At a time when the price of petrol is increasing with each passing day because of the pricing mechanism allowed by the Union government, the Tamil Nadu government has reduced by Rs.3 the State tax on petrol. The order on this takes effect from August 14.
With this, the DMK government in Tamil Nadu kept one of election promises — of reducing the price of petrol in the revised Budget for 2021-2022 presented in the Legislative Assembly on August 13. Although it had stated that the price would be reduced by Rs.5 a litre of petrol in the manifesto, Finance Minister P.T.R. Palanivel Thiaga Rajan reduced it by Rs.3 a litre, bringing cheer to many in the State.
“This government has decided to reduce the effective rate of tax on petrol by Rs.3 a litre and thereby provide major relief to the toiling working class people in the State. This measure will result in a loss of revenue of Rs.1,160 crore a year,” he said. There was no announcement on a reduction in the price of diesel, though. The Finance Minister had made it clear earlier that the DMK government would fulfill the promise in stages, as and when the finances of the State improved.
Presenting the Budget in the Assembly on Friday, and commenting on Centre-State relations, he said, “Nowhere is this dilution of the spirit of federalism more apparent than in the taxation of petrol and diesel at the pump. The overall Union levies on petrol were increased from Rs.10.39 a litre in May 2014 to Rs.32.90 a litre today.”
Laying down his priorities, he said: “Arresting and reversing fiscal mismanagement is one of the important commitments we made to the people. The task is daunting and cannot be completed in one go or in one year. It will need sustained efforts over at least two to three years.”
The Budget will be debated next week. The Assembly session will be on till mid-September, when all Ministries will present their demand for grants. After this process, and allocation of resources, the government will have less than six months left in the financial year 2021-22 to achieve the ambitious goals it had set for itself.
One of the other major announcements was the setting up of a high level committee of educationists and experts to formulate a distinct State Education Policy for Tamil Nadu “in keeping with the historical legacy, present situation and future aspirations of the State”. The DMK had voiced its opposition over many provisions of the National Education Policy formulated by the Union government. The setting up of the committee is an attempt to reclaim the federal space lost by the earlier AIADMK government, one DMK senior explained.
Huge revenue deficit
Noting that the economy is still just recovering from the impact of successive waves of the COVID-19 pandemic, the Minister said that “the time is not yet ripe for fiscal consolidation. Hence, revenue deficit for the year 2021-22 is expected to go up from the unrealistic Interim Budget Estimates of Rs.41,417.30 crore to Rs.58,692.68 crore in the Revised Budget Estimates 2021-22. This increase in revenue deficit is on account of the exceptional times that we find ourselves in and does not detract in the least from this government’s commitment to fiscal rectitude and consolidation in the coming years.”
He said that the overall capital outlay for the Revised Budget Estimates 2021-22 has been scaled down to Rs.42,180.97 crore from the Rs.43,170.61 crore provided in the Interim Budget Estimates. On this basis, the fiscal deficit for the financial year 2021-22 is estimated to be at Rs.92,529.43 crore in the Revised Budget Estimates 2021-22.
The fiscal deficit for 2021-22 – which is now at a whopping 4.33 per cent of GSDP — will still be within the overall norms prescribed by the 15th Finance Commission.