Marginal reduction in sales tax on diesel

A record Rs. 1.02-lakh crore budget, which is a 20.42 per cent increase over the previous year, along with several reliefs including a marginal reduction in the price of diesel, and new taxes proposed on cigarettes and liquor, was presented to the Legislative Assembly by Chief Minister D.V. Sadananda Gowda here on Wednesday.

Karnataka budget - at a glance (PDF)

With the sales tax on high-speed diesel reduced by 1.25 percentage points, indications are that diesel in Bangalore will be cheaper by 50 paise a litre from April 1.

Full attendance

A section of legislators of the governing Bharatiya Janata Party, who had threatened to abstain from the budget presentation, were present in full strength along with their leader, the former Chief Minister B.S. Yeddyurappa, during the nearly two-hour address by Mr. Sadananda Gowda.

A separate budget (a segment of the main one) for the agricultural sector and 0 per cent interest on farm loans up to Rs. 1 lakh formed the highlight.

The Chief Minister said the sales tax on diesel would be reduced to 16.75 per cent from 18 per cent. The current rate for diesel is Rs. 46.46 a litre compared to Rs. 44.43 a litre in Hosur across the border in Tamil Nadu.

On the new proposals, he said, “I propose to levy 5 per cent value-added tax (VAT) on beedis and increase it by 2 percentage points for cigarettes and tobacco products, to 17 per cent from 15 per cent. But VAT on ready-to-cook chapathis and parathas will be reduced by 9 percentage points, bringing it to 5 per cent from 14 per cent.”

Excise revenue target

On excise, one of the important revenue sources for the Government, Mr. Sadananda Gowda said, “With effective enforcement, we expect a volume growth of 7 per cent in liquor sales across the State in the new fiscal, to achieve a revenue target of Rs. 10,775 crore.” Collection from excise duty for this fiscal (2011-12) is expected to surpass the department's target of Rs.9,200 crore by Rs.300 crore to thus touch Rs.9,500,

The Chief Minister opted to increase the excise duty on Indian-made liquor (IML) and beer to 10 per cent.

Wage revision

The budget gave effect to a wage revision for the nearly six lakh government employees. The recommendations of the official pay committee for government employees will be given effect from April 1 “The total additional outgo on account of the pay and pension revision is estimated to be Rs. 4,450 crore,” the Chief Minister said.

Among the outlay for various welfare schemes, notable was the allocation for the welfare of the backward classes, which was raised to Rs. 1,000 crore from Rs. 760 crore last year.


A 10.4-km stretch of the metro rail will be opened in nine months, and the entire phase one will be commissioned by December 2013, for which a Rs. 500-crore allocation has been made in the budget.

The budget shows a surplus of Rs. 930.77 crore in the revenue account and an overall surplus of Rs. 119.85 crore in the capital account with a fiscal deficit of 2.92 per cent, which is well within the provisions of the Fiscal Responsibility and Budget Management Act.