Punjab Chief Minister Parkash Singh Badal on Tuesday announced slashing market fee and rural development fund by one percent each on basmati crop in order to motivate buyers from outside of state for purchase of basmati, said an official spokesman.

The Market Fee and Rural Development Fee would be charged at one percent each against two percent each charged earlier from buyers outside Punjab, said the spokesman.

At present, Punjab charges market fee and RDF at two percent each, besides infrastructure fee of three percent and VAT of five percent on food grain.

However, basmati exporters could claim VAT refund and there will be no infrastructure fee on basmati purchase.

"The incentives will be meant for rice processors or millers of Haryana for export purpose only," Punjab Agriculture Minister Tota Singh said in punjab.

Singh said Haryana requires paddy as they have surplus milling capacity and these incentives will encourage them to enter Punjab market for the purpose of buying crop.

This decision comes after discussions were held with rice exporters from Haryana who were demanding incentives on par with Punjab in order to buy basmati crop from there.

Punjab basmati growers have been complaining about not getting remunerative rates this season similar to what crop prices prevailed last season. Growers in Punjab had accused even 'unscrupulous' traders of lowering crop prices by forming cartel.

Basmati crop in Punjab is fetching Rs 2,100 to Rs 2,400 a quintal as against Rs 2,800 to Rs 3,000 a quintal recorded at the time of arrival in grain markets. Notably, in neighbouring Haryana also, basmati prices are higher by Rs 300-400 per quintal.

The state government also apprehended that market price of basmati would be lower than the previous year, as a result, the government should encourage more buyers so as to ensure remunerative prices to farmers, said the spokesman.

Problem arose for paddy growers of Punjab as area under basmati crop surged by 55 percent to 8.62 lakh hectares this year, creating a 'glut like' situation in the state.

With around 30 percent of total paddy area being under basmati, its output is expected to reach 34 lakh tonne as against 22.65 lakh tonnes recorded last season.

The Punjab government has also decided to continue with the policy of giving incentives to state rice millers on purchase of basmati crop.

The state government had last year waived market fee (two percent), RDF (two percent), infrastructure cess (three percent) on purchase of basmati in order to push crop diversification in the state.

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