New Delhi: In recent years, increasing amounts of central government revenue have been raised by cesses and surcharges. These include the Swachh Bharat Cess, Education Cess, Secondary and Higher Education Cess, Krishi Kalyan Cess , Clean Environment Cess etc. These are examples of cesses which are dedicated to specific priority use areas and derive their justification from the extra funding required for these priority areas. In addition, there are other cesses and surcharges which are commodity-based like the cess on crude oil, bidi, sugar, automobiles, surcharge on paan masala and tobacco products etc.

Taken together, these cesses and surcharges add up to huge amounts which have increased sharply in more recent times. Hence, it is increasingly relevant and important to examine the actual utilisation and usefulness of these cesses and surcharges.

Available data indicates that Rs 75,533 crore were raised from cesses and surcharges in 2014-15 while the revenue accrued from these sources increased to Rs 83,997 crore in 2015-16. In the budget estimate for the next year 2016-17 it became clear that this amount accruing from cesses and surcharges was to be raised drastically. Total revenue of Rs 1,48,031 crore was sought to be raised from these sources in this year’s budget estimate which was later raised further to Rs 1,57,412 crore in the Revised Budget for this year. In the Budget Estimate for 2017-18 this increased somewhat more to Rs 1,69,662 crore. Clearly the figures involved are huge.

The problem of non-utilisation

It is distressing, therefore, to learn from a recent Comptroller and Auditor General (CAG) report that while very significant amounts have been raised from cesses, it has not been utilised properly for the stated purpose, thereby defeating the very rationale of the existence of such a high priority need for which a special cess was needed. People are bound to ask — if money was so urgently needed as to require a cess, why was it not utilised properly?

During the decade 2006-07 to 2016-17, a total of Rs 83,497 crore were raised by the ‘Secondary and Higher Education’ cess. However the CAG report said that this was not transferred to the earmarked fund “as neither the schemes were identified on which the cess proceeds were to be spent, nor the designated fund was created to deposit the proceeds of the cess.”

The ‘Research and Development Cess’ is levied on imported technology and its proceeds are meant to be used on development of indigenous technology. A very laudable objective, most people would say, but they would also like to know whether it is being actually realised by ensuring proper utilisation of funds. The CAG report says that during the two decades 1996-97 to 2016-17 Rs 7,885 crore were raised by this cess but only Rs 609 crore were disbursed to the Technology Development Board. The remaining Rs 7,226 crore was not utilised for high priority objective. In other words, for such a high priority objective, about 90% of the funds were not utilised as per expected norms.

Even in the case of a highly publicised scheme such as Swachh Bharat, the problem of non-utilisation has remained in the context of urban sanitation. A collection of Rs 16,401 crore was made in the two years 2015-16 and 2016-17 from the funds raised by Swachh Bharat Cess. The non-utilisation in this case amounts to Rs 4,001 crore or about 25% and adversely affects urban sanitation at a time when it urgently needs more funds.

The under-utilisation in the case of other important cesses like Central Road Fund Cess and Clean Energy Cess are also no small amount.

Failed objectives

While the imposition of a cess to raise funds for a priority sector or national objective comes with a vision of very urgently needed funds, the high levels of under-utilisation of the funds that actually accrue from various cesses indicate high levels of inefficiency or lack of sincere concern for the often flaunted objectives. To receive and maintain public support of these cesses much better utilisation of cess funds for the stated objective is badly needed.

Another aspect of the revenue mobilisation from cesses by the Union government is that these are meant exclusively for the Union government and remain outside the divisible tax pool that is shared with various states. So as the share of revenue raised by cesses increases, the size of the divisible pool is likely to be adversely affected.

The surcharges on commodities which are harmful for health such as bidis and paan masala are justified on health grounds, but there is another side to it. If the government raises a lot of revenue from such products it may become reluctant to take effective action to reduce their consumption.

Nevertheless, the nature of how cesses are and aren’t used deserve urgent attention as we move forward to the next union budget in February and the 2019 general elections.

Bharat Dogra is a freelance journalist who has been involved with several social movements and initiatives.