The Haryana budget presented on Wednesday proposed to set up a corpus to fund local bodies by imposing a surcharge on VAT for certain items, including electrical goods and sanitary fittings, and paved the way for greater public—private partnership in infrastructure and social sectors.

Faced with a total deficit of Rs. 3,912 Crore, Haryana Finance Minister Ajay Yadav in the budget announced a policy for engaging voluntary and non-government organisations for fast-paced growth in the infrastructure and the social sector.

In addition, a surcharge of five per cent has been imposed on Value Added Tax (VAT) on different items, including petroleum, food items, electrical appliances and sanitary fittings, to raise about Rs. 300 crore annually for local bodies, including panchayats.

On the state’s deficit, the finance minister said the total deficit of Rs. 3,912 crore was within manageable limits of four per cent.

A large part of the deficit is owing to the implementation of the Sixth Pay Commission report, which entails a salary burden of Rs. 2,600 crore and pension and arrear bill of Rs. 1,570 crore.

Of the additional resources generated through VAT, 80 per cent would go to urban bodies and the rest to local bodies, the minister said.

Answering a question at the press conference after the budget, the minister said the surcharge on VAT for local bodies would be a substitute for Octroi, which was abolished some time back.