Bengaluru: The Agriculture Infrastructure and Development Cess (AIDC) proposed in the latest Union Budget will help the Central Government in developing agriculture infrastructure in underserved parts of the country says N R Bhanumurthy, Vice-Chancellor of Bengaluru-based Dr B R Ambedkar School of Economics (BASE).
In a post-Budget interaction with ETV Bharat, the prominent economist said: “Since the Centre is taking over the responsibility as well as the finances, the proposed cess will lead to some kind of equal distribution and equity in terms of agriculture infrastructure development across the country.”
On being asked what might have prompted the Centre to come up with such a cess in the first place, N R Bhanumurthy said, “The agriculture infrastructure should have been made by state governments as it is a state subject; however, having realised that not enough is being done, the Centre seems to be taking over the responsibility.”
Presenting the Budget for FY 2021-22, the Union Finance Minister Nirmala Sitharaman on Monday proposed the agri infra cess on a range of items including apples, gold, silver, alcoholic beverages, petrol and diesel.
These cess collections would go into a dedicated fund called Agriculture Infrastructure Fund and it would be made available to APMCs for augmenting their infrastructure capabilities.
As per the Budget documents, while the cess is to the tune of Rs 2.5 per litre and Rs 4 per litre on petrol and diesel respectively, apples attract 35 per cent cess, peas attract up to 50 per cent cess and most significantly, a 100 per cent cess was imposed on alcoholic beverages.
Meanwhile, allying concerns over hike in consumer prices on account of AIDC, the Finance Minister maintained that the cess won’t affect the final prices as the government has reduced existing duty rates on these items to nullify additional burden.
For instance, the Basic Excise Duty and Special Additional Excise Duty rates on petrol and diesel have been reduced so that the end consumer is relieved from paying the additional price, says the Budget.
Responding to the criticism that the cess makes the farmers pay for their own welfare as farming activities consume a huge chunk of diesel, he said: “It's not necessary that every farmer uses diesel. Even diesel consumption in the industrial sector is also high.”
“So, I don’t think that is the issue we should really look at,” he added.
READ: Do not foresee material change in Capex profile with 5G: Airtel CEO
Centre’s shrinking fiscal space
When asked about the rationale behind the Centre’s inclination for the cess route to mobilise resources as against the tax route, N R Bhanumurthy says that the shrinking fiscal space for the Centre might be a reason for this.
“My understanding is that the fiscal space available for the Central Government to address pan-India issues has shrunk since the 14th finance commission recommendations. It is one of the reasons why the government seems to be going through the cess route,” he said.
As per the Constitution of India, while proceeds from customs, union excise, income tax, corporation tax, etc are divided between the Centre and states on the basis of Finance Commission recommendations, the entire cess collections belong to the Centre alone.
In a significant move, the Fourteenth Finance Commission has recommended 42 per cent share in the divisible pool of revenue to states for the five-year period (2015-20) in comparison to the earlier 32 per cent.
(Shravan Nune, Business Editor, ETV Bharat)
