Chandigarh, December 1
The two-member committee comprising Deputy Chief Minister Sukhbir Badal and Industries Minister Manoranjan Kalia has reached a broad consensus on the issue of subsidies. All modalities were worked out at a meeting between the two early today after which Chief Minister Parkash Singh Badal was also informed. However, the government has decided to withhold the report for now in view of the forthcoming Winter Session of the Vidhan Sabha.

According to highly placed sources, the two- member committee has recommended doing away with free power and introducing an income-support scheme for the farmers wherein the farmers will get direct support from the government at regular intervals, based on a World Bank model. Further, the committee has advised the government to adopt several other measures of generating revenue from the rich and spare the poor.

Highly placed sources said the committee had agreed on areas that needed to be brought under the purview of higher taxation, but there was still a difference of opinion on the manner in which it should be done.

In case of subsidy on electricity for example, it has been proposed that the government will start issuing electricity bills and the farmers will receive vouchers from the collection centres that can then be exchanged for their full value from the designated cooperative banks.

The Tribune has further learnt that the committee has recommended imposing a surcharge on VAT and bringing the service sector under higher taxation. For example, the government has proposed to tax the cellular towers, numbering around 15,000 in the state to yield a revenue collection of several hundred crores. The two have also agreed to re-introduce cess on irrigation water (abiana) and at the same time generate revenue by taxing some urban properties (read house tax).

The committee has already met four times and is expected to put its signatures on the report in the final meeting shortly. There is a thinking within the government over the timing of coming out with the report. Opinion is divided on the issue of taking the report to the Vidhan Sabha or making it public after the session.

There are some other areas such as the service providers and services that are being brought under the purview of this new tax regime. This is also likely to include commodity tax and Urban Immovable Tax.

Punjab has been pulled up on many occasions by the Finance Commission for “splurging on freebies”. But the system worked out by the committee bypasses direct subsidies while continuing to give direct income support, which is permissible as per the directive of the World bank and is also WTO-compatible.

Currently it is estimated that Punjab spends around Rs 3,500 crore on subsidies to the state’s farmers that amounts to about Rs 17,000 per cultivator. But with the introduction of the income-support scheme, Punjab will be able to save huge amounts on pilferages that are paid for by the subsidies.

Inputs received by the two-member committee have suggested that for improving the state’s tax collections, Punjab should impose taxes like the Goods and Passengers Tax in Haryana and charge tax on electricity on the pattern of Gujarat.

It is further learnt that both the members of the committee have informally discussed the proposals with the key leadership of their respective parties and sought their opinion. The next meeting between the two that is expected to be the final one will see both members of the committee putting their signatures on a formal report.