There has been a slump in arecanut prices in the run-up to the Goods and Services Tax (GST) regime starting July 1.
The price of rashi idi variety of arecanut, which was trading at ₹55,000 a quintal in April second week, has dropped by about 34% to ₹37,000 now. The prices of saraku, bette and gorabalu varieties have also witnessed a similar decline.
According to sources in the market, a major chunk of firms in north India manufacturing value-added products from arecanut have stopped purchasing the produce from the local merchants. The merchants are reluctant to purchase the produce from growers, leading to a decline in demand and its prices.
It is said that the firms had piled up huge stocks through brisk buying when the price of the produce was around ₹25,000 a quintal from December 2016 to February 2017. The firm owners are focused on clearing the stock ahead of the GST rollout as they fear that the margins on this stock would be less after July 1 owing to high tax incidence. In addition to this, there is an apprehension among the firm owners that the transition to GST would burden them with paper work on the present stocks to provide information for taxation authorities and that they will not get full set-off for such stocks. Even a section of local merchants who had piled up huge stocks from December 2016 to February 2017 anticipating a surge in the price are apprehensive.
A major chunk of arecanut trading takes place through unregistered dealers to avoid the Value Added Tax and cess. The large merchants and arecanut firms are focused on clearing their inventories purchased illegally prior to the enforcement of GST and this is why they are not interested in making fresh purchases.
Owing to these factors, the arrivals of arecanut to Shivamogga APMC has declined to 10 quintals a day from an average of 150 quintals. D.M. Shankarappa, president of Shivamogga District Chamber of Commerce and Industries who is also an arecanut merchant, told The Hindu that activities in the arecanut market had been low from the past one month owing to apprehension among a section of traders and the owners of arecanut firms over GST. However, normality would be restored in the market after the GST rollout, he said.
Mr. Shankarappa said that after the GST rollout, the government should take stern measures to avoid arecanut trading outside the purview of taxation net as it was causing big loss to the exchequer.
