Maharashtra - Can Pune do away with octroi?

Chief minister Vilasrao Deshmukh appears keen to abolish octroi, but that fact remains that the much-debated tax system is the backbone of Pune Municipal Corporation's (PMC) income, as seen in the draft annual budget for 2008-09.

The corporation has estimated an octroi income of Rs 754 crore for the ensuing year, which is 37 per cent of the PMC's total income. In 2007-08, it collected Rs 560 crore by January 2008 and hopes to reach Rs 720 crore by March.

When asked if the PMC's budget would be adversely affected if the state government abolishes octroi, municipal commissioner Pravinsinh Pardeshi said, "Though the state has announced to abolition (of octroi), the decision would not be implemented in Pune at least for next two years. If octroi income is removed from the budget, it would be difficult to carry on the development works."

He added that the state government is likely to go for phase-wise application for abolition of octroi. "Octroi should be replaced by cess based on accounts of traders. So instead of collecting octroi from posts it could be collected from traders. Of course there would be 15-20 per cent difference in the revenue," said Pardeshi.

The commissioner added that the PMC was pursuing traders to go for account-based system so that it would be easy for the PMC to charge cess in future.

Experts and former bureaucrats have also opposed octroi abolition. Former municipal commissioner P.S. Palande warned that survival of the municipal corporations like Pune depends on octroi as it is a major income source. If it is abolished the entire system of the municipal corporations will collapse. "It would be a suicidal step to abolish octroi. Even if the state government decides to provide alternate source of income to local governing bodies, it is fact that no such alternative is available at all," said Palande recently after releasing the book 'Octroi' by N.B. Sapre.

Civic bodies across the state have opposed abolition of octroi and even state finance minister Jayant Patil has said that octroi cannot be done away with without an alternative source of revenue for civic bodies.

A committee chaired by the state finance secretary in its report has already recommended imposition of profession tax by municipal bodies, levy of additional VAT (value added tax) and increased property tax to compensate for octroi losses. The committee also suggested that municipal bodies be permitted to impose and collect their own independent professional tax.

Source : Times of India - India, dated 05/02/2008