Chief Minister Shivraj Singh Chouhan has reduced Mandi tax from Rs 1.50 to paisa 50 on each quintal for three months.
At a cabinet meeting on Thursday, the government decided to implement the policy with effect from November 14.
Mandi traders had demanded cut in Mandi tax, and agriculture minister Kamal Patel tried to meet their demand.
Through Mandi fees and other sources, the sate Mandis earned Rs 1,200 crore last year.
The Mandis may incur a loss because of the decision to reduce tax. Chouhan asked the officials to improve the system in Mandis.
He told them to find out ways to attract farmers to sell their produce at Mandis. If the reduction in Mandi tax does not hit the income, it may be extended, Chouhan said. The decision will be reviewed after three months, he said, adding that the officials should review income of Mandis every month.
Traders told Chouhan that cut in Mandi tax would not affect the government’s income. A sum of Rs 677 crore is spent on the salary and allowances of Mandi staff.