Tamil Nadu presents soft and sweet Budget

CHENNAI: The ruling DMK entering the 5th year of its current regime, preferred to present a "soft and sweet Budget" for 2010-11 on Friday obviously keeping an eye on the assembly elections due in May 2011.

This is despite visible signs of stress in the state financial resources with mounting food and electricity subsidies and increasing spend on populist measures and government employees and teachers following the sixth pay commission.

No fresh taxes proposed in the Budget even as the revenue deficit for next fiscal is estimated at Rs 3396 crore and the fiscal deficit is projected to soar to the highest ever level of Rs 16,222 crore. Rather, VAT slashed to 4% on a host of essential items including branded coffee powder, sweets and savouries, ready mix food items etc.

The Government has sought to relay heavily on the revival in the economy and expected buoyancy in revenue receipts (15% growth) without resorting to fresh revenue raising exercise or fiscal corrections by way of reducing subsidies or revising the tariffs.
As in the last four years, the Budget for next year presented in the new Assembly by Finance Minister, K Anbazagan on Friday is packed with heavy provisions for welfare and populist measures even while stepping up outlay for capex including for road development and infrastructure.

The Budget has provided Rs 1800 crore to roll out the new concrete housing scheme to build three lakh houses in all the village panchayats. It will cover all families living in thatched roof huts. It is proposed to convert 21 lakh huts into permanent concrete houses over six years. It is to make TN the first hut free state in India.

Officials said since there will be financial savings of over Rs 2500 crore in the next fiscal ( without the need to make provision for pay commission arrears of Rs 2000 crore and free colour TV sets), it is proposed to make use of the resources for the new housing scheme.

Outlining the tax proposals, Anbazagan told the house after VAT was introduced in the State effective January 1, 2007, in the last four Budgets,the Government had reduced tax on several commodities and essentials and gave exemptions. In line with this, the exemption granted to pepper, cumin seed and aniseed with some condition will be extended to the powders of these items.

Besides, there will be no levy of purchase tax on the inputs ( raw materials). The existing 12.5% will be slashed to 4% on branded coffee powder ( other than instant coffee), paint brush, branded sweets and savouries, knives, scissors, and tailoring items, branded ready mix food products ( in the form of flour, powder or wet dough).

The VAT exemption will also cover aloe vera, an agri product with medicinal properties, fuel produced out of municipal solid dry waste, bio-degradable goods like plats, cubs made of areca palm leaf, zari excluding polyester film yarn and radiant yarn to benefit handloom weavers and ice bars\blocks to benefit fishermen.

The Budget has cut food subsidy to Rs 3750 crore from Rs 4000 crore this year in view of the declining prices. The State electricity board is to get a subsidy of Rs 1716 crore.

The Budget has a double whammy effect for the sugar industry, which has shown a strong recovery. As suggested by the Centre to the States, the 4% tax will be waived for one year on imported sugar to contain the domestic open market price. But, for the first time, in the Budget, the TN Government has announced as a " sweet news" a hefty cane price for the coming crushing season ( 2010-11).

The minister said the sugarcane farmers will be given Rs 2000 per tonne inclusive of transport charges and recovery based incentive for the coming season. He also asked the mills to pay an additional price of Rs 100 per tonne for the current crushing season ( 2009-10) to make it Rs 1650 per tonne against Rs 1550 advised earlier. ( It is to be noted that the opposition leader, AIADMK, J Jayalalithaa recently held an agitation at Vilupuram demanding a cane price of Rs 2500 per tonne alleging the growers are in distress).

The other major highlights in the Budget are: Sipcot will set up an industrial park in Vilupuram district; Chennai metro rail project will get Rs 600 crore; Rs 120 crore as state share for the effluent treatment project at Tirupur; to encourage the setting up of hotels and tourism projects in new destinations; southern districts to get more industrial projects and Rs 500 crore project to ease traffic on Anna Salai in the city.