Taxed and Tired

CHENNAI: It was May 7, 2021. DMK president Muthuvel Karunanidhi Stalin took over as Chief Minister of Tamil Nadu. It has been almost two-and-a-half years, and following some of the electoral promises he fulfilled, there has also been a steep rise in prices of essential commodities and utilities, and also taxes, fees, tariffs, etc.

Electricity tariff, the State-run Aavin milk and other milk products price, drinking water charge, property tax, commercial and building licences tax, building demolition fee, company tax, Tasmac liquor price, registration fee, and vehicle tax were increased at an exorbitant rate. Financial crisis/management and administrative reasons may be inevitable reasons, but the hike in cost of services has hit not only the marginalised, but also the middle-class, upper-class, the corporates, and industries.

Electricity Tariff

In July 2023, the Tamil Nadu Electricity Regulatory Commission (TNERC) had hiked the tariff for all the low-tension and high-tension consumers marginally by 2.18%. In its tariff order, TNERC said that though the decision was taken to adopt the escalation rate by comparing with the consumer price index (CPI) in April 2023 and 2022, for the tariff revision to take effect from July 1, 2023.

But, as per the policy directive of the State government dated June 30, the commission decided to compare the CPI of April 2023 with August 2022. Accordingly, the prevailing tariff has been escalated to such a percentage that’s comparable to the index rate prevailing in August 2022.

“However, the tariff inflation for the ensuing years shall be based on the formula stipulated under the tariff order issued in September 2022,” it said.

Though the energy charges for the domestic consumer are hiked by Rs 0.10-0.25 per unit for various slabs, the hike, however, would be absorbed by the State government through subsidy.

For other categories of LT consumers, the energy charges have been hiked by a minimum of 10 paise/unit and a maximum of 25 paise/unit. The fixed charges have been hiked by a minimum of Rs 2/Kw/month to Rs 12/Kw/month.

For HT consumers, the hike ranged from 15 paise/unit to 25 paise/unit while the demand charges increased by Rs 12-562/Kva/month.

In September, 2023, CM Stalin announced that seasonal industries with LT electricity connections such as rice mills, ice factories and spinning mills that run to their full potential only for a few months in a year will be allowed to change their connected load up to four times in a year free of cost. Now, these industries are paying to get the connected load changed.

Officials with Tangedco said that this move would help reduce demand charges during the off-season. Consumers pay these fixed charges apart from the consumption charges based on the connected load. When the factories are not fully functional, they can reduce the load and fixed charges.

But, the representatives of Micro, Small and Medium Enterprises (MSMEs) said that they were not satisfied with the announcements. Around 40,000 industrial units and 9 lakh MSMEs in the State have shut down their industries and staged a protest against the exorbitant electricity tariffs.

“We’re very upset with the new electricity tariffs. Since the tariff will affect MSMEs the most, numerous units have claimed these charges are creating financial problems for their business operations during night shifts,” said an industrialist from Coimbatore.

“When all industries are suffering due to the Russia-Ukraine war and the Israel-Palestine war, electricity tariff hikes make it even harder for industries,” said Senthil Kumar, Tamil Nadu Electricity Consumers Association.

V Sathiabalan, a resident of Pattalam, Chennai said, “We don’t have AC but the EB bill was Rs 650 two months back. Now, after the hike, it has surged to Rs 1,800 if the units cross 500 units. Even the units did not vary much compared to the previous months.”

Aavin Milk, Value-added Products

In August 2023, the price of 5-litre green magic (standardised milk) was increased to Rs 220 from Rs 210.

“The hike was being implemented to ensure that the rate was on par with one litre of green milk that was being sold at Rs 44/litre,” said a release from TN Cooperative Milk Producers Federation Limited.

In September 2023, the maximum retail prices of ghee packs and butter packs were also hiked. “A 500 ml jar of ghee, which was Rs 315 is now Rs 365. Similarly, 500 gm of cooking butter which was Rs 260 is now Rs 275. The same quantity of table butter is priced at Rs 280 now,” said Aavin.

“The product prices were hiked to ensure that they reached the consumers properly. Since Aavin products are the lowest priced in the market, diversion was happening. To prevent that, the hike was effected. We’re still the lowest even after the hike,” the official with State-run Aavin explained.

Meanwhile, SA Ponnusamy, president, TN Milk Agents Welfare Association, pointed out that the reason for the hike was very low procurement prices when compared to private dairies. “Unless Aavin increases the procurement rates, more farmers will continue moving towards private dairies such as Amul and Nandhini,” he added.

However, several consumers have stated that though the price of milk and other related products were lesser in Aavin than other dairies, the quality of milk sachets was very poor.

“The milk sachets’ quality is very poor than other dairies’ sachets. And in many Aavin outlets, we don’t get ghee and butter packs, as it’s out of stock most of the time. Instead of increasing the price, Aavin should ensure the availability of its products in all outlets,” said Dwarakanath from Perambur.

Property Tax

In 2022, the State government increased property tax for all the civic bodies. Residents living in core areas of Chennai with a built-up area of below 600 square feet were charged at least 50% of property tax.

Property tax of residents staying in 600 sq ft-1,200 sq feet was hiked by 75% and 100% for those living in 1,201-1,800 sq feet built-up areas in the capital city.

“People were returning to their normal life after the pandemic-induced lockdown when the Greater Chennai Corporation (GCC) suddenly revised the taxes. The increase in property tax won’t affect high-end owners directly but it would have an adverse impact on the lower and middle-class families who are dependent on daily incomes and monthly salaries. And the rent of residential and commercial buildings has also spiked because of the tax-hike,” said K Krishnavelu, a resident of Otteri.

Earlier, the house rent was Rs 6,000/month whereas now, it’s Rs 10,000/month, exclusive of electricity, maintenance charges and water bills. “Daily wagers struggle to pay the rent and manage other expenses,” he added.

Experts opined that if the government wanted to revise the taxes they should keep the common people in mind and ensure it was increased gradually instead of suddenly steeply rising.

R Beena from Kerala, a resident of Tiruvottiyur, lamented over the 5% increase in cost of drinking water and sewage bills. “Cost of essential items has been high for the past two years. Now, we’re unable to manage with our income. The government should consider the people’s situation before revising taxes and not just focus on the income gained through people’s money,” she rued.

The scenario has worsened in the extended areas of the GCC, where residents are forced to pay water and sewage tax without a connection in their buildings. Residents living in gated communities at OMR and Shollinganallur are fully dependent on the drinking water distributed through tanker lorries for which they pay Rs 5,000/week.

Company Tax

Meanwhile, the Chennai Corporation has increased the company tax from the second half of 2023-2024.

It’s noted that the companies’ annual tax with less than a lakh paid Rs 100 as tax for half a year, but now it has increased to Rs 300. The income from Rs 1 lakh to Rs 1.99 lakh and Rs 2 lakh to Rs 2.99 lakh should pay Rs 600 and Rs 900 respectively.

Also, if the company’s head office is not within Chennai Corporation limits, it still has to pay the tax if its gross income is received in or from the city.

If a company’s 6-month profit is between Rs 10,000-20,000, it would pay Rs 300 tax, which is a spike from Rs 100. If the profits exceed Rs 20,000, the company’s half-yearly tax would be Rs 3,000.

Infrastructure, Amenity Charges

The GCC passed a resolution in the council meeting held on October 30 that from November 10 onwards, the infrastructure and amenity charges would be doubled to Rs 820 for residential buildings and Rs 920 for commercial structures. Except for residential structures measuring less than 300 square metres (sq m), the civic body collects this amount for all buildings, along with the CMDA development charges in case of buildings that have ground plus two floors.

However, the hike will not be applicable if the house measures less than 1,076 square feet. The fee for getting permission for demolition was doubled to Rs 220/sq m (for reinforced cement concrete roof) for the ground floor. For the first floor and above, and also the compound wall, it has gone up to Rs 140/sq m from the present Rs 70/sq m.

The sudden spike in building licence and demolition fee has shattered many residents’ dreams of buying a house in the city. Following the surge in the fee, builders increase the charges. For instance, for a small apartment that costs Rs 10 lakh, aspirants would now have to pay an additional Rs 3 lakh-5 lakh now.

Even the registration and raw materials prices have witnessed a steep rise recently. “Nowadays, people plan for their future especially when they construct a house. They ensure to not have alterations or renovations for at least 40-50 years,” explained M Balakrishnan, a resident of Velachery. “But, when the local body increased the rates, it affected the middle-class people severely. They built or purchased a house by taking a loan. In such a situation, they have to pay their debt for a long time. Based on the demand from the public, the builders too, increase the charges drastically.”

Life Tax of Vehicles

In October 2023, by amending the TN Motor Vehicles Taxation Act, 1974, the State government increased the rate of life tax of new and old two-wheelers, four-wheelers, goods carriages and other vehicles. The rate of life tax for a new motorcycle would be 12% if its cost exceeds Rs 1 lakh, and 10% if its cost does not exceed Rs 1 lakh.

In case of new cars and other motor vehicles, the rate of life tax would be 20% for vehicle that costs over Rs 20 lakh. For new cars and other motor vehicles whose costs are between Rs 10 lakh- 20 lakh, the rate of life tax would be 18%. For vehicles costing between Rs 5 lakh and Rs 10 lakh, it would be 13%. In case of vehicles costing below Rs 5 lakh, the rate of life tax would be 12%.

However, the new Bill provided for different rates of life tax for old two-wheelers and other vehicles depending on how old they are. It also provides revised rates for tourist cabs, and construction equipment vehicles, among others. A green tax of Rs 1,500 for five years was levied for motor vehicles (other than transport vehicles) that have completed 15 years from the date of their registration.

For transport vehicles that have completed 7 years, the green tax would be Rs 750/year. For auto rickshaws, the green tax would be Rs 250/year. “Receipts from taxes on vehicles are low which brings lesser revenue to the government. To augment the financial resources of the State exchequer, the Tamil Nadu government decided to amend the Act suitably,” reads the legislation tabled in the Assembly. However, the ruling DMK’s labour wing LPF opposed the Bill and raised concerns over it.

Liquor Prices

In March 2022, the liquor prices were increased. According to Tasmac, the monopoly agency to sell liquor in the State, the hike ranges from a minimum of Rs 10 to Rs 80. This was the first hike since 2020. Beer prices were also increased by Rs 10/bottle for certain brands. Price of imported liquor, including beer and wine, has gone up by Rs 10-Rs 320 in Tamil Nadu from July 2023.

Officials said that over 500 brands including some of the marque brands, would be costlier after the hike. A circular has been issued to the authorities that licensees holding FL2 (recreation clubs) and FL3 (star hotels) permits should sell on the revised rates with immediate effect. As of March 31, 2023, the number of Tasmac shops was 5,329. About 500 liquor shops were closed in 2023 by the State government and now it’s around 4,800.

In 2022-2023, total revenue from liquor sales was Rs 44,098.56 crore. Now, the State government is planning to further increase the liquor price ranging from Rs 10-60. Slamming the Tasmac, V Jayaraj from Choolai said, “A quarter bottle worth Rs 130 is being sold at Rs 140 in Tasmac outlet here. They’re selling at Rs 10 more than the MRP. Even if the price is hiked, charging more than MRP should be stopped. Selling quality goods at reasonable prices as in other states would be welcome.”

First hike in 10 years

Despite complaints, there are also many who believe that there was no harm in increasing the fee or taxes in the city. The government has not increased the licence and demolition fee for over a decade and it was therefore needed. “The hikes were justified given that the people’s income has increased significantly over the years. They have the resources to spend luxuriously and deserve to be taxed. We know the taxpayer’s money is being criminally squandered. At the same time, revenue is also needed to restore or maintain the basic infrastructure facilities,” opined C Raghukumar, who resides in Perambur.

Registration Fee

After 20 years, in July 2023, the Tamil Nadu Commercial Taxes and Registration department revised the fees for services such as document registration, preservation of the document to be registered, and provision of copies of documents from electronic devices. “Based on Section 78 of the Registration Act, 1908, the rates for registration fee and stamp duty for certain documentary registrations have been revised,” said a senior official with the department.

“For example, the registration fee for receipt of documents is increased from Rs 20 to Rs 200. Maximum registration fee for settlement, partition and release documents between family members is increased from Rs 4,000 to Rs 10,000.” Maximum stamp duty is now increased from Rs 25,000 to Rs 40,000. Registration fee for private land is increased from Rs 200 to Rs 1,000.

This includes revising the registration fee from Rs 10,000 to a percentage of the market value of the property for public authority documents for non-family members. As stated in the 2021 Assembly election manifesto, the DMK government which implemented the scheme of providing Rs 1,000/month to women heads of the family, has indirectly introduced tariff hikes in all sectors to cover the expenditure.

Consumers and industries are concerned that this may increase the financial burden further in the coming years. Experts pointed out that the State government was burdening the debt-ridden electricity board and the transport corporation with more debt.

Chief Minister Stalin is often quoted as saying that the Dravidian model government does not only what it says but also does what it doesn’t say.

Well, in the light of ever-increasing costs and prices of essentials, the common people of Tamil Nadu want to know: Are these hikes a part of the supposed unspoken electoral promises?

(With inputs from R Sathyanarayana, Swedha Radhakrishnan)