The Benjamin Franklin quip about the certainties of life demands an amendment. In the Indian context, it must read, in this world, nothing can be said to be certain, except death, taxes and a new cess every year.
Beginning this week, a number of the government’s revenue proposals—higher STT etc.—kicked in. The headline grabber is the Krishi Kalyan Cess. The milch class is now obliged to let the government extract a little more every time they pay restaurant bills, couriers, health care, banking, visit cinemas, beauty parlours, travel by air, buy insurance, subscribe to DTH and mobile phone services. The average Jane Jamila Janaki buying a recharge coupon of Rs 100 will pay the government Rs 15 to get “talk time” worth Rs 85.
All for a good cause, we have been told. The Krishi Kalyan Cess is aimed at funding initiatives on improving agriculture and welfare of farmers. The budget documents estimate the government will collar around Rs 5,000 crore in the June to March period. The math is a bit fuzzy. Be that as it may, the question is not about the quantum—and obviously Rs 5,000 crore is not enough to alleviate agri-distress—but about outcomes.
Last year, the Comptroller and Auditor General of India made some scathing revelations on the use of cess collected. Only Rs 26,983.47 crore of Rs 66,117.23 crore collected between 2002 and 2014 under USO for creating access was used. Only a tenth of the total sum collected under Research and Development Cess was utilised. Education cess collected for primary education is underutilised consistently since 2005.
Worse is the case of the cess collected for secondary education. The CAG says “Scrutiny of the Union Finance Accounts for the period 2006-15 showed that a total collection of SHEC of Rs 64,228 crore had been made. However, unlike the creation of PSK in the case of primary/elementary education cess, neither a fund was designated to deposit the proceeds of SHEC thereto nor schemes identified on which the cess proceeds were to be spent.” In short: There is no dedicated fund or usage detail on Rs 64,228 crore. And these are just the highlights. The saga of Clean Energy Cess (now Clean Environment Cess) has not been very different.
It is true that period under review was that of the UPA. There has, however, been no statement yet by the NDA government on moving towards a more transparent and accountable regime. The question that begs to be asked is what has happened to the monies collected. Were they used to fill the deep trenches of deficit? If the taxpayer is asked to and is obliged to part with his monies for a specific purpose, is the taxpayer not entitled for a clean statement—a left and right-hand column on total cess collected under all heads, segment-wise deployment of cess collected and outcomes achieved statement?
The other facet of the cess pool is that government after government, for reasons of political and economic exigencies, institute a new cess. Remarkably, and frequently, the cess is instituted to improve or address an area of deficit or distress that is squarely in the domain of state governments. Unsurprisingly, the usage and deployment of funds is stranded between Centre and states —thanks to the divorce of authority and accountability.
The systemic ailment is aggravated by diagnosis and prescription. The reigning belief is that states are failing and the Centre must step in. The NDA too has fallen prey to this theology. The NDA, for instance, created the Swachh Bharat Cess last November and the Krishi Kalyan Cess this year. There is a belief in some quarters that cess—a fund pool that doesn’t have to be shared with states—enables the Centre to address issues directly. There is also the argument about political messaging. But both aspirations are subject to the statute of political benefits and administrative limitations.
Governance is haunted by the structure of delivery for public services. One of the primary reasons for failure—and, therefore, the need to institute the kinds of cess that governments have instituted —is the dysfunctional apparatus of design, process and delivery. This government has coined the mantra of cooperative federalism. It has also repeatedly chanted the mantra of transparency and good governance. Both aspirations demand empowerment—of funds, functions and functionaries. And the timing couldn’t be better—the BJP is after all now in power in nearly a dozen states.
The politics of India is determined by the manner in which the political economy is managed. The rush for exceptional nature of political promises stems from multiple failures and failed promises. Witness the parade of sops offered by political parties in successive elections in Uttar Pradesh, Punjab, Bihar and most recently in Tamil Nadu.
The pressure of sops on the balance sheets—again very visible in the cumulative losses of state electricity boards, thanks to the populism of free power—leaves states handicapped in funding transformative measures. The need for Swachh Bharat cess and the smart cities initiatives are proof that state after state has not recognised the reality of urbanisation nor cared for its potential. The cascading effect of failures leads to promise of even grander sops and the idea of free money.
The road to populism is slippery. This week, Switzerland is voting on a referendum on whether citizens should be granted $2,000 per month as universal no questions asked basic income. What are the odds that a government—say in West Bengal or Uttar Pradesh—will not promise a basic minimum income or another dole masquerading as a job scheme to win votes?
The political economy of India is split into three categories. At the top quintiles are those who seek rent in return for funding the business model of politics. At the bottom quintiles are those who often vote on the basis of entitlements proffered during the election campaigns. Stuck in the central quintile is the middle class. It cannot wrench rent like those above and it is not qualified for entitlements. This is clearly not a sustainable structure—neither in its economics nor in its politics. Cess is but a subset of excess.
Shankkar Aiyar is the author of 'Accidental India: A History of the Nation’s Passage through Crisis and Change'
You can reach him at shankkar.aiyar@gmail.com