Karnataka proposes more taxes on fuel, liquor

Bengaluru: Karnataka has announced proposals to raise taxes on petrol and diesel, and additional excise duty on Indian-made liquor in an effort to ease huge financial burden the state government takes on with the loan waiver scheme for farmers. Chief minister H.D.Kumaraswamy on Thursday announced a massive Rs 34,000 crore farm loan waiver in the first stage, as part of the Janata Dal (Secular) election manifesto promise of writing off Rs 53,000 crore of agricultural debt.

Kumaraswamy has proposed to hike the rate of tax on petrol by Rs1.14 per litre and diesel by Rs1.12 per litre. Moreover, he has also announced a proposed to hike the additional excise duty on Indian-made liquor by 4% across the board on all 18 slabs.

Following the announcement of a tax hike on liquor, shares of Indian liquor companies declined. United Spirits Ltd fell 5.60%, United Breweries Ltd 2.93%, Radico Khaitan Ltd 3.78% and GM Breweries Ltd 3.06%.

The farmer-focused budget, which has been provided for by increasing taxes on petrol, diesel, excise and energy consumption as well as cutting back of budgets to other programmes, comes a a day after the National Democratic Alliance (NDA) government raised the minimum support price (MSP) of kharif crops as part of its programme to double farmers incomes by 2022.

With crucial elections coming up in agrarian states like Madhya Pradesh, Chhattisgarh and Rajasthan this year, and general elections due by May 2019, the move of the Union government could potentially mitigate the political damage facing incumbent regimes because of the prolonged phase of farm distress.