Union Finance Minister Nirmala Sitharaman on Monday announced an agriculture infrastructure and development cess (AIDC) on select items such as petrol, diesel, apples and alcohol, pointing to an immediate need to improve the sector’s infrastructure. However, she stressed that this would not lead to additional burden on consumers.
During a post Budget interaction with the media, she said basic Custom duty rates have been reduced on most items where the AIDC was being imposed, so as to not put the burden on the end consumer. This would ensure enhanced remuneration for farmers.
“It is just a restructuring we’ve done. We reduced the Customs duty and we levied a disproportionate amount of cess. So, it was not the exact amount of reduction in Customs duty that we levied in the form of cess. For example, 10% was brought down for Customs, we have only added 5-6% [in AIDC], so the price for the end consumer has been reduced or in some cases has remained the same,” Ms. Sitharaman explained.
This had been done only to make sure that there was a dedicated amount coming out to the Budget to improve agricultural infrastructure, she added.
Some of the items on which AIDC had been imposed include gold, silver and dore bars (2.5%), alcoholic beverages (100%), crude palm oil (17.5%), crude soyabean and sunflower oil (20%), apples (35%), coal, lignite and peat (1.5%), specified fertilizers (Urea etc) (5%), peas (40%), Kabuli chana (30%), Bengal gram/chick peas (50%) lentil (mosur) (20%) and cotton (not carded or combed) (5%).
Additionally, an AIDC of ₹2.5 a litre had been imposed on petrol and ₹4 on diesel. However, the Basic Excise Duty (BED) and Special Additional Excise Duty (SAED) rates have been reduced on them so that there was no additional cost to the consumer.
Siraj Hussain, former Agriculture Secretary, noted that the Customs duty was shared with the States, while the cess would go entirely to the Centre. It would have an impact on sharing of resources between the Centre and the States, and more clarity would emerge once the fine print of the budget documents was fully understood.
When asked about the farmers’ protest, Ms. Sitharaman said she believed that dialogue was the way forward. “We understand that farmers are sitting at the borders… If they have any questions, the Agriculture Minister has never shied away from sitting with them for a discussion… however many rounds it may take, and has said that we are ready for a clause by clause discussion with farmers.”
Replying to a query on how confident the government is about containing the fiscal deficit at 6.8% as per BE 2021-2022, Tarun Bajaj, Secretary, Department of Economic Affairs, said, “If you notice, our revenue figures for this time, if anything, are understated and not overstated. We have taken on nominal GDP 14.4% and the revenues at 16.7%. So, the buoyancy is only 1.16%. We are hopeful that we will be able to get more than this and also achieve more in the other areas of non-tax revenue under disinvestment and we will definitely be within 6.8% and could be lower also.”
Ms. Sitharaman said, “…our fiscal deficit, which started at 3.5% during February 2020, has gone to 9.5% of the GDP. So, we have spent, we have spent and we have spent. Otherwise, fiscal deficit would have reached this number…We’ve also given a clear glide path for deficit management and bringing it down.”
There were two important features of this Budget. “It is that we chose to spend big on infrastructure, which spans across roads, bridges, ports, power generation, and so on. And to also attend to the needs of the health sector…capacity building in health has taken a very big place in the Budget,” she said.