Financial Daily from THE HINDU group of publications
Tuesday, Jul 20, 2004
Industry & Economy - Budget
Sops for farmers, ST reliefs in Karnataka Budget
The Karnataka Deputy Chief Minister and Finance Minister, Mr S. Siddaramaiah, with the Chief Minister, Mr N. Dharam Singh, arriving to present the Budget in Bangalore on Monday. K. Bhagya Prakash
Bangalore , July 19
KARNATAKA offered a slew of sops for the farm sector and simultaneously reduced the sales tax rates on a series of goods of mass consumption.
Presenting the Budget for the current fiscal on Monday, the Deputy Chief Minister, Mr S. Siddaramaiah, who also holds the finance portfolio, estimated a revenue surplus of Rs 72.83 crore despite the battery of concessions. If achieved, it will be the first time over a decade that the State showed surplus in its Budget. The Finance Minister also said the State would be VAT-compliant by the end of this fiscal year.
The concessions offered to the farm sector include credit at 6 per cent interest rate through cooperative banks, waiver of farm loans where the interest paid was in excess of the principal amount and the setting up of a price stabilisation fund for farm produce. The State Government has also set aside Rs 241 crore as crop insurance for the farm sector.
The subsidy package also includes a scheme for providing concessional foodgrains to Below Poverty Line families and a midday meal scheme for school-going children. The impact of these subsidies is estimated to cost about Rs 562 crore.
The tax concessions include complete rationalisation and reduction in the rates of tax on about 125 commodities and 43 types of work contracts. As a result, several categories of commodities would now be levied sales tax rates between 1 per cent and 4 per cent. In addition, Mr Siddaramaiah has also opted for rationalisation of taxes by reducing the rate slabs from the current level of 14 to 7. Commodities would be taxed at the lowest rate of 4 per cent.
However, the special rates for some commodities would continue to neutralise the effect of the reduction in revenue. The highest special rate is 28 per cent. Sales tax on diesel has been raised from 17.5 per cent to 20 per cent. The State Government has also withdrawn the tax concession for defence canteen purchases. In addition, it has also opted for levying a cess on certain categories of goods.
As far as economic services are concerned, the Government indicated that power sector subsidies would be performance-oriented for which memorandums of understanding would be signed between the four electricity supply companies and Karnataka Power Transmission Company Ltd.
Similar MoUs would also be signed with special purpose vehicles of the State Government in a bid to reduce the Budget borrowings and the consequent debt-servicing burden. In addition, the Finance Minister has also opted for shifting to a contributory pension fund for State Government employees in a bid to cut revenue expenditure.
These efforts are expected to help the State show a revenue surplus of Rs 72.83 crore for the current year as against a deficit of Rs 1,318.44 crore in the revised estimates for the last fiscal and generate tax revenues of Rs 14,957 crore and non-tax revenues of Rs 4,486.35 crore for the current fiscal.
The revised estimates for the last fiscal indicated tax revenues of Rs 12,962 crore and non-tax revenues of Rs 3,426.47 crore. Inclusive of central transfers, the gross revenue receipts this fiscal are estimated at Rs 25,510.31 crore, up Rs 21,731.84 crore in the revised estimates for the last fiscal.
Revenue expenditure this year was estimated at Rs 25,437.48 crore as against Rs 23,050.28 crore in the revised estimates.
The fiscal deficit has also been scaled down for the current year to Rs 4,246.64 crore as opposed to the revised deficits for the last fiscal of Rs 5,564 crore.
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