Karnataka Reverses Surplus Budget Record

The Janata Dal (S)-BJP coalition government in Karnataka has partially blotted its copybook by presenting a marginal deficit of Rs 23 crore in its budget for 2007-08, thus reversing the state''s record of three surplus budgets (2004-05 to 06-07) in a row. This has been necessitated by its decision to make good a political promise to ban the sale of arrack which will cost it Rs 1,300 crore in revenue for the part year from July and Rs 1,905 crore in a full year. The arrack decision has taken another toll, a drastic fall in the rate of growth of plan expenditure, from 47.8 per cent in 2006-07 over the previous year to 8 per cent projected for the next year (07-08) in relation to the current year. For its part, the government has claimed that despite the return to marginal overall deficit, both in terms of the revenue surplus (0.74 per cent) and fiscal deficit (2.87 per cent) estimated for 2007-08, it is well within the parameters laid down by the Karnataka Fiscal Responsibility Act. Finance minister B S Yediurappa plans to partially make good the revenue loss on account of arrack by expecting to earn Rs 150 crore more from higher licence fees for establishment selling Indian made liquor and Rs 75 crore from higher stamp duty. The government will also mobilise an additional revenue of Rs 75 crore by enhancing the tax of various classes of vehicles. The government intends to raise Rs 80 crore by levying 20 per cent tax on mollasses, ethyl alcohol, denaturated spirit and rectified spirit on which levy of excise duty has legal disputes.