AGRICULTURAL EQUIPMENT, INPUTS AND REFRIGERATION INFRASTRUCTURE NEED TO BE TAX-FREE OR MINIMUM-TAXED.

 

AGRICULTURAL EQUIPMENT, INPUTS AND REFRIGERATION INFRASTRUCTURE NEED TO BE              TAX-FREE OR MINIMUM-TAXED.

A tax-free film is a beautiful example to exemplify my points mentioned in this note. Many a times, some of the Films of the Film Industry are made tax free, and when I was a child, I did not understand what does tax-free means, and when the film posters pasted on the walls on those days( there was not so much digital media then), used to mention as tax-free in big size letters super-imposed, this question had remained unanswered in my mind, till I grew in age to understand it. The films are made tax-free when a specific film has any societal value and to encourage that more number of people visit the cinema halls (or any other media in present age) and see the tax-free films. In case of a tax-free film, there is no entertainment tax (which is quite a lot in percentage and value), hence a ticket cost to view the film in Cinema Halls is a lot less. For digital media, while the distribution cost of a tax-free film is quite less, when a film is declared tax-free, now people understand that the film may have some special value for the society.

Similarly, the Agricultural Equipment, Inputs and Refrigeration Infra Structure has a lot of value for the Agriculture and directly or indirectly it has lot of value (immense value would be better words to say) for the society as a whole. Refrigeration Infrastructure such as Refrigerators, Deep Freezers, Cold Storages and such Refrigeration Infrastructure by whatever name is called in its industry are of no-underminable importance for the agricultural produce and the society as a whole. Presently, as per published information, about 30-40% of perishable (or short shelf life) agricultural produce which are primarily foods, get wasted for the major reason of non-availability of simple refrigeration facility to preserve it in India. The fruits and vegetables wasted in India per year primarily due to want of refrigeration facilities to preserve is such a huge quantity that whole of UK can consume it for a year. Even this issue I had individually raised in Ph.D. thesis as back as during the period from 1996-2000 (the period when I did my Ph.D. and it was awarded in the year 2000). Other than Refrigeration Infrastructure, the Agricultural Equipment and Inputs (such as Fertilizers and Pesticides etc.)  do have importance for Agricultural Production, cost to farmers and ultimately of immense importance to society.

Any facility provided by the sovereign governments in tax regimes, that has benefits to producers and consumers both, could be the best option. In case of Agricultural produce, while the farmers (can call them producers) are the producers, the other citizens are the consumers. The producers should get a price for their production that should be reasonable and remunerative, the consumers should pay a price that is reasonable (or fair) and affordable, this could be the best situation and balanced situation, without tilting on any side unreasonably.

In my views, if the Agricultural Equipment, Inputs and Refrigeration Infrastructure made tax-free or minimum taxed, it would benefit both the farmers and consumers. If the Agricultural Equipment and Inputs are made tax-free or minimum taxed, the cost to farmers would go down for production and also it would enhance the use of equipment and inputs for enhancing production.  If the Refrigeration Infrastructure is made tax-free or minimum taxed, the farmers, the intermediary (traders) and consumers(households) will use refrigeration more for preservation of the Agricultural Produce and waste would get reduced. With waste reduction, the farmer’s return would get enhanced (waste at farm level is a big cost to the farmers), the profitability of intermediary/traders would improve (the waste is a cost to the intermediary and draining their profit) and the expenditure of the Consumers would get saved (the waste is a cost to the consumers and increasing their expenditure). Hence over all, and at all levels if preservation is in force, waste is reduced, there would be benefit accrued to everyone from farmers to consumers. In fact, I had observed and postulated in my Ph.D. thesis from 1996-2000 that the Refrigeration Facilities in India should be excise free to encourage more availability and use of Refrigeration in India for preservation of perishable (short shelf life) agricultural produce.

If the Refrigeration infrastructure is made tax-free or minimum taxed in India ( or even in any country for that matter ), it will encourage investments in Refrigeration facilities like cold storages, the price of the Refrigeration Equipment would go down, the farmers would be encouraged to acquire refrigeration facilities and infrastructure for preservation of the agricultural produce and also at subsequent levels of its handling up to consumers. The published reports say that only 30% of Indian Households as of 2016 had a Refrigerator. The 2016 ICE 360° survey showed that a little less than 30% of Indian families have a refrigerator (the survey is conducted by- People Research on India's Consumer Economy, in 2016 it had covered 61000 households of India). If this is the situation, it goes without saying that the cold-storage/refrigeration facilities available in India is dismally low and there is an essentially essential need to enhance it at national level in India. The farmer level refrigeration facility is dangerously low, it also goes without saying and needs urgent attention by all means.

It is also interesting to observe that in India, there are very big facilities of Air-Conditioned Markets now with lot of Big-Malls coming to being, to sell everything from textiles to gadgets under cool air-conditioned environment. I do not deny, a very small quantity of agricultural produce (fruits, vegetables, cereals or pulses etc.) as sold in these Air-Conditioned malls or other such smaller stores, however, the % of Agricultural Produce sold under such Air-Conditioned markets can not even exceed 5% of all the agricultural produce being produced, handled and sold in India. Hence, the road to travel for storing/preserving, handling and selling the agricultural produce under refrigerated environment in India is very long ahead and there is no choice other than to travel this long road with consistent efforts.

It can be imagined, if the Refrigerators are made tax-free or minimum taxed, its price in India would go down substantially and more households would be encouraged and can afford to buy a Refrigerator for their homes. Similarly, if the Cold Storage infrastructure is made tax free or minimum taxed, there will be more investment and availability of Cold Storages for Storing the Agricultural Produce from farm gate till consumers households. Some countries abroad have even made energy consumed for Agricultural use as tax free or less priced. An example is Spain as I know, had made the fuel used in Agricultural use tax exempted with addition of different non-interfering colours into the hydrocarbon fuels (such as petrol/diesel/kerosene to differentiate with normal fuel of the market ). In my considered views, if the Agricultural Equipment, Inputs and Refrigeration infrastructure are made tax-free or minimum taxed, it will make great difference and would change the present situation in India substantially for the benefit of everyone and for the Economy as a whole.  

With these observations, I am of the views that as a first step from Sovereign side (from National Government side), the Agricultural Equipment, Inputs and Refrigeration Infrastructure should be made tax-free or minimum taxed in the National Interest and in the better interest of Economy to sustain and grow.

About the Author : Dr. Nimain Charan  Biswal is a B.Sc.(Agri. Science and Technology). M.B.A. and Ph.D.( Management Area ) by qualifications and he has 34+years of work experience in both  industrial and development sectors in diversified fields of social importance. He has been educated at Orissa University of Agriculture and Technology (OUAT)-Bhubaneswar, Institute of Rural Management Anand (IRMA) and Gujarat University ( with Resource Support of IIM-Ahmedabad ). Dr.Biswal is further educated at IIM-Calcutta, XLRI-Jamshedpur, Apple Computer Industries and Spar Inc., USA. He has worked for reputed National and International Organisations in Senior/Top Management Capacities. He is a management  expert, a prominent professional of India and known Internationally as well. He lives at Mumbai in India.