Centre should refuse to pay for state taxes on grain procurement

P Chidambaram is unlikely to appreciate this piece of information: a number of state governments now treat the finance minister as a milch cow. Even as he tears his hair trying to trim the flab in the central government's huge subsidy bill, state governments are merrily adding to it. Punjab collects nearly Rs 4,000 crore by way of taxes and cesses on food grain procurement in the state. The minimum support price of wheat was recently increased by the Centre to Rs 1,350 per quintal. When the Food Corporation of India (FCI) buys wheat at this price in Punjab, it will pay an additional 14.5% of Rs 1,350 for every quintal of wheat procured in the state as assorted taxes and cesses on the procurement process. Now, other states are cottoning on to this mode of devolution by other means. The government of Madhya Pradesh has announced a bonus of Rs 150 per quintal of wheat. How will it finance this largesse? It's quite simple. It has imposed a 10% levy on the value of procurement in the state. The FCI and the Centre's food subsidy provision will foot the bill. The political credit goes to the state government but the tab is picked up by the accommodating milch cow at the Centre. But the waste goes to the nation. This must stop.

Procurement in MP is expected to go up to 10 million tonnes this year, all of it merrily stored in the open, without even the benefit of the complex fig leaf Punjab uses called 'covered plinth', leave alone silos. The FCI has in its stocks grain procured in 2008-09. The government hoards about one-third the country's annual grain output, creating an artificial shortage and pushing up prices. Our food economy is completely mismanaged in the name of food security. A priority is to get rid of stocks, particularly old stocks, and create room to store fresh procurement. The Centre should halt open-ended procurement and make it clear to the states that the minimum support price would include any tax the state chooses to levy.