Siddu walks tightrope to maintain fiscal discipline

Bengaluru: With the continued economic slowdown affecting revenue collection, Chief Minister Siddaramaiah may have to explore new avenues for resource mobilisation if he continues to offer populist, subsidy schemes in the 2016-17 fiscal year, let alone giving a boost to the much-needed infrastructure facilities.

The government appears to be grappling with the shortage of revenue as a result of sluggishness in the economy: Shortfall in own tax revenue is expected to be in the range of Rs 1,500 crore to Rs 2,000 crore in the current year. Collections from the Commercial taxes and Stamps duty and Registration fees are likely to disappoint the government – mainly on account of falling fuel prices and slump in realty sector.


If the mid-year review of State Finance 2015-16 report is any indication, Siddaramaiah, who also holds the Finance portfolio, will have to shun populism and concentrate on streamlining burgeoning expenditure in order to maintain fiscal discipline. The report had cautioned against increasing the subsidy expenditure. The government’s spending on subsidies in the current year is a whopping Rs 18,454 crore. Free power supply to irrigation pumpsets and supply of palm oil and free food grain distribution under Anna Bhagya scheme are among the major subsidy programmes.

Moreover, burgeoning expenditure has been a cause for concern to the government. As many as 82% of the total revenue of the State is being spent on the committed expenditure, leaving a very limited elbow room to fund the infrastructure development.

The committed expenditure comprises salaries, pensions, subsidies, administrative expenses and devolution to local bodies. In 2014-15 financial year, for instance, Rs 89,691 crore of the total 1,08,908 revenue receipt was spent on committed expenditure. Salary and pension took a lion’s share of about Rs 31,714 crore, followed by subsidy schemes with Rs 15,842 crore expenditure.

Sources in the Finance department said the mounting expenses has forced the government to review some of its expenditure proposals and prune them to fund unforeseen expenses approved by the legislature in the form of supplementary estimates in the middle of the year. The sources, however, did not disclose the expenditure proposals that were dropped.

Agri, infra need attention

Siddaramaiah needs to focus on the agriculture sector which is facing a crisis. Karnataka witnessed highest number of farmer suicides in 2015-16. At the same time, the industry sector, which is facing the heat of slowdown, has been demanding the government give a boost to the infrastructure sector. Infrastructure facilities, particularly roads in Bengaluru, are crumbling. The government has to spend a huge sum to address the problem of infrastructure inadequacy, the sources said.

Apart from these economic challenges, the Siddaramaiah government is facing the threat of waning popularity, especially after the Congress’ poor performance in the recent Assembly byelections and panchayat polls. The chief minister is, therefore, under pressure to use the budget to salvage the image of his government. Siddaramaiah appears to believe that offering populist schemes is the only way to achieve it.

His 11th budget today

Siddaramaiah is scheduled to present the State budget 2016-17 on Friday at 11.30 am in Vidhana Soudha. This will be the 11th budget of Siddaramaiah and the 4th one as chief minister.

Major subsidies

Power: 7498.00 cr
Food: 2021.70 cr
Milk: 821 cr
Cooperation: 797.30 cr
Transport: 748.47 cr
Industries: 279.46 cr
Housing: 222.95 cr

Karnataka budget proposes costlier fuel, liquor, soft drinks:

Petrol, diesel, beer, liquor and soft drinks will be costlier in Karnataka from April 1, as the state budget for the coming fiscal (2016-17) seeks to hike various taxes on them.

Presenting the budget for the next fiscal, Chief Minister Siddaramaiah told lawmakers in the legislative assembly here on Friday that petrol price would go up by Rs.1.89 per litre, with four percent increase in tax to 30 percent from 26 percent.

“Similarly, diesel price will be 89 paise costlier per litre with increase in tax to 19 percent from 16.65 percent,” Siddaramaiah, who also holds the finance portfolio, said in his two-hour-long budget speech delivered in Kannada.

Justifying the increase in fuel taxes, the chief minister said though the central government had increased excise duty three times on petrol and diesel during the current fiscal (2015-16) despite steady fall in crude oil prices in the international market, the state government did not raise tax on them.

While doubling excise duty on beer to Rs.10 from Rs.5 and increasing same duty by Rs.5 on Indian made liquor to Rs.50 from Rs.45, the chief minister has also hiked additional excise duty on liquor by four percent to 12 percent across all the 17 slabs.

“I propose to increase additional excise duty on beer to 150 percent from 135 percent. I also propose to levy an administrative fee of Rs.2 per litre on export and Re.1 per litre on import of spirit, excluding ethanol.

To mobilise additional resource, the budget has increased value added tax (VAT) to 20 percent from 14.5 percent on aerated and carbonated non-alcoholic beverages, including soft drinks and soft drinks concentrates.

The budget also increased motor vehicle tax on transport vehicles to mobilise Rs.121 crore additional revenue next fiscal.

“As the motor vehicle taxes have not been revised since 2010, I have proposed to enhance taxes on private stage carriage by Rs.300 to Rs.900 from Rs.600 per seat, on private city service stage carriage by Rs.150 to Rs.450 from Rs.300 per seat, on contract carriages by Rs.500 to Rs.1,500 from Rs.1,000 per seat,” Siddaramaiah said.

Vehicle tax on all India tourist omni buses has been increased by Rs.750 to Rs.3.500 from Rs.2,750 per seat and tax on stage carriages operating on special permit to Rs.1,500 to Rs.1,000 per seat.

“As transport and non-transport electric vehicles are eco-friendly, I propose to exempt them fully from taxes,” Siddaramaiah added.

The budget proposals also raise entertainment tax by four percent to 10 percent from six percent collected from multi-system operators and direct-to-home service providers.