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Maha budget focuses on farm sector; VAT hiked

For you, the agrarian spending, combined with burden of populist decisions by the government, would mean more money off your savings

mumbai Updated: Mar 19, 2016 01:28 IST
Ketaki Ghoge
Ketaki Ghoge
Hindustan Times
Finance minister Sudhir Mungantiwar (right) with minister of state Deepak Kesarkar outside Vidhan Bhavan. (Kunal Patil/HT)

Taking a leaf from the Union budget, Sudhir Mungantiwar, the state’s finance minister, made the ailing farm sector the focus in his budget for 2016-17, announcing Rs26,819 crore for agriculturists.

But critics have panned the budget for lacking overall vision and the direction to pull the state’s rural economy out of crisis. For you, the agrarian spending, combined with burden of populist decisions by the government, would mean more money off your savings.

The budget has made way for a marginally high Value Added Tax of 0.5% on more than 80-odd items, ranging from hairpins to coir mattress, coffee beans, Ayurvedic medicines, pressure cookers, buckets, pizza bread and hawai chappals, all of which will now have a VAT of 5.5%, instead of the earlier 5%.

Buying a two-wheeler will also cost you more, with motor vehicle tax on bikes hiked in the range of 8% to 10% from the existing flat 7%, based on engine capacity.

A bike that is 300cc or above, for instance, will be taxed at 10%, those from 100cc to 299cc will be taxed at 9% and scooters with engine capacity of 99cc will be taxed at 8%.

The out-of-turn tax introduced by the state government in October, again ostensibly for drought mitigation, will continue for another year. So a surcharge of Rs2 a litre on petrol and diesel, increase in VAT by 5% on aerated drinks, liquor and cigarettes, and by 0.2% on gold, diamonds and jewellery will continue for another year, despite an earlier promise to rationalise the taxes.

The out-of-turn taxes are expected to rake in nearly Rs4,000 crore in revenue for the government in the coming year. Net earnings from tax proposals presented on Friday works out to Rs363 crore. This is because revenues from VAT hike (estimated at Rs700 crore) will be used to offset tax sops given to say, the sugar industry, as sugarcane purchase tax has been waived off.

The question now is whether the tax proposals will alleviate the farmers’ miseries. For the first time, the state has tried to take a holistic look at the agrarian crisis, and has made budgetary allocations aimed at building the capacity of farmers — the Rs2,000-crore fund to build farm ponds and wells, Rs1,000 crore for the flagship water conservation scheme Jalyukt Shivar and Rs1,855 crore for a crop insurance scheme.

But, despite the finance minister’s spotlight on agriculture, critics say the budget document lacked sufficient vision and direction to pull the state’s rural economy out of crisis.

While drought mitigation has been stated as a reason for expenditure going up, the BJP’s populist decisions to fulfil promises they made ahead of the 2014 Assembly elections, such as scrapping Local Body Tax, will also cost the exchequer Rs5,500 crore next year. Cancelling the road toll tax is expected to cost another Rs800 crore.

Even as the compiled Rs26,000-crore plus figure sounds impressive, opponents have questioned such a summing up of outlay from across departments.

“They tried to present a farmer’s budget of Rs25,000 crore, with the finance minister himself listing 23 dedicated items. But, other than packaging, I don’t see too many new schemes. For instance, allocation across departments like power (subsidy of Rs3,500 crore ), the employment guarantee scheme (Rs 5,000 crore), irrigation budget (Rs7,000 crore) have been included in this share,” said Jayant Patil, former finance minister and senior NCP leader.

The power bill subsidy is given routinely to farmers and irrigation department funding has actually reduced, he added.

“Ideally, the budget document should have laid down a roadmap for the state’s plans over the next two- three years. Instead, we have an attempt to please all sections through budgetary tokenism like women-only buses, money to build houses for freedom fighters, among others. All good ideas, but they can’t make up for lack of a vision,” said a senior bureaucrat, requesting anonymity.

The budget has an annual plan size of Rs56,997 crore (development budget), while the total revenue expenditure is estimated at Rs2,24,454 crore and revenue earning at Rs2,20,810 crores. The revenue deficit for coming year is slated at Rs3,644 crore.

First Published: Mar 19, 2016 01:04 IST