Amma tries to woo investment in Manufacturing Sector

The Tamil Nadu government is keen on boosting investment in the state. And that explains why the state Budget presented in the assembly saw a definite thrust on the manufacturing sector. But it's the tax on alcohol that has everyone talking, reports CNBC-TV18's Swathi Narayanan.

Jayalalithaa is cleaning out her closet and she's starting by whipping the state finances into shape. The state Budget estimates that total revenue receipts in FY13 will stand at over Rs 1 lakh crore, while total revenue expenditure, including all the freebies and social welfare schemes, will be a little over Rs 98,000 crore. That's a surplus of above Rs 2,300 crore.
The state's debt burden stands at a whopping Rs 130 lakh crore.
But the state government is taking a leaf from the union finance minister's book, and focusing on fiscal consolidation.
K Shanmugam, principal secretary of finance, government of Tamil Nadu, said that the aim was to focus on fiscal consolidation of the state. "We want to keep track on movement of loans and we want to control the movement and net borrowings," he said.
Amma is also working to bring investment back into the state. That explains the status quo on commercial taxes and the measures tailored to give manufacturing a fillip.
Case in point - additional subsidy of over Rs 3,000 crore to the Tamil Nadu generation and distribution company. The government believes this will ease the power crunch in the state and bring back to life manufacturing plants which have gone silent for want of power. A new industrial policy will also be unveiled shortly that will focus on jumpstarting the manufacturing sector. In addition, to help the small and medium enterprises, the state government will look at acquiring an additional 20,000 acre of land.
The budget also proposes that an Rs 1,000 crore infrastructure fund be created to fuel infrastructure development in the state. The government expects to bring in investments to the tune of Rs 20,000 crore in the manufacturing space over the next six months led by companies like Yamaha, Nokia and Eicher Motors.
Then came the announcement that stunned everyone - a drink in a pub like 10 Downing Street is going to cost more.
Shanmugam said the last point of sale was not tapped in the sales tax. "We brought that point only in hotel, restaurants and bars. These places will be brought under the taxation at 14.5%," he said.
This move is directed only at the higher-end pubs and restaurants that serve alcoholic beverages. It does not apply to alcohol purchased from any Tasmac store, that's a store run by the Tamil Nadu State Marketing Corporation which enjoys a monopoly in retail alcohol. Clearly, populism prevents Amma from breaking the spirits of the common man.