Indian farmers are successfully taxed, not subsidised, agriculture economist Dr Ashok Gulati has mentioned, citing worldwide producer help benchmarks and warning that coverage distortions proceed to suppress farm incomes beneath the guise of client welfare.
Gulati’s response got here throughout a podcast with Groww, the place he was requested why farmers in India usually are not taxed. He mentioned he helps affordable taxation on all high-income sources, together with agriculture, however highlighted the complexity of implementation. “Revenue from any supply—whether it is excessive—it must be fairly taxed. I’m all the time for decrease charges of taxation and wider base. That’s all the time good in agriculture. The issue is – what’s your price and what’s your income? How do you estimate that? And that is a tough scenario.”
The economist then argued that removed from being undertaxed, Indian farmers are literally internet taxed when all coverage distortions are accounted for. “India’s producer help estimate is unfavourable, -14%,” he mentioned. “What does that imply? You give subsidies on inputs—fertiliser, free energy, this and that. However on the drop of a hat, you set export bans. You say – personal sector can’t maintain shares. You say this can’t go from right here to there. So there are Important Commodities Act provisions that are a draconian 1939 Protection of India rule, then 1955. That ought to have been thrown out of the window a long time again.”
Gulati defined how the Organisation for Financial Co-operation and Improvement (OECD) calculates Producer Help Estimates by combining enter subsidies and output value insurance policies. “For the OECD nations as a complete, the producer help estimate is about 14% of the farm produce. Meaning no matter is the worth of their farm produce, 14% of that may be a subsidy or help – largely by output costs, and possibly one thing on the enter costs. China, which was virtually zero, is once more virtually crossing the OECD nations. So China can also be defending its farmers at the moment to the tune of 14 to fifteen%,” he mentioned.
“In distinction, Indian agriculture in contrast to the Chinese language agriculture, in contrast to the Japanese agriculture, in contrast to the OECD agriculture, an Indian farmer is internet taxed regardless of all of the subsidies you’re giving. So this must be saved in thoughts.”
He additionally criticised the position of the Meals Company of India (FCI) in artificially decreasing costs. “At present FCI, when it procures, shops and distributes, they’re promoting available in the market at Rs 29 a kg. Its price of rice is Rs 42 a kg. That is dumping in its personal nation to suppress the costs. So what are you doing? If it was another nation, then we’d have put anti-dumping responsibility on them. However when your individual Meals Company of India is doing it, you’re implicitly taxing the farmers.”
The economist mentioned India’s farm coverage is designed with a consumer-first lens. “Onion costs go up, you instantly put a ban and you then neglect. When the costs come down—two rupees, 4 rupees a kg—and the farmers are on the streets, you then get up. So this export controls, stocking limits, motion restrictions, personal sector can’t maintain greater than this inventory, futures are suspended—these are all meant for Nineteen Sixties and we’re following them at the moment.”
Gulati added: “Why are you defending me once I should buy my automobile of Rs 30 lakhs and also you need onion value (managed)? It’s farmer’s revenue. Let the market determine that.”
He additionally identified tax evasion by high-income city professionals misusing agriculture as a authorized shelter. “WTO definition says all those that have lower than 10 hectares of land are small farmers. You understand what’s the land ceiling act in India? Whether it is irrigated land, you can not have greater than 7.5 hectare. So all India is small farmers by our definition. Those that are above 10 hectares are 2.5% of these farmers.”
“However there are numerous urbanites — I do know personally lots of the individuals — in excellent professions, whether or not medical doctors, engineers, others, they’ll purchase one acre of land and present all of the revenue is coming from there. So all their money revenue is transformed into white by displaying them agriculture revenue. So this loophole must be plugged.”
He concluded: “Anybody having greater than specified revenue, internet revenue, who’re displaying as agriculture revenue, have to be taxed. There isn’t any doubt about that.”
Gulati mentioned he helps wider taxation with decrease charges and transparency. “Revenue from any supply — whether it is excessive — it must be fairly taxed. I’m all the time for decrease charges of taxation and wider base. That’s all the time good, in agriculture too. The issue is, what’s your price and what’s your income? How do you estimate that? And that’s a tough scenario.”
