Delhi, Maharashtra present contrasting state budgets

Delhi and Maharashtra – India's National Capital Region and the state with the country's financial capital Mumbai – on Wednesday presented sharply contrasting budgets.

Chief Minister Sheila Dikshit, in her Rs37,450 crore, Delhi budget, not only announced no fresh taxes but also slashed or eliminated value-added tax (VAT) on several items, including chilli spray – used for warding off attacks in a city where women are not very safe – and 'desi' ghee.

Among other items that saw prices slashed are power-saving light-bulbs, tiles and kerbstones made from construction debris, pencils and geometry boxes, and footwear costing less than Rs500.

In another progressive step, the chief minister completely withdrew VAT on refuse-derived fuel in a bid to promote proper solid waste management.

On the other hand Maharashtra – which has become notorious for its swingeing taxation regime – announced new taxes worth Rs1,150 crore in its budget. For no item has the tax been reduced.

Deputy Chief minister Ajit Pawar has proposed to increase in tax rate of gold, silver and jewellery made from these from 1 per cent to 1.10 per cent.

Sugarcane purchase tax goes up from 3 per cent to 5 per cent to ''raise funds for drought relief for one year''.

Pawar further increased the taxes on all tobacco products. The tax on cigarettes will go up from 20 per cent to 25 per cent and on bidis from five per cent to as much as 12.5 per cent. Taxes on bulk uncured tobacco have also been hiked.

Excise duty on liquor has also been raised. Duty on country liquor will go up from Rs95 to Rs110 per proof litre, and on Indian made foreign liquor (IMFL) from Rs240 per proof litre to Rs300 per proof litre.

For fragmented strong beer, the duty will be Rs60 per bulk litre or 200 per cent of the manufacturing cost, whichever is higher. Earlier, the rate was Rs42 per bulk litre or 175 per cent of manufacturing cost, whichever is higher.

Further, the government has proposed to increase the export fee of IMFL having a maximum retail price less than Rs 500. The fee will go up from to Rs 1 per bulk litre to Rs 3 per bulk litre.

Export fee on IMFL above Rs 500 has been raised from Rs 5 per bulk litre to Rs 10 per bulk litre.

Coming on top of the tax increase in finance minister P Chidambaram's union budget, tobacco products will become dear indeed.

It is impolitic to criticise the 'sin tax' on tobacco, with its increasingly bad health reputation. But as for liquor, the prices in the state are already the highest in the country – despite it licencing perhaps the largest number of liquor outlets - and a further tax hike will hit tipplers hard.

Further, financial institutions in the state will be liable to pay stamp duty on mortgage deeds. The institutions will need to impound any existing instrument for which proper stamp duty is not paid on or before 30 September 2013 and forward it to the collector for further processing.

Experts point out that Delhi's is something of an 'election budget' as the state is bound for the polls next year. Maharashtra on the other hand is battling drought in as many as 16 districts, and needs funds for irrigation, and is also seeing a serious industrial slowdown.

Be the budget compulsions what they may, few would deny that Delhi – even given its twin advantages of being the national capital as well as a much smaller state – has managed its finances much better than Maharashtra in recent years.

On the other hand Maharashtra, once India's premier industrial (and social) destination, has lost its way over the years - most of its crises seem to be of its own making.