Karnataka Budget: Hike in electricity tax will impact SMEs, says KASSIA

Bengaluru, July 6 (KNN) Reacting to the Budget presented by Karnataka Chief Minister HD Kumaraswamy, industry body KASSIA has hailed the announcement of waiving farmers loans availed from the Co-operative as well as Nationalised Banks.

Presenting a balanced maiden Budget, Kumaraswamy unveiled a farm loan waiver as promised by the JDS ahead of the state polls.

Kumaraswamy announced a Rs 34,000 crore farm loan waiver scheme for 17.32 lakh farmers, who took loans up to Rs 2 lakh and defaulted on payments till December 31, 2017. Pending farm loans up to Rs 2 lakh will be waived off by all banks on the basis of a guarantee by the government through a bond to enable banks to issue clearance certificates to farmers to avail new crop loans, said economic advisor S Subramanya.

The state government this year will compensate banks to the tune of Rs 10,500 crore for the loan waiver and will generate funds for the payment mostly through an increase in taxes on fuel, electricity, motor vehicles and alcohol, announced in the 2018-19 budget.

In the second phase of the scheme, the coalition government has also proposed an incentive of Rs 25,000 each for 27.67 lakh farmers who have repaid their loans on time “to prevent complaints that only defaulters have benefited”, Kumaraswamy said. The loan waiver will be restricted to small farmers.

“As expected CM Kumaraswamy heading the coalition government has kept up his promise of waiving of farmers loans availed from the Co-operative as well as Nationalised Banks.  In this direction, the cess on petrol and diesel has been increased. The tax on liquor is increased, said Karnataka Small Scale Industries Association (KASSIA). 

The JDS-Congress coalition has announced an increase in taxes on petrol and diesel by Rs 1.14 and Rs 1.12 per litre, excise tax on liquor by 4 per cent and an increase in motor vehicle taxes. The duty on electricity consumption has been increased from 6 per cent to 9 per cent for all consumers. The new tax measures are expected to increase state tax revenues by around Rs 14,900 crore.

“Revenue surplus is estimated to be Rs 106 crore. Fiscal deficit is expected to be Rs 40,753 crore which is 2.89 per cent of the GSDP. Total liabilities at Rs 2,92,220 crore at the end of 2018-19 are estimated to be 20.75 per cent of GSDP. This is within the limit of 25 per cent for 2018-19 mandated in the Karnataka Fiscal Responsibility Act,” Kumaraswamy said.

To create employment, Kumaraswamy has proposed a “Compete with China” scheme where industrial production capacity will be nurtured in seven areas in eight regions entailing a Rs 14,000 crore investment by the state over the next few years. The scheme is expected to generate 8 lakh jobs at the rate of 1 lakh per district, Kumaraswamy said.

On this, the industry body KASSIA said, “The Tax increase on petroleum products will certainly affect the middle class.  The hike in electricity tax will also impact SMEs which are already burdened with high tariffs. There is also the question of adequate allocation to small industry sector, a priority sector, and the need to help them grow with easy access to finance from the financial institutions still remains to be addressed in a concrete manner.”

KASSIA, however hoped that the substantial allocation made to the health and irrigation sectors and education along with waiving off of farm loans will help create new demand for goods and services and also bring in greater investments.

KASSIA hopes that the Chief Minister who is fully briefed of the woes   of SMEs will provide greater focus to SMEs which play a great role in creating employment for the needy in the days to come, said its President Basavaraj S Javali.

Meanwhile, in the Budget, populist schemes like the distribution of free rice under the Anna Bhagya programme launched by the Siddaramaiah government has been expanded to provide 500 gm of tur dal, and 1 kg palm oil, salt and sugar at subsidised rates.

Kumaraswamy announced allowance to Rs 1,000 per month to pregnant woman and stated that the amount will be increased in a phased manner over the next five years.

In his election manifesto, Kumaraswamy had promised Rs 6000 allowance for pregnant woman.

Kumaraswamy also announced an increase in the monthly pension for senior citizens from Rs 600 to Rs 1,000 costing Rs 660 crore this year. The JDS manifesto had promised Rs 6,000 as pension for senior citizens above the age of 65.

The budget has a slew of schemes for southern Karnataka districts like Hassan, Ramanagara and Mandya and a new multi-speciality hospital, a medical college and a film university has been proposed for Kumaraswamy’s Ramanagaram constituency on the outskirts of Bengaluru.