Odisha could follow other states in hiking taxes on liquor and fuel

BHUBANESWAR: Delhi has done it, so have Karnataka, Maharashtra, Tamil Nadu and even next-door neighbours West Bengal and Andhra Pradesh, but Odisha is yet to allow sale of alcohol or increase excise.

In the face of dwindling revenues, Naveen Patnaik’s government has similarly held back on increasing vat on petrol and diesel. The Centre’s decision to hike excise duty on petrol on Wednesday may finally nudge the state government to announce a hike in the Value Added Tax charged by state on petrol and diesel.

Sale of liquor during FY 2019-20 brought the state Rs 5,600 crore in excise and VAT. With a new excise policy rolled out this fiscal – offering smarter packaging and greater rationalisation – Odisha was looking forward to revenues of Rs 6600 crore in FY 2020-21. Instead, the first month’s earnings have been practically wiped out, said an official on condition of anonymity.

Against the Rs 350 crore in April of 2019, only Rs 10 crore of pending arrears were collected last month. Going by how its neighbours have acted – West Bengal increased excise duty by 30 per cent and Andhra Pradesh by 25 per cent – one expects the Patnaik government to increase excise by at least 20 per cent.

Some states have decided to allow online sale and home delivery liquor, to avoid the mile-long queues outside liquor shops. The Congress government in Chhattisgarh has set up a new marketing corporation to do this but only in areas of no active positive cases, or green zones. Odisha which claimes to have done better than most on containment has yet to reopening of alcohol shops. This is expected to change soon say those in the business.

Odisha has a chequered history of recurring instances of deaths from the consumption of spurious liquor and the lockdown has seen a number of cases of seizure of liquor across the state. A critical factor impeding a quick decision on this is its likely political fallout.

The lockdown has similarly adversely affected the state’s realisation from sale of petrol and diesel. Indian Oil Corporation, the largest distributor in the state, had paid Rs 240 crore in April of 2014, this April it paid the state only Rs 95 crore in taxes. VAT in the state has increased from Rs 11.17 in FY 2014 to Rs 13 currently whereas, during the same period the Centre has increased excise duty from Rs 9.47 per litre in 2014 to Rs 32 per litre now, after its recent increase on Wednesday. Of this, only Rs 2.98 goes to the divisible pool.

The government is reportedly working on a slew of austerity measures for public expenditure and officials, the announcement of which will hopefully create a conducive milieu for the announcement of the hike of VAT on fuel.

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