Agriculture infra cess may hit state revenues
NEW DELHI: The government on Monday introduced a new agriculture infrastructure development cess (AIDC) on petrol, diesel and several other imported items. Finance minister Nirmala Sitharaman assured it won’t place any additional burden on consumers.
However, following the introduction of the cess, states are likely to lose some revenue. Currently, the Centre shares 41% of its total tax revenue with states. But surcharges and cesses are not included in this pool.
“There is an immediate need to improve agricultural infrastructure so that we produce more, while also conserving and processing agricultural output efficiently. This will ensure enhanced remuneration for our farmers,” Sitharaman said in her budget speech.
The finance minister added that “while applying this cess, we have taken care not to put additional burden on consumers on most items.”
The cess was imposed with immediate effect on petrol (₹2.5 per litre), diesel (₹4 per litre) and 12 other agricultural and non-agricultural commodities, including gold, silver, alcoholic beverages, crude edible oils, apple, coal, fertilizers, some varieties of pulses and cotton.
The budget also reduced the
basic custom duty and excise and special excise duties on these items.
“Consequent to imposition of AIDC on petrol and diesel, the basic excise duty and special additional excise duty rates have been reduced on them so that overall consumer does not bear any additional burden,” said the budget papers.
During a post-budget press interaction, revenue secretary Ajay Bhushan Pandey said the Centre expects to collect ₹30,000 through the AIDC.
This implies that states stand to lose their share—about 41% of customs duties collected, as per the 15th Finance Commission recommendation.
“A cess is only fit for timebound targets and not for something as generic as agriculture infrastructure; besides, it should come with a sunset clause,” said Pronab Sen, former chief statistician.
“States are certainly not going to like this since they will lose their share of customs duties collected by the Centre,” added Sen.
According to Sen, the Centre does not share the central excise duties on fuel with states, so the cess on petrol and diesel is revenue neutral for states.
The AIDC is part of the government’s thrust to improve post-harvest management of crops which include better facilities at the farm-gate and at wholesale markets, and improved storage and processing capacities.
In May last year the government announced a ₹1 trillion agriculture infrastructure fund. According to the Economic Survey released last week, about ₹3,000 crore was sanctioned (in-principle) under the scheme till 15 January.