On the streets of Kolkata and the dusty roads of rural Bengal, it's already being called the "Saradha Tax". MamataBanerjee's off-the-cuff plan for a Rs500-crore payout for Saradha depositors and her decision to make smokers cough up a part of the funds has triggered ripples across the state.
On Wednesday evening, Mamata had announced a 10% hike on cigarettes to mop up Rs 150 crore of the Rs 500-crore, and urged people to "smoke more often". Officials of the commercial tax department say the government is yet to issue the circular on the hike on cigarette tax, which is already on the higher side. The CM is also yet to explain what are the "other sources" of fund mobilization but some officials said that the remaining Rs 350 crore can be managed from the state's income on account of hike in petroleum prices.
The CM's decision to levy higher tax comes barely a month after her finance minister Amit Mitra raised two VAT slabs by 1% each and hiked taxes on cigarettes and gutka by 5%. This is not all. The government also raised non-tax revenue, such as land revenue, stamp and registration fees, state excise, electricity duty only a month ago.
Mamata says the purpose of the Rs 500-crore corpus is to give some relief to small and medium depositors who are ruined by the Saradha meltdown, which is already having a cascading effect on other Ponzi schemes operating in Bengal.
If utilized, this will again add to the rising subsidy component of the state government, which rose from Rs 1512.95 crore in 2012-13 to Rs 2171.56 crore in the current fiscal.
Amit Mitra raised it even higher by introducing the monthly financial assistance of Rs 1,500 to registered unemployed youth under the Yuba Utsaha Prakalpa. Add to it Mamata's promise of monthly assistance to imams and the compensation she announced for the families of hooch victims.
The 'Saradha Tax' has sparked a debate on whether a broke government can afford to go on a populism overdrive when the state's annual interest liability on debt exceeds its own generation.
State officials fear that the CM's announcement will impede the finance minister's efforts to improve the state's revenue generation. Mitra is struggling to pay salary and pension to government employees - this liability alone stands at Rs 42,000 crore while the state's generation plus annual debt servicing adds up to Rs 49366.65 crore.
While placing the 2013-14 budget in March, Mitra pegged the state's total plan outlay at Rs 26,674 crore, hoping that the increased allocation in social and physical infrastructure would spur economic growth and fetch investments through the Keynsian multiplier effect.
Little did he know that the Ponzi schemers will use this principle to rob households in Bengal and Mamata's generosity would pass on the burden to those who had nothing to do with the Saradha bust.
The CPM on Thursday sharply criticized the move to set up a corpus to compensate investors. "It is strange that an additional 10% tax will be levied on tobacco for augmentation of the corpus. The money should come by attaching property of the accused and all the political party leaders involved," former finance minister Asim Dasgupta said.
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