Kerala to raise water tariff, tax on alcohol

The Kerala Cabinet has decided to raise water tariff by 50 per cent and revise upwards tax on alcohol and cigarettes to help the State government deal with a fiscal crisis.

The crisis peaked last week when the government slipped into an ‘overdraft’ position after exhausting a Ways and Means Facility with the Reserve Bank of India.

Sales tax on alcohol (115 per cent now) will be hiked by at least 20 per cent, according to official sources. Additional levy on alcohol, cigarettes and wine alone is expected to bring in ₹1,000 crore.

Stamp duty will also be reviewed as part of these initiatives while a Cabinet sub-committee will look into a similar option with respect to fixing the fair value of land.

It is learnt that the next meeting of the Cabinet will take a decision on special levies for luxury residences and households owning more than one car.

While raising the water tariff, care has been taken to spare the common man from the steep hike announced, an official spokesman said.

The 50 per cent hike will be applicable for every additional kilolitre consumed above a threshold of 10,000 kilolitres on a monthly basis.

This would mean that the incremental kilolitre consumed above this limit would cost ₹2 more – at ₹6 instead of ₹4 now.

A proposal submitted by the Kerala Water Authority, the public utility, had in fact asked to fix this at ₹8, the official spokesman said.

Last week, ₹2,500 crore in expected but debilitating outgo from the exchequer to fund advance salaries and other payments during the Onam week had exposed the deep fissures in the State finances.

This is what led the government to exhaust the Ways and Means Facility that helps it deal with the temporary mismatches in cash flows. It was then forced to use the overdraft facility.

The normal monthly outgo from the exchequer is ₹1,400 crore in salaries; ₹750 crore in pensions; and ₹700 crore in interest payments.

Growth in revenue expenditure is assessed as clocking in at 20 per cent while that in revenue income lags at 12 per cent. This perennial mismatch has been affecting the State’s fiscal equilibrium.