Rajasthan, Gujarat & Karnataka To Allow Unrestricted Trading Of Agricultural Products Outside Mandis

Rajasthan, Gujarat, and Karnataka are now among a small group of states that allow free trade outside of mandis without levying any taxes, paving the way for agricultural trade reform.

Even for direct purchase from farmers, agricultural trade is controlled in most significant states, with Uttar Pradesh and Madhya Pradesh issuing licences and imposing mandi fees. Direct purchase from farmers is not permitted in the Union Territory of Chandigarh.

When the Centre enacted the controversial farm laws, one of the primary concerns was that it would provide farmers "freedom to sell" wherever, and that the changes would be opposed by Punjab, Haryana, and western Uttar Pradesh. However, an examination of current agricultural trade reveals that a few states have begun reforms in farm produce trading based on the now-abandoned farm laws. However, in most states, there is still a stubborn refusal to embrace reforms.

Mandi Charges

Except in Gujarat and Maharashtra, where the local Agricultural Produce Market Committee (APMCs) are permitted to determine rates that fluctuate from crop to crop between 0.5 and 6%, mandis impose different fees, cess or user fees, and they are consistent everywhere. Traders and businesses are allowed to acquire deregulated commodities, such as fruits and vegetables, from outside mandis without paying any fees. However, if fruits and vegetables are sold within mandis, most states impose a 1% user fee, which is collected from the customer.

"Mandi fee is a revenue model for all the States that they would never want to abandon, even if they are aware that it raises the overall cost of food." Furthermore, because of the mandi's location, traders who purchase in the mandis also sell the goods there, primarily fruits and vegetables, since retailers congregate there. "Mandi fees cannot be collected from de-regulated commodities, which is why several States demand user fees," said Anil Dwivedi, a dealer at Delhi's Azadpur mandi.

During April-February of this fiscal year, Chandigarh received 86,082.10 tonnes of goods in its two mandis, which is more than the whole fiscal year 2020-21. Due to the pandemic, arrivals plummeted roughly 40% last year, to 75,752 tonnes, from 2020 levels. A 2% mandi tax is levied by the local government.

Punjab, on the other hand, levies a 6% mandi tax (including development cess) on wheat and non-Basmati paddy, and a 1-3% tax on Basmati, maize, cotton, fruits, and vegetables. Wheat, paddy, arhar, sesame, and green fodder are taxed at 4%, while other commodities are taxed at 1-3%. All commodities in Uttar Pradesh are subject to 1-1.5 percent mandi fees/user charges (including cess).

While direct buys from farmers should continue, Hussain believes that states should also gather data on how much commodities are exchanged at what prices in order to better define their policies, with the primary goal of assisting farmers in getting better prices for their products.