab. They can avail refund of VAT paid by them on the basis of existing documentation (H form) and there is no infrastructure fee on basmati purchase. He further added that this relief for other buyers of basmati in Punjab is aimed to ensure competition in market for remunerative prices to the farmers.

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