Today, when Kerala’s finance minister K.N. Balagopal started his budget speech, he started the very first line with a “happy” news announcing that Kerala has overcome the “trying times of severe fiscal constraints that had affected the State in recent years”.
But the opposition has already raised the strong contention that what Vijayan government’s last full budget, that is estimating a revenue expenditure of Rs 1,79,476 crore and a revenue deficit of Rs 27,124 crore, is attempting to loot the public. The opposition raises this argument citing the measures like the major raise in the land revenue across all existing slabs.
Balagopal announced that the basic tax rates in all the existing slabs will be increased by 50 per cent to improve revenue to Government from land. The minister cited that the value of land and its income generating potential have increased manifold in the State in recent years owing to overall development. “The basic tax now levied on land is quite nominal,” he announced in his budget speech.
“We are not against raising the land tax, but what has been announced is outright loot. A 50 per cent hike in land tax is intended to exploit the poor. This government has no other option left,” argued Satheeshan.
As part of resource mobilization, the government has introduced certain measures, taking a calculated risk ahead of the local body elections.
Notably, the Vijayan government’s final full budget has proposed a 50 per cent increase in road tax for private vehicles—two, three, and four-wheelers—that are older than 15 years. The government expects to generate Rs 55 crore from this tax alone. However, this measure will impact the working class, and it is likely to draw criticism, particularly from three-wheeler trade unions, including those affiliated with the Left.
The government is also looking to capitalize on Kerala’s electric vehicle (EV) boom to boost revenue. Kerala is a frontrunner in EV adoption among Indian states. Despite accounting for only about 4 per cent of India’s total passenger vehicle sales, the state ranks second in electric car adoption, closely trailing Maharashtra. EV penetration in Kerala’s passenger vehicle segment rose to 5.2 per cent in FY24, up from 2.3 per cent in FY23.
A BNP Paribas report highlighted Kerala’s dominance in the electric two-wheeler segment as well, noting that the state surpassed Karnataka and Delhi in battery-powered two-wheeler registrations in the fiscal year ending March 31, 2024. In FY23, Kerala had ranked third in electric two-wheeler penetration.
In 2020, Kerala had just 1,368 registered EVs. By 2024, that number had surged to 1,83,686. The budget aims to tap into this growing consumer trend, targeting an additional Rs 15 crore in revenue from the EV sector.
The finance minister announced the rationalization of taxes on electric vehicles (EVs). Under the new structure, EVs costing above Rs 15 lakh will be taxed at 8per cent of the vehicle’s price, while those priced at Rs 20 lakh and above will be taxed at 10%. Additionally, the government has introduced a 10 per cent tax on electric cars with a battery rental facility, regardless of their cost. While this move is expected to generate an additional Rs 30 crore in revenue, it could potentially dampen demand for EVs.
The filing fees for Gehans and Gehan releases submitted by cooperative institutions at Sub-Registrar offices have also been revised and structured into slabs. The state government anticipates an additional Rs 15 crore in revenue from this revision.
Notably, the state government did not announce any increase in social welfare pensions. With local elections approaching, there were some anticipations that welfare pensions would be increased. However, Balagopal’s budget only assured that the pending three-month pension arrears would be disbursed on time, avoiding any extra burden on the government.
Given these measures, it is evident that the opposition will portray Balagopal’s resource mobilization efforts as a burden on the working class and the poor. Meanwhile, the ruling Left Democratic Front (LDF), which claims to represent the working class, may find itself defending the budget by highlighting allocations for mega projects such as Metro rail, IT parks, and the Vizhinjam seaport, as well as more funding under Karunya medical scheme. Additionally, the government is likely to counter criticism with rhetoric against the Union government’s perceived apathy, as reflected in the budget speech.
