Why farm prices must be raised to balance GST contribution

Staples, vegetables and fruits production come mainly from some states that contribute less GST to the centre than those with British-legacy metros and cities. Why is this important? Because people dwelling in the metros seem to have forgotten their roots and keep chest-thumping about the GST contribution of their states. They lament that not the entire GST amount returns to them and instead a bulk goes to “poorer” and therefore undeserving states. People in some states like Tamil Nadu even say, “Make Tamil Nadu a country and we will develop more than Korea”!

Let us first take a look at the GST contribution of states to the centre – a rough measure of industrial/manufacturing development of a state.

For November 2022, the Central government received nearly Rs.146,000 crore gross GST revenue, up 11% YoY.

State-wise, the picture is different and as follows (highest to lowest; Rs crore, November 2022):

Position	State	Nov-21	Nov-22	Growth
1	Maharashtra	18,656	21,611	16%
2	Karnataka	9,048	10,238	13%
3	Gujarat	9,569	9,333	-2%
4	Tamil Nadu	7,795	8,551	10%
5	Uttar Pradesh	6,636	7,254	9%
6	Haryana	6,016	6,769	13%
7	Delhi	4,387	4,566	4%
8	West Bengal	4,083	4,371	7%
9	Telangana	3,931	4,228	8%
10	Odisha	4,136	4,162	1%
11	Rajasthan	3,698	3,618	-2%
12	Andhra Pradesh	2,750	3,134	14%
13	Madhya Pradesh	2,808	2,890	3%
14	Jharkhand	2,337	2,551	9%
15	Chhattisgarh	2,454	2,448	0%
16	Kerala	2,129	2,094	-2%
17	Punjab	1,845	1,669	-10%
18	Bihar	1,030	1,317	28%
19	Uttarakhand	1,263	1,280	1%
20	Assam	992	1,080	9%
21	Himachal Pradesh	762	672	-12%
22	Goa	518	447	-14%
23	J&K	383	430	12%
24	Dadra and Nagar Haveli	270	304	13%
25	Sikkim	207	209	1%
26	Puducherry	172	209	22%
27	Other Territory	95	184	93%
28	Chandigarh	180	175	-3%
29	Meghalaya	152	162	6%
30	Center Jurisdiction	180	154	-14%
31	Nagaland	30	34	11%
32	Arunachal Pradesh	40	62	55%
33	Tripura	58	60	3%
34	Manipur	35	50	42%
35	Ladakh	13	50	273%
36	Mizoram	23	24	3%
37	Andaman & Nicobar Islands	24	23	-7%
38	Daman and Diu	–	–	67%
39	Lakshadweep	2	–	-79%
Total		98,708	1,06,416	8%

In return, the central government released Rs17,000 crore to states/UTs on 24 Nov 2022 towards the balance GST compensation for the period April to June 2022. The total compensation released during 2022-23 stands at Rs115,662 crore, and more remains to be reimbursed.

State/UT	(Rs. crore)
Maharashtra	2,081
Karnataka	1,915
Uttar Pradesh	1,202
Delhi	1,200
Tamil Nadu	1,188
Punjab	984
Gujarat	856
West Bengal	814
Rajasthan	806
Kerala	773
Madhya Pradesh	722
Andhra Pradesh	682
Haryana	622
Telangana	542
Odisha	524
Chhattisgarh	500
Uttarakhand	342
Jharkhand	338
Himachal Pradesh	226
Jammu and Kashmir	208
Assam	192
Goa	119
Bihar	91
Puducherry	73
Total	17,000

There is disparity, but minor. However, what is being overlooked is the contribution of farm produce and other sectors that ensure food, water and national security. What about the lives of armed forces? Will the “rich” states remain so forever? What about mental well being and environment?

Let us focus on food. Here are the prices of some staples, vegetables, and fruits (8-9 Dec 2022, Delhi).

	Per quintal (maximum/Rs)	Per kilogram (maximum/Rs)	Remarks (minimum Rs per kg/variety)
Rice	2,625	26.25	26.25/Mexican
Wheat	2,903	29.03	27.51
Tur/Arhar Dal	–	–	66 MSP
Potato	1,380	13.80	4.00
Onion	1,125	11.25	2.50
Tomato	920	9.20	2.00
Apple	5,938	59.38	16.25/’Delicious’
Banana	1,500	15.00	10.00/Ripe
Green leaves (seasonal)	1,500	15.00	4.00

Sources – Delhi Agricultural Marketing Board (delagrimarket.nic.in); Economics And Statistics,Ministry Of Agriculture,Government Of India (dacnet.nic.in)

There is significant stockpiling of rice and wheat which could earn more for the farmers if exported. Would this be OK for other items like software or garments? What if the food producers say they are entitled to the share of food being produced by them for reimbursement from central stockpiles? What about medicines and water?

The question is can the people living in cities, earning in lakhs per month, not afford to buy these staples at a higher price? How long will the government be subsidising food for consumers and how long will farmers have to live below their means? These questions are important while we are discussing GST and tax redistribution.

Indian production of rice
Production (000 tonnes)
2019-20 State Production/Share (%) 1 West Bengal – 15,881.44/13.36 2 Uttar Pradesh – 15,517.80/13.05 3 Punjab – 11,779.28/9.91 4 Andhra Pradesh – 8,658.88/7.28 5 Odisha – 8,360.37/7.03 6 Telangana – 7,427.77/6.25 7 Tamil Nadu – 7,171.14/6.03 8 Chhattisgarh – 6,774.77/5.70 9 Bihar – 6,297.99/5.30 10 Assam – 4,984.63/4.19 11 Haryana – 4,824.30/4.06 12 Madhya Pradesh – 4,778.15/4.02 13 Karnataka – 3,634.48/3.06 14 Jharkhand – 3,012.80/2.53 15 Maharashtra – 2,897.59/2.44 16 Gujarat – 1,983.05/1.67 17 Tripura – 810.24/0.68 18 Uttarakhand – 658.38/0.55 19 Kerala – 605.57/0.51 20 Jammu & Kashmir – 587.02/0.49 21 Rajasthan – 480.53/0.40 22 Manipur – 385.50/0.32 23 Nagaland – 363.31/0.31 24 Meghalaya – 303.44/0.26 25 Arunachal Pradesh – 244.73/0.21 26 Himachal Pradesh – 143.79/0.12 27 Goa – 90.39/0.08 28 Mizoram – 60.01/0.05 29 Pondicherry – 59.35/0.05 30 Dadra & Nagar Haveli – 36.28/0.03 31 Andaman & Nicobar – 17.98/0.02 32 Delhi – 16.80/0.01 33 Sikkim – 16.14/0.01 34 Chandigarh – 4.40/0.00 35 Daman & Diu – 2.03/0.00
Source: National Horticulture Board (NHB)
*2021-22 ( 1st Adv. Estimate)

Indian production of wheat
Production (000 tonnes)
2019-20 State Production/Share (%) 1 Uttar Pradesh – 33,815.50/31.35 2 Madhya Pradesh – 19,607.14/18.18 3 Punjab – 17,615.56/16.33 4 Haryana – 11,876.39/11.01 5 Rajasthan – 10,916.12/10.12 6 Bihar – 5,579.72/5.17 7 Gujarat – 3,326.82/3.08 8 Maharashtra – 1,793.68/1.66 9 Uttarakhand – 904.08/0.84 10 Himachal Pradesh – 563.42/0.52 11 West Bengal – 509.94/0.47 12 Jammu & Kashmir – 488.35/0.45 13 Jharkhand – 439.44/0.41 14 Karnataka – 179.70/0.17 15 Chhattisgarh – 115.29/0.11 16 Delhi – 82.87/0.08 17 Assam – 14.43/0.01 18 Telangana – 9.21/0.01 19 Arunachal Pradesh – 6.68/0.01 20 Nagaland – 6.28/0.01 21 Manipur – 5.75/0.01 22 Chandigarh – 2.46/0.00 23 Meghalaya – 0.90/0.00 24 Tripura – 0.33/0.00 25 Sikkim – 0.18/0.00 26 Odisha – 0.17/0.00 27 Dadra & Nagar Haveli – 0.12/0.00
Source: National Horticulture Board (NHB)
*2021-22 ( 1st Adv. Estimate)

India is a blessed country, where around 65% farm area is unirrigated but gets rains on time. And, along with subsidies and meagre income of farmers, it generally ranks in the top three in rice, wheat, vegetables, fruits, and milk production and exports.

It goes without saying that if there are droughts, prices could overnight shoot and make life miserable for people, especially in the cities. Hence, it is important to raise investment significantly in the farm sector – irrigation, machinery, farmer income and research. This will also lead to less migration and more food security, which obviously is more important than software exports in the long term.

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