Assembly elections

In poll-bound Himachal Pradesh, apple growers and traders are still hurting from note ban and GST

Could their resentment affect the outcome of the impending Assembly election?

The Bharatiya Janata Party has described demonetisation and the Goods and Services Tax as the biggest achievements of its central government. But apple growers and traders in poll-bound Himachal Pradesh aren’t clapping.

While the growers in the hill state, which goes to polls on November 9, claim that they are hurting from higher input costs as a result of the GST, the traders complain the cumbersome system for filing returns under the new tax regime has hiked their operational costs at a time when trade volume is already down by around 40%.

This when the apple trade was already stressed. Over the past two years, apple production in Himachal has dropped from around three crore cartons a season to less than two crore cartons, said Ravinder Chauhan, president of the Apple Growers Association of India, which is active in the four major apple-growing states of Himachal, Jammu and Kashmir, Uttarakhand and Arunachal Pradesh. “It has happened because of weather conditions and factors that are ecological and environmental in nature but poor formulation and implementation of policies have played a significant role in causing distress to apple growers. First demonetisation and then the GST aggravated the problems of the apple growers.”

Political implication

Could the resentment among apple growers and traders affect the election in any way? “It is definitely going to be a deciding factor in at least seven districts that produce apple in Himachal,” Chauhan said.

The seven districts – Shimla, Kullu, Kinnaur, Mandi, Chamba, Sirmaur and Lahaul-Spiti – account for 33 of the state’s 68 Assembly seats.

Until just a few years ago, Himachal’s apple economy was worth Rs 5,000 crore, Chauhan said, citing data maintained by his association. Last year, it was down to around Rs 3,500 crore and declining. One major reason was demonetisation. As Chauhan explained, November is when traders usually go to villages to buy apple – with cash. Only last November, demonetisation sucked cash out of the economy, delaying payments to the growers by months and leaving them with little money to invest in fertiliser and manure for the current season. Payments to migrant farm labourers were also delayed, Chauhan pointed out, and many of them did not return to Himachal this year, fearing they would again not be paid on time owing to the cash crunch. As a result, apple production suffered.

“Then came the GST, which has again made it difficult for farmers to invest for the next season,” Chauhan said. “Input prices have increased. Some standard fertilisers have become dearer by Rs 50 to Rs 60 per quintal. Same is the case with manure and equipment such as sprayers, tillers, grass cutters. Farmers are mostly illiterate. If the GST has not really caused the price rise, then farmers are being cheated by traders on the pretext of GST. Either way, it causes resentment.”

The GST has also increased the prices of cartons and trays for packaging apple. Growers say the cartons that cost Rs 40 to Rs 43 until last season come for Rs 50 to Rs 52 now. “A standard carton takes six trays and the price of trays too has gone up by one rupee a piece,” Chauhan said. “Till last year, the average tray price was four and a half rupees.”

Widespread distress

Apple traders in Himachal refer to the month of Diwali as the “bumper cash season”, but there was nothing bumper about this Diwali, said Inderjeet Singh, president of the Shimla Beopar Mandal, which has around 4,000 members in the district. “There is at least 40% drop in turnover. It seems like retailers, who had run out of cash after demonetisation, are still thrifty after the roll-out of the GST when it comes to spending on goods other than essentials. It affects the apple market because the apple economy in Himachal has traditionally been a cash economy.”

Fresh apple, like all fresh fruits and agricultural products, is exempt from the GST, as are businesses with annual turnover less than Rs 10 lakh in the North East and in hill states such as Himachal.

Still, even apple traders with income less than Rs 10 lakh register for the GST.

“It is primarily for two reasons,” explained Nitin Sohal, an official with the Shimla Beopar Mandal. “Most traders also play the role of commission agents and they charge 6%-8% commission from growers as well as buyers in some of the mandis. This commission was exempt earlier but now it attracts 18% GST. Secondly, they sell the apple in the rest of India.”

All traders, irrespective of their turnover, are required to register for the GST if they want to do business outside their states.

So, even though they trade in a GST-exempt product, apple traders have to sign for the new tax regime. Herein lies the problem. “Does Himachal have that many accountants to help the largely non-tech savvy apple traders with the cumbersome return filing process that the GST demands?” Sohal remarked, suggesting it does not.

The GST subsumes all indirect taxes businesses paid to the Centre and states separately, with the aim of creating a common market. But it also involves a new complex tax filing system. “Most accountants have started charging exorbitantly for helping traders with the tedious process of filing the GST returns which demands several forms to be filed periodically through the internet,” Sohal said. “This has increased operational costs for traders at a time when turnover is already declining for a range of reasons, mostly related to the cash crunch following demonetisation. Hundreds of small traders went out of business and thousands of people employed by them lost jobs after demonetisation. After the GST roll-out, most of them have not been able to resume business.”

Sohal agreed with Chauhan that “resentment on the ground shall definitely have an impact in the election”.

In Shimla’s Theog constituency, an apple grower has decided to take matters in his own hands. Rakesh Singha is contesting the election as a Communist Party of India (Marxist) candidate with the “distress of apple growers as top agenda”. “Apple production in Himachal Pradesh has been declining over the past few years as a result of weather conditions and ecological reasons,” Singha said. But “man-made factors such as demonetisation and GST policies,” he added, are making the situation worse.

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