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Wednesday, May 22, 2024
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Taxing Primary Processing of F&V Hits Farmers

We are witness to Indian farmers being perennially in crisis. It is most unfortunate that the person who feeds the nation goes to bed hungry. And the nation has no solution to offer. For him every day is an untold story of fighting for survival, facing harsh elements of nature, uncertainties of weather and crop, an utter lack of life’s basic facilities and on top of it all manmade economic problems, all bundled up in a tragic denial of sensitivity on the part of policy makers and the implementation machinery.


It is high time we introspect and find out how and where we defaulted and finally lost track. Definitely, this is not the India we had opted for. For some reasons, India has not been able to pursue ‘integrated policy making’ i.e. all relevant issues related to the farmer are not considered together. We look at issues of technology, land holding, irrigation, infrastructure, pricing, mandis, revenue etc. independent of each other. Every seat of responsibility focuses on its own parameters and misses to integrate the same with the requirements of the farmer. Every person may have justified his target, but it may still be off the mark for the farmer. Kindly do not take it as an accusation.


One farm sector which is extremely high on perishability and most vulnerable to losses is ‘fruits and vegetables’. Even though this issue has been a debated innumerable times in the Parliament, it is reported that we continue to lose more than Rs.30,000 crore worth of fruits and vegetables by way of wastages annually. It is saddening to see farmers throwing away tomato in the season when it does not fetch even Rs.1 per kg while the consumer has to pay Rs.50 per kg for the same later. We are losing at both ends – the Farmer and the Consumer. Perhaps the real agony is that we have not understood the fact that nature provides in a ‘glut’ which humans find difficult to manage.


It is known that the only way to stop this wastage is to handle natural produce during the glut harvest time and either store it in ‘ambient controlled environment’ or subject it to ‘primary processing’ for use throughout the year. Cold storage systems are helpful but for highly perishable produce like fruits & vegetables, they give partial relief and become very expensive. Primary processing of glut produce is more sustainable. This is how the world does it. Many developing nations have reached processing levels of 40% – 80% as compared to 2%- 4% in India. We cannot rest with small improvements through normal schemes which are well attempted but limited in scope and effectiveness, vis-à-vis nature’s system of doing things.


The moral of the story if we have to save our farmer is to ‘Make Processing a National Movement’, a culture in its own right, a country wide drive with the same intensity as ‘Save the Girl Child’ or ‘Swachh Bharat’. Consumption of fruit and vegetable preparations has to reach every household and become useful for every class and age. Let us not distinguish between citizens for the outreach of fruit and vegetable preparations.


As a first step we have to consider activities like sorting, cleaning, washing, cutting, pulping, crushing, storage as a part of the farm chain without levy of taxes, at least for supplies for industrial use in non-consumer packing. Among the items which deserve such treatment are Mango Pulp, Papaya Pulp, Pineapple Pulp, Tomato Puree, Cut fruits/vegetables in brine or other preservative solutions for use throughout the year for preparing fruit and vegetable products. Such items should be considered as survival mechanism and not value addition.


As of present ‘Fruit & Vegetable Pulps and Purees’ are subject to 2% Excise Duty (without availing Modvat) and 5% average VAT. However, under GST these items have been placed at 12% level. GST is a laudable concept but we cannot treat everything with theoretical calculation. There are issues of special merit which need to be considered differently and preferentially. If we prefer to keep ‘Education’ and ‘Health’ out of the ambit of GST for valid reasons, we have to decide to keep ‘Primary Processing of Fruits and Vegetables’ out of the ambit of GST, at least for supplies for industrial use in non consumes packing. The relevance of this to the farm economy is too obvious to be missed and definitely not to be ignored.


Let GST become the vehicle to make a new beginning in the interest of the farmer, the consumer and the nation. Let old perceptions not limit future potential. It is sincerely hoped that the push for revenue will not cloud new horizons or miss ground realities. We are losing immense value, many orders more than the revenue in question, and strategic opportunities. Tax policy for ‘Primary Processing of Fruits & Vegetables’ needs to be revised urgently.


(The author is the president of AIFPA. Views expressed are personal.)