Chief Minister Siddaramaiah, who is expected to present a people-friendly budget in the Assembly on Friday, faces one of the toughest challenges with the financial document having to be in favour of the people. Simultaneously, he has to tighten the tax administration to raise the requisite resources for schemes which have been announced apart from the ones likely to be proposed.
The plan expenditure, as approved by the Planning Commission, is Rs. 47,000 crore, and the government has to necessarily make arrangements for funding the plan.
Of the very many subsidies and programmes announced by the new government in under two months, the most important is the rice subsidy with the government launching sale of 30 kilograms of rice for every BPL card holder at Re. 1 a kilogram, and the milk incentive scheme where an additional Rs. 2 for a litre of milk is being given to milk producers in addition to the Rs. 2 per litre provided by the Bharatiya Janata Party government. This is expected to cost Rs. 5,000 crore to the State Exchequer.
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The Chief Minister has announced waiver of cumulative loans, including the interest component, running into Rs. 1,225 crore of 10 lakh beneficiaries belonging to the Scheduled Castes (SCs), Scheduled Tribes (STs), Other Backward Classes (OBCs) and minorities. This is also to be made good in the budget. The budget is expected to revise the special component plan module to benefit the SCs and the STs.
The government spends Rs. 16,000 crore a year on meeting the cost of subsidies alone. It should be noted that taxation in Karnataka, particularly value added tax, is one of the highest in the country and there is hardly any scope for further taxation. As such, the previous government had raised two of the VAT slabs to meet the additional cost owing to drought and it (government) had then said that it will be brought down this year.
The (VAT) slabs of 14 per cent were raised to 14.5 per cent and that of 5 per cent to 5.5 per cent with a commitment that this will continue only till July 31, 2013. The slabs were hiked in August last to mobilise Rs. 1,000 crore for drought relief work. The proceeds purportedly went to fund the crop loan and interest waiver scheme for farmers.
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The Chief Minister has made it clear that although he is not a financial expert, it is imperative that “I come up with a budget that can safeguard the interests of the poor and the farmers. My association with the common man and his problems have given me rich experience. I hope to give a good budget this year”.
Added to this is the fact that the Lok Sabha elections are round the corner and the Chief Minister has to work up a populist budget. The Congress has, in its manifesto for the Assembly elections, promised several schemes for the people and these have to be implemented in a time-bound manner.
At the same time, many of the schemes implemented by the BJP government may be withdrawn.
Mr. Siddaramaiah is expected to give special attention to Bangalore where infrastructure development is the need of the day. The government’s special grants to Bangalore may see a big increase given the fact that the Bruhat Bangalore Mahanagara Palike and the Bangalore Development Authority are facing a funds crunch for various development work.