'Removal of cess will make India globally competitive'
Mr. Kamal Nath, Union Minister of Commerce, said that the decision to repeal the Agricultural Produce Cess Act, 1940 and the Produce Cess Act, 1966 in order to remove the cess on exports will make Indian agricultural products more competitive in the global markets. “This will make our exports more competitive. We cannot subsidise exports like the developed countries, but at least let us not tax them”, he said.
The cess under these Acts is a tax on exports. In the present national and international context, it is bad economics to tax exports. From a national perspective, agricultural exports are being seen as a means to augment farm incomes. Exports are being incentivised through schemes, which involve foregoing of revenue. Taxing some of these very exports, which are being incentivised, is inconsistent and illogical. From the international perspective also, it seems illogical to levy a tax on agricultural exports, when many other countries are aggressively promoting their agricultural exports through large subsidies. A cess would only make the exports more expensive and uncompetitive. Agricultural exports already form a significant proportion of India’s total exports and there still remains a vast untapped potential for exports from this sector, the proposal argued.