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Punjab to hike taxes to bolster economy
‘Abiana’ to be revived, 10% cess on VAT likely
Chitleen K Sethi
Tribune News Service

Chandigarh, July 1
The cash-strapped Punjab government is set to increase various taxes and cesses to meet its overambitious plan targets for this fiscal. Giving a sneak peek into what is most likely going to unfold soon, sources close to the finance department said the state will revive ‘abiana’ (user charges for irrigation water from canals) to be collected from farmers, introduce an additional cess on VAT and hike the electricity duty imposed on consumers.

Calculated at the rate of Rs 80 per acre per year, ‘abiana’ was introduced in 2002 by the Amarinder Singh government, only to be stayed in 2004. Since then the government has yet to recover over Rs 350 crore on this account. A proposal to reintroduce the charges at an increased rate of Rs 150 per acre a year is expected to be included in the budget proposals. With those employing canal water for irrigation in the state numbering about a million, the government is looking at mopping up an additional Rs 150 crore. Incidentally Haryana charges Rs 200 acre per year as ‘abiana’.

The sources said there is also a proposal to hike the electricity duty for all consumers except industrial from the current 10%t to 15%. This would fetch an additional Rs 120 crore in revenues.

A 10 per cent cess on VAT is also expected to be levied. This means those who were paying, for example 4% VAT would now be paying VAT at the rate of 4.4%. The move is expected to bring in over Rs 800 crore to the exchequer. The government is also considering imposition of some form of one-time charges for use of electricity by farmers.

A proposal being hotly debated is to raise the retirement age of all Punjab government employees from the current 58 to 60 years. This, the sources said, would save the state Rs 1,000 crore this year.

“However the finance minister is against the move. He thinks it would be retrograde step that would diminish opportunities for the young to get jobs. If he does include the proposal in the budget he would be doing so with a heavy heart,” remarked an official involved in the process of finalising the budget exercise.

Finance Minister Manpreet Badal is going to need much more than his poetic skills to be able to balance this year’s Budget. Though one can expect a fair sprinkling of Urdu couplets in his Budget speech — to be delivered on July 7 — get ready for some unpleasant surprises too.

When contacted, Badal remained tightlipped about any of these proposals. “I cannot divulge anything at this stage. All I can say is this year has been the cruellest for the state. Revenue collections have come down due to a sagging economy. We have also been burdened with the pay commission’s recommendations. In addition, since the central government’s tax revenues have decreased we have received Rs 600 crore less as part of our share. Moreover, we won’t be getting the relief we had been expecting as an outcome of the finance commission’s recommendations, which are not going to be implemented this year,” said Manpreet.

With the plan outlay totalling a staggering Rs 8,625 crore the state is now expecting a shortfall in revenues of Rs 3,000 crore.

“We have consciously decided to raise the bar for ourselves because the consensus among all planners, including most finance ministers, was that, in order to take the sting out of the recession and give a stimulus to the state’s economy, government spending must increase substantially,” he added.

As a result almost every sector in the state’s economy will have a larger allocation of funds. “Power gets a lot and so does infrastructure development. Allocations for education and health will also be increased,” he stated.

“It’s immensely satisfying that we have raised the plan size by 25% each year and managed to achieve 100% compliance. If I’m able to attain the same for this plan too it would mean my greatest challenge has been overcome,” said Manpreet.

Watch out for

n Revival of ‘abiana’ or user charges on canal water @ Rs 150 per acre a year
n Hike in electricity duty from 10% to 15%
n 10% cess on VAT
n Increase in retirement age for all state govt employees from 58 to 60 years

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