DIDI’S SIN TAX Rs 500cr plan to refund poor victims

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By OUR BUREAU
  • Published 25.04.13
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Calcutta, April 24: If those who commit the sin of smoking sin a bit more, it will pay for some of the alleged sins of Sudipta Sen.

Chief minister Mamata Banerjee today announced a Rs 500-crore relief fund for the worst-affected poor depositors of the Saradha Group, signalling a 10 per cent additional tax on tobacco products to raise the money and asking smokers to light up “a little more” to fill the mercy purse.

The announcement, considered a political water-cannon to douse public anger, stunned officials who are bracing for an administrative nightmare.

Some wondered how the government could refund the investors when Sebi, the capital markets watchdog, had asked Sen to pay back the money in three months. “Is it a bailout package for the poor or for Sen?” asked an incredulous official.

Mamata cited compassion for the downtrodden — a theme that was at play in Singur when plots could not be returned and after a hooch tragedy near Diamond Harbour. “Despite our acute financial constraints, we have decided to set up a relief fund of Rs 500 crore. This will be exclusively for those depositors who are really poor, downtrodden and those who are banking exclusively on the money they had deposited with the company,” she said.

It was not clear how Mamata arrived at the figure of Rs 500 crore as the extent of the defaults is not yet fully known. Sen has put his liability between Rs 300 and 400 crore, though others had spoken of Rs 1,200 crore.

“I seek apology from everyone for having to say that we have decided to increase 10 per cent tax on cigarettes and all kinds of tobacco products…. Despite this measure, Rs 500 crore cannot be arranged as the tax increase will give us only Rs 150 crore. We will arrange for the remaining sum somehow,” the chief minister said.

She added: “Apnara ei kodin ektu beshi korey khan, taholey taratari uthey ashbey (please smoke a little more these few days, then the amount can be raised quickly).”

Public health specialists were aghast. About 36 per cent of adults in Bengal consume some form of tobacco, in contrast to 35 per cent in India, and 14 per cent adults smoke in Bengal, against 9 per cent across India.

“A move to raise taxes on tobacco would be in favour of public health — as it’s intended to reduce consumption. But such a move should certainly not be accompanied by suggestions that people should use more tobacco,” said Monika Arora of Public Health Foundation of India, a research institution in New Delhi.

“If this was intended to be a serious message, it would tantamount to a violation of the 2003 law that prohibits any person from promoting tobacco for any purpose,” said Amit Yadav, a lawyer with Hriday, a Delhi-based NGO.

The chief minister cited the examples of Rajasthan and Uttar Pradesh, where taxes on tobacco products add up to around 50 per cent. She said that even after the hike, the tax would be only 40 per cent in Bengal.

Slapping a “sin tax” on addictive and harmful products is not unusual if the objective is to discourage their consumption and fund welfare projects. But few could recall an instance where the proceeds were used to repay deposits collected illegally amid allegations of links to those in power.

A comparison could be the $700-billion bailout the US government offered in 2008 to banks that triggered the crisis by reckless lending. But the default in Bengal does not have the global implications the US meltdown had — barring the political uncertainties confronting Trinamul.

“Why is the government shouldering the responsibility of Sen? Is the government trying to pay the price of the party’s proximity to the Saradha Group?” asked a city-based economist.

According to him, the chief minister should take measures to ferret out the money the group had collected.

Saradha Realty’s balance sheet for the year to March 2011 shows it had collected an advance of Rs 78 crore on account of bookings against property. Another unexplained advance of Rs 79 crore is shown. Saradha Tours and Travels, the other company raising deposits, shows Rs 17 crore under this head as on March 2012. Government officials felt the figures were too low, compared with the mobilisation drive.

According to the chief minister, the Justice Shyamal Sen commission will determine the beneficiaries of the relief fund.

A senior minister said he would not be surprised if people started queuing up outside BDO offices. “This may set a precedent as people will ask the government to return the money if other companies default,” he added.