Prices of various pulses have not come down in the state despite a reduction in the value added tax (VAT) by the state government since July 1. Rates of pulses barring moong dal are still hovering at levels they used to be before the VAT cut was effected.
The state government whittled down VAT by 4 per cent effective from July 1 on an experimental basis for three months. The rate was brought down from 5 per cent to 1 per cent. This followed a prolonged agitation by traders who demanded that pulses be kept out of VAT as it is an essential food article.
The Orissa Byabasahi Mahasangha (OBM), an umbrella outfit of traders in the state, which spearheaded the campaign, went on record saying that a VAT cut will ease the prices of pulses across the board. It went on to say: “The move will not only benefit consumers and traders but will also help the state government mop up more revenue.” The government earned about Rs3 crore from VAT on pulses every month which the association claimed will go up to Rs5 crore.
In fact, the outfit claimed there will be a drop of Rs4 to Rs5 on the price of every kilogram of pulse. However, these claims have been proved untrue. Nearly one month has passed since the decision was implemented in the state, but the pulse prices have refused to come down. On the contrary, prices of certain pulses have firmed up.
The revenue loss of Rs9 crore to be incurred during three months when VAT will be waived on pulses will not help the consumers. It will rather go to the pockets of traders. Last week, the department of food supplies and consumer welfare wrote to district collectors to take punitive action against unscrupulous traders responsible for artificially jacking up retail prices of pulses.
The government has asked collectors to hold meetings with traders in their districts and direct traders to pass on the benefits of the tax reduction to consumers. Further, collectors have been told to notify the prices at which pulses are procured from other states and the margin that the wholesalers and retailers keep before they are sold to end-users.
The decision of the state government to cut the VAT on pulses cannot be faulted. It is a pro-people move and the intention of the government was to make the essential foodgrain available to common people. However, this ought not to have been done in a hurried fashion. By doing so, the administration played into the hands of cartels of traders. The VAT reduction should have been preceded by a robust market survey and the actual position of stocks.
A proper administrative control over the delivery mechanism should have been ensured so that unscrupulous traders would not have rigged the system. Last week, the Centre wrote to state governments to remove taxes from essential food articles, especially pulses. States have been asked to intervene in markets immediately if they feel there is an artificial spurt in the prices of food products.
However, this won’t do much good. Prices of pulses continue to remain high due to supply side constraints. Inasmuch as the state government does not enforce implementation of minimum support price (MSP) for pulses, there is no likelihood of a rise in the production of pulses in the state.
Rise and fall in the production of farm produce is natural. It depends on many imponderables. However, recurrence of a crisis year after year is indefensible. People should not be indefinitely held hostage to such adverse conditions. The pulse issue has been nagging people for nearly two years.
The government should anticipate such crises and put in place a contingency mechanism to overcome them. Incentivising farmers to grow more pulses by increasing acreage of cultivation, increasing the MSP of pulses and its implementation in the state and building a buffer stock of pulses in line of rice and wheat could be some of the solutions to control the rapid pulse.
