Unfazed by its failure to roll out FDI in multi-brand retail in the light of strong Opposition from regional parties, particularly from key UPA ally Trinamul Congress, the Centre has now embarked on preparing a law to streamline inter-state trade and transportation of agricultural produce, which involve state taxes.
The aim of such a law is to free traders from multiple local taxes like octroi and toll tax. Under the proposed law the traders would be required to register themselves only to a centralised system by paying a stipulated fee for a minimum five years and would then be free to trade all across the country.
The agriculture ministry’s move, which has the backing of Prime Minister Manmohan Singh and the law ministry, is considered a step towards reforming the marketing side to ensure free flow of commodities like rice, wheat, pulses and oilseeds all across the country and, in turn, help reduce inflationary pressure. But the flip side is that the move is likely to hit the FDI-in-retail kind of political roadblock as it encroaches upon the revenue streams of state governments.
Sources in the agriculture ministry, however, have argued that the government would not allow such a situation to arise as, before finalising the Cabinet note (in progress), “states will not only be informed about the law, but will also be taken on board on the revenue-sharing mechanism”.
Ministry officials feel that once a consensus is built among the states that a part of “the registration fee will be shared with the state governments in lieu of the estimated loss in their revenue”, the benefits of the proposed law would be manifold. “It will not only reduce red tape, but also help keep inflation under control,” they said, adding that at present local taxes like octroi, toll tax, entry fees etc account for almost 15 per cent of the actual price of farm produce.
As per the plan, once a trader registers himself with the centralised authority, he will be issued a certificate that will give him the flexibility to move his goods from one state to another to sell, or purchase, without paying any state levies. He can also trade in more than one agriculture produce marketing committee either within or outside his state.
The proposed legislation, which has been cleared by the law ministry, is to be called the Inter-State Agriculture Produce Trade and Commerce (Development and Regulation) Bill.