Budget is UDF's political statement

By Our Special Correspondent

THIRUVANANTHAPURAM, JULY 15. The Finance Minister, Mr. K. Sankaranarayanan's first budget appears to be the UDF's political statement.

Contrary to the general belief that he would present a harsh budget, the Finance Minister's tax proposals are just limited attempts to skim off additional revenues till the tax structure is overhauled under the VAT due to be installed next year.

Despite the official prescription for tough measures, the Finance Minister obviously did not want to go against the UDF's political subscription that it would be politically incorrect to come up with harsh measures in the light of one of the largest ruling majorities the coalition had got.

The Finance Minister, as he himself stated, was pinned down by the fact that he was merely presenting an alternative budget. His stand is that he could have gone in for an overhaul only at the expense of a major dislocation four months into the financial year.

The other logic which he has followed is to space out the burden of fresh imposts, be it by way of additional taxes, extending the tax base or hike in user charges ranging from electricity, bus fares or education fees. The Antony Government has displayed extra caution in ensuring that it did not become unpopular within months of winning a comprehensive popular mandate.

There are few tax measures like the one bread and bun which have come in for criticism. The 15 per cent across the board additional sales tax on the existing ST (barring petroleum products and liquor) would, it is feared, lead to price rise. The official version is that the price rise would be within manageable limits.

The across the board 15 per cent AST is significant for another reason. All most all Finance Ministers in the past have had to put up with pressures from strong lobbies while preparing their taxation measures. The across the board principle is a subtle message that the Government was averse to giving in to pressures from various lobbies.(It is a different matter that the Minister would have to worker harder to sustain this momentum).

Moreover, the AST would be in force only to the end of the financial year. Many of the items which qualify for higher tax incidence would witness a buoyant time when value add tax come into force rationalising rates. The UDF appears to have followed the thumb rule of squeezing as much revenue as possible before VAT comes into force. The Finance Minister could feel happy that he has not given a firm handle to the Opposition to beat him. He would be forced to review some of the tax proposals when the Assembly starts debating them.

To off set the implications of additional revenue mobilisation, the Finance Minister has taken care to project the pro- development positions of the UDF by making budgetary allocation for development projects, even while putting welfare measures on the backburner for the time being.

But he and the State Government would have to face far more difficult times soon or later. The uncovered deficit of Rs. 447 crores is a clear indication of the State Government would have to set aside its political agenda. The long list of harsh measures include hike electricity charges, bus fares, water charges and education fees.

But before the State Government embarks on these, it would have to decide whether it should go in for a major restructuring of State finances to begin with, topping it up with the restructuring of the power and other sectors. It is at this point that the political and administrative capabilities of the Antony Cabinet would be put to test.

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Section  : Southern States
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