Why Octroi abolition will take a heavy toll

One look at the then prevalent rates of octroi in the neighbouring councils as against rates in the KDMC is enough to prove why this took place. While the KDMC charges octroi at the rate of four per cent to generate badly needed revenue, the neighbouring councils charged only two per cent and lesser. In this dog-eat-dog competitive age it is little surprise that the manufacturers have decided to move out. In fact, the proximity of the Gujarat border has made it easier to shift out of the state, as the Gujarat government attracts traders, manufacturers and entrepreneurs with all kinds of tax benefits.

With the dice already loaded against the corporations, one wonders why the state government deemed it fit to further put them at a disadvantage by abolishing octroi totally in the councils. True, octroi brought with it a host of problems.Corruption and delays at nakas made traders see red due to the accompanying losses. But is this only true of council areas and not corporations? If the government was serious about doing away with these problems, why couldn’t it abolish octroi all over the state and enforce a uniform entry tax, like most states in the North have done?

How can the government make up for a collective loss of over Rs 4,000 crore to the 14 corporations, when it is itself in a precarious financial position (a fact confirmed by none less than the RBI itself)? Even making it up to the 232 councils who stand to collectively lose Rs 440 crore is going to prove an uphill task. It is perhaps the foreboding of this and not knowing what to do with the octroi staff in already over-staffed councils which has led to a lukewarm response from both the administrations and elected representatives of municipal councils. Purnima Kabre, the president of the Ambernath Municipal Council feared: “Our council, which is already in a messfinancially, will face further problems if the grants to compensate us for the loss in octroi get delayed.” Kabre speaks from experience, as every fund allocation takes its time trickling down from the Mantralaya to the councils.

According to former BMC commissioner S S Tinaikar, one of the biggest advantages of octroi is its liquidity. “The liquidity gives the civic body spending power which cannot be matched by annual grants,” he pointed out. Another point in favour of octroi is that it is the only source of revenue which can be enforced. As a senior official in the Mantralaya remarked, “In all other sources like sales tax and excise, the government has to go mostly by the tax payers’ version, which generally is on the lower side.”

Moreover, the anomaly that the state government has created is going to make citizens residing in corporation areas pay for citizens in the council areas! Sample this. A cess is to be levied on sales tax in corporation areas (where they are still paying octroi) to makeup for the fund shortfall. In a classic case of heads-you-win-tails-I-lose, the citizens will be penalised because the state decided to confer corporation status on their civic body. If you think that the government will revoke its order once it realises its folly, forget it. It will amount to political harakiri for any party to touch this sacred cow once it is in place. So what if all developmental activity comes to a standstill, at least the netas will have proven their point by creating a difference in the selling price of the same commodities in council and corporation areas.