Karnataka budget: Costlier fuel and liquor to fund agriculture, water infrastructure

BENGALURU: The economy is slowing, adversely impacting revenue collection. Devolution of central funds to Karnataka has been reduced significantly by the 15th Finance Commission – on the grounds that the state’s IT sector, which accounts for a quarter of its GDP, is exempt from taxes on its exports. These concerns prefaced chief minister BS Yediyurappa’s budget for 2020-21, prompting him to say, “This magnitude of economic difficulties was never faced in the previous years by our state.”
To raise revenue, he did what governments tend to do under such circumstances. He increased taxes on petrol and diesel, and excise duty on alcoholic beverages. We will now pay Rs 1.60 more per litre for fuel. Liquor prices, for a 180ml bottle, will rise anywhere between Rs 2 and Rs 27.

Yediyurappa stayed away from other favourite taxation segments — property and motor vehicles — because they have been in the throes of a prolonged downturn. In fact, he reduced stamp duty from 5% to 2% for first-time buyers of an apartment costing less than Rs 20 lakh.
Even after the new impositions, the government’s total receipts are expected to rise by a mere 3%, lower than the inflation rate. This, after assuming an 11% increase in state GST, which is optimistic considering the state of the economy and the estimated increase in 2019-20 is only 2%.
Capital account expenditures — which create new productive assets in the economy — will rise by almost 17%. One of the biggest allocations here is for irrigation and flood control which registered a 28% hike. That’s much needed, considering drought has been a huge concern for the state economy. Water supply and sanitation will see a 42% increase, on top of the 41% increase in 2019-20 — again a reflection of the severe crisis in urban areas, especially Bengaluru.
Urban development gets 84% hike, but that follows a decline in allocation in 2019-20, compared to the year before. Roads and bridges and tourism will see significant declines in capital expenditure. Bengalureans can take heart from a Rs 1,000 crore allocation over the next two years for restoration of roads affected by BWSSB’s laying of pipelines and drainage systems.
There’s also a Rs 999 crore allocation for solid waste management in Bengaluru, for projects that Yediyurappa promised will be implemented in the coming year.