Mitra, Mukherjee

New Delhi, Aug. 3: The Bengal government is expected to present a budget shortly that will increase taxes on high-end goods and luxury consumables to meet a condition set by the Centre to allocate more funds.

However, the state government has not agreed to raise water or electricity tariff despite such an advice by the Union finance ministry.

The tentative concurrence and resistance are the upshots of the consultations between the Centre and Bengal finance minister Amit Mitra, who flew to Calcutta today.

Mitra had met Union finance minister Pranab Mukherjee for two hours last evening and his officials had meetings with senior finance ministry officials today. The consultations came against the backdrop of an assessment that Bengal would need additional funds of Rs 19,000 crore, around Rs 7,000 crore more than calculated earlier.

The central government will work out packages on specific schemes for which the state wants more money over and above the Rs 22,244 crore already sanctioned in the annual plan.

If these additional funds are eventually given, Mamata Banerjee can use them to fulfil specific projects she has promised. But the money cannot be used to ease the state’s debt burden, which has been put at Rs 2 lakh crore.

Revenue-sharing formulae and fiscal responsibility rules have made it difficult for the Centre to dole out largesse not tied to specific projects. A window can open if the finance commission can be convinced on the need for a debt write-off for the most indebted states, which will include Bengal. But that is not a short-term measure.

Bengal has one of the lowest tax-to-state GDP ratios at 4.5 per cent, which the Centre wants to improve.

Officials said Mitra had been advised that the state budget, a means for mobilising revenue, should be hurried up. The state government has been dropping hints about placing a fresh vote-on-account, which will permit regular expenses, instead of a full-fledged budget.

“Although Bengal is reluctant to impose water charges and raise electricity tariff, we will try and persuade it to look at discriminatory pricing where well-off households would pay a water charge while poor households would be exempted,” an official said.

The finance ministry and the Planning Commission feel Bengal has to have a long-term sustainable plan to finance its development needs.

The Centre has also advised Bengal to cover most goods and services in value added tax and service taxes so that when the goods and services tax regime kicks in next year, the state is able to reap dividends.