The Maharashtra government has decided to impose additional surcharge of Rs 2 per litre on diesel and petrol prices to partially offset the annual loss of Rs 3,600 crore due to scrapping of the local body tax (LBT) with effect from August 1, 2015, and in view of the sharp decline in crude oil prices in the international market.
At a cabinet meeting Wednesday, the state government also enforced 5 per cent tax on cigarette, liquor and aerated drinks. Besides, a marginal tax increase on diamond and gold and its ornaments from 1 per cent to 1.20 per cent was announced. The tax hike will generate an additional revenue of Rs 1,600 crore in the next five months.
The mid-year taxation hike undertaken by Devendra Fadnavis government aims to tackle the financial constraints and challenges posed by drought in almost 25,000 villages out of the total 40,000 villages. The compulsion to fulfill the poll promise of abolishing LBT to cater to the trading community vote bank, coupled with the failure of the Centre to enforce GST, appear to have taken heavy financial toll on the state government.
The prolonged drought for the third consecutive year led to a foodgrain shortfall of around 30 per cent. The ambitious water conservation programmes undertaken under the Jalyukta Shivar Yojana to tackle the severe water crisis will also require a massive budget.
In the last 11 months, the state government has spent Rs 3,332.57 crore on providing relief to farmers in drought and hailstorm-hit districts of Marathwada, parts of west and north Maharashtra and Vidarbha. Besides, an additional budget of over Rs 10,000 crore has been set aside for drought mitigation projects.
Speaking to The Indian Express, Finance Minister Sudhir Mungantiwar said, “It is not a drought tax. We have selectively imposed tax on cigarette, liquor and aerated drinks to raise more funds. We have also imposed additional surcharge of diesel and petrol to raise funds following the loss of Rs 300 crore per month due to abolition of LBT and fall in the crude oil prices.”
He added that the decisions would be enforced for five months. There would be a review after that, coinciding with the annual state budget of 2016-17.
“I believe we can further impose taxes on all luxury items. I am sure nobody would mind paying Rs 25 more for a cinema. There are several such avenues that cater to certain upper strata from where we can generate more funds,” said Revenue Minister Eknath Khadse.
He added, “I suggest we should tax the rich to take care of the poor in rural Maharashtra. I have drawn a list of such sectors from where a marginal tax hike can help rural economy.”
During the monsoon session in June-July, Fadnavis had indicated the government would consider agriculture tax to provide relief to farmers. However, the state government tried to knock at the Centre’s door to raise additional funds to tackle the water crisis.
Fadnavis said, “Financial constraints cannot come in the way of extending relief and compensation to farmers. Moreover, we have undertaken ambitious flagship short and long-term projects to mitigate the drought situation in Maharashtra.”
He said while the government had already spent more than Rs 7,000 crore on relief and various projects, more funds would be sanctioned for water conservation and agriculture-related projects.