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Government's budget proposals are in doubt
March, 19th 2010

Maharashtras finance minister Sunil Tatkare might well be forced to exclaim VAT lagi (Im skewered) if the opposition insists on withdrawal of an ordinance issued last month to increase by 1% thevalue-added tax levied by the state on 97 essential commodities.

Withdrawal of the ordinance would mean Tatkare and his team would have to rework the state budget for 2010-11. The budget is scheduled to be presented next week.

On Day 1 of the budget session, the opposition put the government on the mat, pointing out that the ordinance increasing the VAT rate by 1% was illegal and beyond its powers.

Eknath Khadse, leader of the opposition in the assembly, said, The state governments power to change VAT rates expired in 2007. So, the ordinance suggesting the increase is unconstitutional.

Khadse said the move also amounted to a breach of privilege of the legislature, because only the legislature can amend the VAT rates now. Whats worse, he pointed out, two commodities from the central list - textiles and sugar - were included in the list of commodities on which the increased tax would be levied.

The government hoped to garner an additional revenue of Rs700 crore through the measure. NCP politician Tatkare, desperate to mop up resources for the plan outlay, has already added this revenue to his plan outlay for 2010-11.

In 2009-10, the states plan outlay was Rs26,000 crore. But this year, a source said, management of finances has been so poor that it was getting difficult for the state to stretch the plan beyond Rs25,000 crore. Chief minister Ashok Chavan indicated last week, after a meeting with the Planning Commission in New Delhi, that the state will have to find new ways to raise funds.

A senior minister was particularly incensed because several departments, including finance, law, the chief secretarys office, and the chief ministers office, vetted the proposal before the cabinet gave it the nod.

Yet, no one realised that it was flawed, and the governor promulgated the ordinance on February 16.

Sensing that the opposition was not going to allow the house to function unless the government withdrew the ordinance, speaker Dilip Walse Patil decided to reserve his ruling.

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