In September 2021, as Leader of the Opposition in the Assembly, Siddaramaiah demanded a reduction in Sales Tax on petrol and diesel in Karnataka. During a debate in the Assembly on the issue of price rise, he urged the then BJP government to bring down petrol prices by over Rs 3 per litre while citing the Tamil Nadu government’s move to reduce the prices. The party had also launched a massive campaign against the price rise.
Now, fast forward to July 2024. A year after it came to power, the Siddaramaiah government is facing flak for increasing the fuel prices by Rs 3 per litre. Opposition BJP and JDS leaders are up in arms and have hit the streets in protest. Accusing the government of burdening common people to fund the guarantee schemes, the opposition parties have decided to continue the protests till the decision on the fuel price hike is rolled back.
The political slugfest between the ruling and opposition parties will continue. After the Lok Sabha elections, the government is taking several measures to mobilize resources as the harsh realities of delivering on the guarantee schemes and sustaining them seem to have turned the heat on the state’s finances.
It is exploring every means to get that extra buck for the guarantee schemes and development works. There is a perception that development works have taken a hit over the last year. The increase in fuel prices is expected to help to generate around Rs 3,000 crore a year. The government requires an amount in the range of a whopping Rs 60,000 crore a year for the guarantees.
Although the state government has limited options for resource mobilisation, tightening the screws too much on the citizens could be counterproductive. The very essence of some guarantee schemes, especially the “Gruha Lakshmi” that provides Rs 2,000 financial assistance per month to women heads of households, was to lessen the burden of inflation.
At the scheme’s launch in August last year in Mysuru, Congress leader Rahul Gandhi stated that during his “Bharat Jodo yatra” in the state, thousands of women expressed concerns about inflation. Ironically, the move of the government by his own party to increase the fuel prices will impact everyone, including the beneficiaries of the guarantee scheme.
The diesel price increase will impact everyone as transportation costs will go up. As a result of this, prices of commodities will also spike, while the hike in petrol prices will pinch the pockets of motorists. However, the Chief Minister has maintained that there is no plan to hike state transport corporation bus fares.
Justifying its decision to hike fuel prices, the government maintains that it is committed to balanced and responsible governance and the VAT adjustment ensures funding for essential public services and development projects. The government contends that despite increasing VAT on petrol to 29.84% and on diesel to 18.44%, the state’s taxes on fuel remain lower than most South Indian states, and the diesel prices in Karnataka are lower than in Gujarat and Madhya Pradesh, the BJP-ruled states. The State Government has also blamed the Centre for an increase in Central Excise duty and urged it to reduce the taxes.
While the timing of the fuel price hike — immediately after the Lok Sabha polls — raised many eyebrows, the state government is also contemplating revising the water tariff, which was not done in the last 10 years.
It has also decided to take women’s Self-Help Groups’ (SHGs) help to collect property tax and water cess arrears. Property tax arrears of Rs 1,860 crore and water cess dues of Rs 20.25 crore have to be recovered. Meanwhile, earlier this week, the government issued a draft notification for rationalising liquor prices in the state. With the move to bring down the prices of premium liquor, the state is aiming at making the prices more competitive compared to other southern states and increasing the state’s revenues.
While going on an overdrive to mobilise the resources, the State Government has to be extra cautious as any move that burdens the citizens could invite their wrath. That could undo the goodwill it has gained by implementing the five guarantees.