As the debate rages on the impact of high mandi taxes on the finances of the Food Corporation of India (FCI), the data available with the Commission for Agriculture Costs and Prices (CACP) — the body that fixes minimum selling price (MSP) of crops — shows that arthiya (middlemen) commission and mandi taxes are expected to account for 32% of the total procurement incidentals of FCI in the 2020-21 wheat procurement season that began in April. Procurement incidental of FCI is part of the economic cost of procuring foodgrain.
The other components are pooled cost of grains and distribution cost that includes freight, handling, and storage, etc. Data of past five years shows while the economic cost of wheat increased at an annual growth rate of 4.9%, the distribution cost recorded the highest growth of 7.2%, followed by pooled cost of grains (5.7%), and the lowest (1.2%) was procurement incidentals.
Increase in pooled cost of grains is due to a rise in MSP of wheat and lower growth rate in procurement incidentals is due to reduction in statutory charges after introduction of the goods and services tax.
However, these charges are still high in some states, a CACP report said, and there is a need to reduce procurement incidentals by reducing mandi fee and other charges in states such as Punjab and Haryana, the report said.