Heavy taxes proposed in Kerala budget leave even ruling-front leaders fuming

Finance Minister KN Balagopal feels isolated while even ruling front leaders are making veiled attacks over the recent Kerala budget.

ByK A Shaji

Published Feb 05, 2023 | 11:20 PM Updated Feb 05, 2023 | 11:21 PM

Centre order to Kerala off-budget borrowing limit

While Kerala is reeling under the heaviest additional tax and non-tax burden ever levied by a finance minister, the budget recommendations of KN Balagopal — including an unprecedented fuel price hike — have adversely affected the ruling Left Democratic Front (LDF) while it is preparing to face the fast-approaching Lok Sabha election.

The social security cess imposed on petrol and diesel has given a dubious reputation to the state: Land of the highest fuel prices across India.

By enforcing the cess, Kerala has put the Andhra Pradesh and Telangana fuel prices in the rearview mirror.

While the Congress-led UDF in the Opposition is fuming over the decision, LDF convenor EP Jayarajan has demanded a rollback — at least partially.

Jayarajan has told reporters that increased fuel prices would force industrialists to move away from the state.

MV Govindan, state secretary of the LDF’s major constituent, the CPI(M), met fellow party leader and Chief Minister Pinarayi Vijayan, and demanded at least a 50-percent rollback of the cess to minimise people’s wrath against the government.

Other LDF constituents, including the CPI, have urged the chief minister to engage in damage control immediately.

Gaining maximum Lok Sabha seats in Kerala next time is crucial for the LDF, as anything other than that would divide the Indian Left.

Now, the LDF is fearing the budget recommendations could boomerang on its aspirations.

Related: Economists slam government over inaction on financial crisis

Central tax relief nullified?

Across Kerala, there is an impression now that Balagopal spoiled the positive impacts of almost all tax reliefs announced by Union Finance Minister Nirmala Seetharaman in the latest Union budget.

Many believe the Kerala government was forced to initiate extra revenue collection because of its populist schemes, extravaganzas, luxuries, and poor financial management.

The first Vijayan government borrowed the maximum from all available sources to implement populist schemes. Those sources are not ready to lend anything more. Repayment is also a significant issue confronting Kerala.

In the last six years, the two Vijayan governments took no initiative to find additional revenue, and remained least concerned about financial discipline.

Now, the whole responsibility for aggressive resource mobilisation is on the shoulders of Balagopal, and he is suffering public humiliation for doing so.

Neither the CPI(M) nor the LDF has come to his defence. The leaders remain directionless when youth activists of the Opposition wave black flags against the chief minister and attempt to waylay him.

Aiming to mobilise highest-ever revenue

Through the budget, Balagopal announced that he was aiming for an additional resource mobilisation of ₹2,995 crore, the highest in the history of Kerala. Even in the pre-GST era, few finance ministers attempted it in any Indian state.

In 2014, when the then-finance minister KM Mani of the UDF increased the building tax, the LDF called him cruel and insensitive. This time, even property buyers are set to suffer because they must pay more to the government as it increases fair value.

Those who stay away by keeping their residences also have to pay taxes.

As usual, alcohol products remain heavily taxed. Stamp duty on flats has been increased from 5 percent to 7 percent.

A graded increase has been effected in the one-time cess on all ranges of new vehicles. Even judicial court fee charges have increased significantly.

Government sources say the state is under enormous fiscal stress, and it has no choice but to introduce new fat levies.