Kerala fouses on raising depleting revenue in budget for next fiscal year

Kerala finance minister K N Balagopal

People in Kerala will have to pay more for land, property, vehicles and fuel as the state government decides to hike rates to shore up its depleting revenue.

The state government has introduced cess on petrol and diesel, motor vehicles and liquor, increased one-time tax on motor vehicles, revised property tax and royalty on minor minerals and raised electricity duty, stamp duty rates and court fees in the state budget for 2023-24 presented by Kerala finance minister K N Balagopal on Friday.

The major project announcements include `Make in Kerala’ to increase domestic production, employment and investment opportunities in the state and an industrial township at Vizhinjam, where one of the largest container transshipment facility is coming up.

The government has earmarked Rs 2,000 crore to continue market interventions considering the threat of inflation has not completely abated. Balagopal also announced a higher subsidy of Rs 600 crore for rubber to help rubber farmers in the state.

He said the budget had been prepared with the vision of the Left Front to further improve the standard of living of the people and create a sustainable and modern ‘Nava Kerala’ (New Kerala).

According to him, the state is anticipating more fiscal constraints during the year with the reduction in revenue grant and cessation of GST compensation from the Centre and restriction in the borrowing limit and treatment of the liability of Kerala Infrastructure Investment Fund Board (KIIFB) and Social Security Pension Ltd as that of the state.

The government will address these through a three-tier policy of augmenting tax and non-tax revenue, more efficient utilisation of resources and joint resistance along with the support of other states against the fiscal policy of the Centre, he said.

The state is expecting a revenue deficit of Rs 23942.42 crores for 2023-24, a rise of 20 percent over the previous year. The estimated revenue receipts are Rs 135,418.67 crore and revenue expenditure Rs 159,360.91 crore

The state is expecting to mop up Rs 1,000 crore from the revision of property tax, application fee, scrutiny fee and permit fee for the construction of residential and non-residential buildings through local self-government bodies.

Other major revenue mobilisation sources include the social security cess of Rs 2 per litre on petrol and diesel which is expected to bring in Rs 750 crore. The royalty revision across all segments of minor minerals and social security cess of Rs 20 on Indian Made Foreign Liquor (IMFL) of prices Rs 500 to Rs. 999 per bottle and Rs 40 on liquor priced above Rs 1,000 are expected to yield Rs 600 crore and Rs 400 crore respectively.

The state has hiked one-time tax on motor cars and private service vehicles at the rate of 1-2 percent. The 2 percent hike is for vehicles costing between Rs 5 lakh and Rs. 15 lakh. One-time tax on newly registered motorcycles costing up to Rs 2 lakh will go up by 2 percent.

In addition, there will be a one-time cess on newly registered motor vehicles ranging from two-wheelers to heavy motor vehicles at the rate of Rs 50 to Rs 250. However, the one-time tax on electric cars and cabs has been reduced.

The state has also increased the fair value of land by 20 percent to bridge the gap between fair value and market value. The stamp duty rates have been hiked from 5 percent to 7 percent.

Power will become costly for the industries as the budget has proposed to increase the electricity duty for commercial and industrial units by 5 percent. The budget has also proposed to revise court fee stamp charges.

The budget has additionally provided Rs1,000 crore for ‘Make in Kerala’ during the plan period. An amount of ₹100 crore is earmarked for the project this year. Support will be provided through the project to agritech startups in Kerala that produce agriculture value-added products including interest subvention for identifying capital for enterprises.

A detailed study on Make in Kerala was conducted by the Centre for Development Studies which said Kerala imported products worth around ₹1,28,000 crore in 2021-2022. Out of this 92 percent was from other states.

During this period, the state’s exports were around ₹74,000 crore. Out of this 70 percent was to other states. From this, it has to be understood that the trade deficit of Kerala is very high. In this context, the aim of the study is to find out the imported products which can be produced locally.

At Vizhinjam, a township chain of industrial institutions, commercial centres and extensive accommodation, facilities will emerge. An amount of Rs 1,000 crore is earmarked through KIIFB for the land acquisition activities of this industrial corridor with an estimate of Rs 5000 crore.

The government will take initiatives to develop industrial parks, logistics centres and residential areas with the involvement of the people living on either side of the industrial corridor. Development plans comprising government, private entrepreneurs and property owners will be drawn up. It is expected to implement development plans worth Rs 60,000 crore in the first phase by making use of land pooling system and PPP development methods.

The minister said that the National Industrial Corridor Development and Implementation Trust has approved the State’s project – ‘Kochi – Palakkad Hi-tech Industrial Corridor’ as part of the Chennai – Bengaluru Industrial Corridor Project. It is expected that first phase of the project in Palakkad district would attract a total of 73 investments of ₹10,000 crore and thereby create employment directly to 22,000 and indirectly to 80,000 in 5 years.

The budget set aside Rs 200 crore for building green hydrogen hubs in Kochi and Thiruvananthapuram.

Balagopal said in 2021-2022, Kerala’s Gross Domestic Product at constant prices grew by 12.01 percent

"The uniqueness of economic growth in 2021-2022 compared to previous years is that we could achieve economic growth by including the manufacturing sector as well. For the first time in recent history, agri-allied sector and industry-allied sector have achieved growth rate of 6.7 percent and 17.3 percent respectively," Balagopal said

Within the industrial sector, decisive growth rate (18.9 percent) has been achieved in the manufacturing sector. The policy of the Left Government is to augment production and thereby revenue by reviving the economy in this way.

Though Gross State Domestic Product (GSDP) in 2022-2023 was expected to be Rs 9.99 lakh crore, as per the revised figures, the GSDP has increased to Rs 10.18 lakh crore, Balagopal said. 

Along with the growth of GSDP, there has also been an increase in own revenue. The own revenue which was Rs 54,955.99 crore in 2020-2021 increased to Rs 68,803.03 crore in 2021-2022. It is expected that this will increase up to Rs 85,000 crore in the current fiscal.

The minister said KIIFB is an institution which has given tremendous speed to the infrastructure development of the state. KIIFB has given approval for 993 mega projects worth Rs 74,009.55 crore. Out of this, 986 projects worth Rs 54,000 crore are at different stages of execution. Of the above, construction of the projects worth Rs 6,201 crore has been completed.