Interest-free loans up to Rs 2 lakh; tax hikes to fund populism

The “revised” Karnataka Budget for the current fiscal gives major sops to farmers with an eye to the general elections next year.

Presenting the budget, Chief Minister Siddaramaiah, who holds the finance portfolio, said he proposes to give interest-free loans up to Rs 2 lakh to farmers and also constitute an agricultural prices commission.

He said a separate agriculture budget will not be presented from now onwards which the previous BJP government had made a norm.

Tax Hikes

The government expects to raise revenues for some of its populist schemes through increase in taxes such as imposing additional excise duty of 24 per cent to 40 per cent across all the 17 slabs of Indian made liquor. This is expected to yield Rs 12,600 crore this fiscal.

The government has also sought to reduce allocation for the industry & commerce department. The allocation has been reduced by over 40 per cent to Rs 885 crore.

The budget, however, gives relief on diesel by reducing Sales Tax from 16.75 per cent to 15.65 per cent. This will reduce price of diesel by 51 paise per litre at Bangalore.

As additional resource mobilisation measures, Siddaramaiah has maintained the increase in VAT rates from 5 per cent to 5.5 per cent and from 14 per cent to 14.5 per cent to continue beyond July 31.

The revision of property guideline market value for the current year is also being carried out. Revenue collection target for stamps and registration department will yield Rs 6,500 crore for 2013-14. A dedicated valuation cell will also be set up in the state.

Constitution of GST Consultation Committee in the Commercial Taxes Department has also been planned. The department has set revenue collection target of Rs 37,740 crores for 2013-14. The transport department collection target has been fixed at Rs 4,120 crore for 2013-14.


Siddaramaiah presented the budget with a total expenditure of Rs 1,21,611 crore, a growth of 18 per cent over previous year, anticipating more collections in state’s own taxes.

Of the total expenditure estimated at Rs 1,21,611 crore, revenue expenditure is Rs 97,391 crore and capital expenditure Rs 24,220 crore. The debt repayment is Rs 5,840 crore.

“I have presented an inclusive budget prepared to take everybody together. Today’s budget presentation has fulfilled 40-50 per cent of Congress Party manifesto. Along with rural development, I have given focus for Bangalore development especially towards improving infrastructure,” said Siddaramaiah.

He admitted that there will be impact on the finances of state due to commitments on important scheme announced by the government like the rice subsidy scheme, enhancement of milk incentive, waiver of crop loan and the loan waiver, subsidy for reimbursement of fee, remuneration to guest lecturers during the period of previous government.

Chief Minister said he has provided Rs 1,300 crore to overcome the deficit of grants provided by the previous government.

The state’s revenue surplus is estimated to be Rs 596 crore. Fiscal deficit is expected to be Rs 17,449 crore, which is 2.9 per cent of GSDP. Total Liabilities at Rs 1,36,078 crore at the end of 2013-14 are estimated to be 22.62 per cent of GSDP.

“This is within the limit of 25.4 per cent for 2013-14 mandated in Karnataka Fiscal Responsibility Act. Therefore, all these three fiscal parameters are within the mandate of the Karnataka Fiscal Responsibility Act. This reflects fiscal responsibility of the State,” Siddaramaiah said.

Resource mobilisation

The State’s total own tax revenue for 2013-14 is estimated to be Rs 62,464 crore with an increase of 20.5 per cent over the budget estimate for 2012-13.

A total of Rs 4,038 crore is expected to be collected from non-tax revenues. The State Government expects to receive Rs 15,056 crore by way of the share in the Budget 2013-14 in Central Tax and another Rs 16,428 crore as grants from Central Government.

Siddaramaiah said, “These revenue receipts are estimated to be supplemented by gross borrowings of Rs 22,396 crore, non-debt receipts of Rs 200 crore and recovery of loans to the extent of Rs 135 crore.”

(This article was published on July 12, 2013)
XThese are links to The Hindu Business Line suggested by Outbrain, which may or may not be relevant to the other content on this page. You can read Outbrain's privacy and cookie policy here.