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Kargil-type surcharge being contemplated

Our Bureau

NEW DELHI, Sept. 17

THE Government is looking at the option of a Kargil-type surcharge as part of the contingency plan to counter the impact on the economy arising out of a possible US retaliation on terrorists.

``We would wait and watch the situation and then take a view on mid-course corrections including levy of a Kargil-type surcharge,'' said a senior Finance Ministry official. Despite the alarming fiscal situation, a cut back in Plan expenditure is not bein g considered for the moment, the official added.

As per the current assessment, the tax revenue shortfall vis-a-vis the budget estimate could be in the region of Rs 15,000 to Rs 20,000 crore during the current fiscal. The Budget has targeted gross tax revenues of Rs 2,26,649 crore as against the revise d estimate of Rs 1,98,321 crore in 2000-01.

The picture so far is dismal as net direct tax revenues declined by over 18 per cent up to August this year. Customs collections too have registered a negative growth.

Although the Government is set to target corporates through selective scrutiny and assessment and improve efficiency of tax administration to shore up revenues, such measures are unlikely to make a major dent in corporate tax collections.

The Government had, in this year's Budget, removed all surcharges payable by corporates and non-corporates - ie the 10 per cent surcharge on corporates and 15 per cent surcharge imposed on non-corporate tax payers at the higher income levels due to the u nexpected burden of Kargil.

It only retained the 1 per cent surcharge on corporates towards the National Calamity Contingency Fund and an additional 2 per cent Gujarat surcharge on all tax payers.

The Finance Ministry, which gave a detailed presentation on the state of the economy last week, has already given its assessment on revenue collections to the PMO. ``A slippage in the fiscal deficit target of 4.7 per cent of the GDP is almost certain, as the targeted Rs 12,000 crore from disinvestment is unlikely to materialise,'' said sources.

The Government would also have to look at measures to contain the any increase in the oil pool deficit -

which of course does not have a direct bearing on the fiscal deficit. Given the dismal performance in revenue collections, a cut in duties is virtually ruled out. The other option is to increase the administered prices of petro products, which may have p olitical ramifications.

``The fisc is under pressure due to a host of factors including the global slowdown. With the recent events in the US threatening to impact the economy, the choices are limited,'' officials reckon.

They pointed out that any cut-back in Plan expenditure would only compound problems and accentuate the industrial slowdown. The Government has, in fact, been talking about pump-priming measures to reverse the slowdown, even as economists have cautioned t hat pump-priming measures should not be at the cost of a higher fiscal deficit.

Moreover, the Finance Minister, Mr Yashwant Sinha, has also indicated that funds would not be a constraint to Ministries as long as they are deployed for capital investments. The mid-course correction exercise, if undertaken, would entail a cut in non-Pl an expenditure.

The issue of a Kargil-type surcharge figured during the all-party meet convened by the Prime Minister, Mr Atal Bihari Vajpayee, late last week in the wake of the developments in the US.