Prices of fuel, liquor to go up in Kerala; economists slam government over inaction on financial crisis

However, the finance minister assured that the financial constraints would not impact the welfare schemes of the Left government.

BySouth First Desk

Published Feb 03, 2023 | 4:55 PM Updated Feb 03, 2023 | 5:13 PM

Kerala Finance Minister KN Balagopal presenting the budget

In a move by the Kerala government to mobilise additional revenue to carry forward its security schemes and development programmes, the prices of petrol, diesel, and liquor were hiked in the budget presented in the Assembly on Friday, 3 February.

Taxes on motor vehicles and fair price value of land will also go up in Kerala.

Despite wide expectations, the social security pension received no hike, but Finance Minister KN Balagopal, while presenting the budget for fiscal 2023-24, assured that the financial constraints would not impact the welfare schemes of the Left government.

He did not mince allocations in the health and education sectors amid the cash crunch which received an outlay of ₹2,828.33 crore and ₹1,773.09 crore, respectively.

The finance minister said it was proposed to levy a Social Security Cess on Indian Made Foreign Liquor (IMFL) and on the sale of petrol and diesel as the commitment to continue protecting the decent lives of vulnerable sections of society require supplementing the financial resources.

“It is proposed to levy a Social Security Cess at the rate of ₹20 for each bottle of IMFL having MRP between ₹500 and ₹999 and at the rate of ₹40 per bottle of IMFL having MRP above ₹1,000,” Balagopal explained.

Additional revenue of ₹400 crore is expected through this, he said.

Also read: Kerala gets order from Centre, cutting off-budget borrowing

Social Security Cess on fuel

Another impetus measure towards the Social Security Seed Fund was proposed to be brought by bringing the Social Security Cess on sale of petrol and diesel at the rate of ₹2 per litre, he added.

“This is expected to bring in additional revenue of ₹750 crore to the Social Security Seed Fund,” he said.

The existing fair value of land would be increased by 20 percent to bridge the gap between market value and fair value, the finance minister said.

The one-time tax on newly purchased motorcycles having a value up to ₹2 lakh was enhanced by 2 percent, he said adding that an additional income of ₹92 crore is expected through this.

However, a one-time tax on electric motor cabs and electric tourist motor cabs was reduced to 5 percent of the purchase value to minimise air pollution and to promote public transport, the minister added.

Also read: Kerala decries ‘step-motherly’ attitude in Union Budget

Balagopal, in his budget, allocated ₹100 crore for welfare programmes and set aside ₹2,000 crore for tackling price rise, besides announcing a slew of initiatives for the infrastructure and higher education sector.

“An amount of ₹2,000 crore is earmarked for 2023-24 to continue vigorous market interventions, considering that the threat of inflation has not completely abated”, the finance minister said.

The minister also said the common people would not be ignored while announcing big projects and ₹80 crore would be allocated for alleviating extreme poverty in the southern state.

A total of ₹600 crore would be set aside for rubber subsidy in the state budget, he said, adding that a separate Research and Development budget would be presented to give more focus to the R&D sector.

An extensive industrial and commercial centre will be developed in the area around the under-construction Vizhinjam port, he said.

More focus would be given to the “Make in Kerala” project to increase the state’s domestic production and give a boost to employment and investment opportunities, the minister added.

‘Government is looting poeple’

The opposition Congress-led UDF slammed the Kerala budget, protesting against the proposal for a cess on petrol, diesel, and liquor. It accused the Left government of looting people.

“The budget is hiding the critical financial situation faced by the state government, and the proposals amount to looting the people. The decision to impose a cess on liquor will lead to more people shifting towards drugs. The budget was presented without doing adequate studies,” said Leader of Opposition VD Satheesan.

He said when the state was facing inflation, the rise in petrol and diesel prices would adversely affect the market.

“The imposition of cess on petrol and diesel comes at a time when we are fighting against soaring fuel prices. This will lead to price rise of essential commodities affecting the common man,” Satheesan said.

‘State on the way to growth’

Beginning the budget speech on a positive note, Balagopal said Kerala had bravely overcome Covid-19 challenges and finally returned to the path of growth and prosperity.

Though the state’s economy is facing challenges due to the financial policies of the Centre and its decision to impose cuts on its borrowing limit, Kerala is not in a debt trap, he said.

Even though the minister claimed that the state is on a path towards growth economists are opposing the statement by pointing out the financial crisis that the state is going through.

Noted economist BA Prakash who was chairman of the fifth finance commission of the state is of the opinion that no measure has been taken by the government to address the financial crisis.

“Kerala government is going through an unprecedented financial crisis, an important reason for the situation is the extra burden created by the changes in the salary scale. The expense of salary and pensions in the year 2020-2021 was ₹46,754 crore, in the year 2021-22 it became ₹71,393 crore, an increase of 52 percent,” Prakash told South First.

“Due to this, other than the most essential needs there is no money for any other projects in Kerala. There has been no measure put forth on the part of the government to solve this crisis. This continues to put the financial situation of the state in crisis which results in a lack of funds for welfare and development,” he added

Finance minister slams Centre

In his budget speech, Balagopal accused the Centre of bringing change in fiscal federalism, saying it goes against the spirit of the constitution.

“Centralisation of power and disregard for states, especially Kerala has increased unprecedentedly”, the minister said.

He alleged that Kerala is being sidelined in the allocation of centrally sponsored schemes also.

“Can anyone with a commitment to the people of Kerala justify this situation? On whose side do those who celebrate this disregard stand?” the minister asked.

Slamming the Centre, he said as a result of the cessation of GST compensation, there has been a shortfall of around ₹7,000 crore during the current fiscal.

“As a result of the policy of the Union Government treating Public Account as debt liability, there is a revenue loss of around ₹10,000 crore per annum”, the minister said.

‘Share of Kerala in divisible pool reduced’

Balagopal said during the tenure of the Tenth Finance Commission, the share of Kerala was 3.875 percent of the divisible pool to be distributed among the states.

“By the time of the Fifteenth Finance Commission, it came down to 1.925 percent. Through this, the Union Government cut down the revenue of Kerala by tens of thousands of crores”, he said.

He also said there is a shortfall of around ₹6,700 crore due to the reduction of the Revenue Deficit Grant by the Union Government.

Referring to the financial crisis in developed countries like Britain and neighbouring Sri Lanka and Pakistan, Balagopal said this particular situation can be survived only by taking every single step forward carefully.

“As a matter of pride that Kerala is able to move forward with alternative welfare policies despite this global scenario,” Balagopal said and urged the legislators to set aside all our differences beyond party politics and stand united for the state.

(With inputs from PTI)