Punjab cotton prices dip as purchases wane on cess

By Ikhhlaq Singh Aujla

CHANDIGARH, Sept 5 (Reuters) - Cotton prices have dipped in the northern state of Punjab as traders avoid purchases due to a hike in cess, forcing farmers to sell produce at lower prices in other states, traders and farmers said.

Arrivals have begun in parts of Punjab, the country's fourth largest producer, but procurement has been hit due to a stand-off between traders and Punjab government over infrastructure cess, which was doubled to 2 percent from April this year.

Infrastructure cess is levied on agriculture produce by the state government for boosting infrastructure in the state.

Barring one or two markets, the traders are not buying cotton in Punjab now, officials and traders said.

"There is hardly any buying of cotton in different markets of Punjab due to an increase in infrastructure cess," Harwinder Singh Cheema, president, Arhitiya Association Punjab, said.

Cotton prices in the spot markets in Punjab have fallen to 2,700-2,800 rupees per 100 kg now, from 3,000-3,500 rupees last month, he added.

"A percent rise in tax means we will have to pay 12.5 percent as taxes for buying 100 kg cotton while in Haryana and Rajasthan taxes are much less," said Bhagwan Bansal, president of Punjab Cotton Factories and Ginners Association.

Taxes levied on agriculture prdouce in Haryana is 10.5 percent, while it is 7.6 percent in Rajasthan.