Bengaluru: The Karnataka government increased taxes on petrol and diesel by roughly Rs 3 with immediate effect to “bring down the price differences on the same commodity in neighbouring states”.
According to a government notification dated 15 June, the state sales tax on petrol and diesel has increased from 25.92 percent to 29.84 percent and 14.34 percent to 18.44 percent.
“The petrol and diesel in Karnataka is much cheaper than all the neighbouring states. Therefore it has not been revised and it is now being revised,” a senior government official told ThePrint, requesting not to be named.
The increase, the official added, will translate to roughly Rs 2,500-3,000 crore annually.
The move fuels speculations among dealers and the Opposition that the increase is to fund several schemes and guarantees of the Siddaramaiah-led state government, which has been strapped for funds, relying on higher borrowing.
The state government has denied that the increase has anything to do with its guarantees, saying it is instead to bring the taxes on fuel on par with neighbouring states.
The last revision of petrol and diesel prices was in November 2021 when Karnataka, to supplement Prime Minister Narendra Modi’s move, cut prices by about Rs 7 at a time when COVID-induced restrictions were in force.
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Five guarantees
The increase in petrol and diesel prices has not gone down well with dealers in Karnataka, who believe the state government is trying to increase taxes on everything to make up for its guarantees.
“Our commission margins (profitability)… they have not increased it for the last seven years. The commission we are getting as of now is Rs 3 on petrol and Rs 2 on diesel. Salaries and wages have almost doubled… even operations cost,” Ravi Hamsa, the former president of the petrol bunks’ association in Bengaluru, told ThePrint.
The BJP, the principal opposition in Karnataka, Saturday said it was criminal on the Congress’s part to increase fuel prices especially in a drought year.
“The CM should leave his ignorance and recall the notification on hiking petrol and diesel prices. If not there will be protests in all district headquarters on Monday,” B.Y. Vijayendra, the state BJP president, said in a statement Saturday.
A large section of the political opposition has accused the Siddaramaiah government of increasing taxes in various departments to fund its guarantees.
During an event to mark one year in office, Siddaramaiah alleged that the decline in the state’s share by the Centre had caused a loss of Rs 59,274 crore due to the “unscientific implementation” of GST (goods and services tax) in the last seven years. He added that under the devolution pool, the state had lost Rs 62,098 crore in six years.
In February, the state government brought into effect a hike of 200-500 percent in stamp duty charges for all documents that do not require registration — partition, addition deed, affidavit, cancellation of deed, reconstruction and demerger of companies, among others.
The five guarantees proposed by the Congress party in the run up to the 2023 assembly elections are estimated to cost Rs 50,000-60,000 crore in the current fiscal.
The party that stormed to power in the 2023 assembly elections, dislodging the Basavaraj Bommai-led Bharatiya Janata Party (BJP) government, had made five guarantees.
This included free public bus rides for women (Shakti), Rs 2,000 per month for women head of the households (Gruha Lakshmi), free power up to 200 units (Gruha Jyothi), 10 kg of free rice (Anna Bhagya), and Rs 1,500-3,000 for unemployed graduates (Yuva Nidhi).
The Siddaramaiah government maintains that the state had “no other option” but to go in for higher borrowings as the Modi-led Union had cut the state’s share in central taxes.
This had become one of its major poll planks in the just concluded Lok Sabha elections in which the Modi-led National Democratic Alliance (NDA) returned to power with a smaller mandate.
As of 20 May, there were over 201 crore bus rides under the Shakti scheme, amounting to Rs 4,857.95 crore.
Under Anna Bhagya the government paid Rs 5,754.6 crore for an additional 5 kg of rice per family at Rs 34 per kg.
Siddaramaiah said there were 1.67 crore beneficiaries of Gruha Jyothi and Rs 7,436 crore used to fund the scheme.
Under Gruha Lakshmi, 1.2 crore women have, so far, received Rs 20293.49 crore.
Under Yuva Nidhi, over 1.53 lakh youngsters had registered, but 29,587 beneficiaries received Rs 1,500-3,000 through direct bank transfers (DBT).
“We had said in the budget that we would spend Rs 54,374 crore for development works other than guarantees. But we spent Rs 56,274 crore in capital expenditure,” the CM said.
Siddaramaiah added that in irrigation, the government had already spent Rs 18,198 crore as against budget estimates of Rs 16,360 crore and Rs 9,661 crore for PWD.
Capital expenditure or money spent to create assets to boost economic growth in 2024-25 is Rs 52902.96 crore or just over 14 percent of the total expenditure of Rs 3,71,383 crore.
In comparison, capital expenditure accounted for over 17 percent or Rs 54,374 crore of the total expenditure (revised estimates) of Rs 3,17,836 in the previous fiscal.
Year-on-year, this translates to a nearly 3 percent decline in the state’s ability to create assets and focus more on welfare measures.
In contrast, the government allocated 43 percent of its total budget, including Rs 52,000 crore for its guarantees, for welfare schemes, totalling Rs 1,20,373 crore to mitigate “price rise, unemployment and huge income disparities”.
has decided to downward revise taxes on the premium category of IMFL (Indian Made Foreign Liquor) to make it more competitive with neighbouring states. However, this is likely to result in a marginal increase in prices at the lower end of the slab, according to the finance department, ThePrint reported in February.
The government has reasoned that the premium category of IMFL currently accounts for about 2-3 percent of the total liquor market and that it would boost higher sales by making it cheaper. The state government has set a target of Rs 38,525 crore from excise this year.
Meanwhile, gross borrowings stood at Rs 1,05,246 crore, taking the total liabilities to Rs 6,65,095 crore, with no clear road map for financial recovery.
Though Siddaramaiah remains confident that the budget and fiscal situation will return to normalcy by next year, there is little clarity on how the government proposes to do this.
(Edited by Madhurita Goswami)
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