Finance Minister Nirmala Sitharaman on February 1 announced an agricultural infrastructure and development cess (AIDC) on some goods to support the sector, but she clarified that states will not feel short-changed by this new component and the burden will also not be passed on to the consumers.
Speaking to News18 Network’s Editor-in-chief Rahul Joshi, Sitharaman pointed out that the agri infra cess has been carved out of the additional excise duty imposed on certain goods such as petrol and diesel, which is purely central government's money. To compensate for the additional cess, the government has reduced the excise duty component, resulting in no additional cost for the public.
Citing the example of gold, she said there was a basic customs duty of around 12p per cent, which has now been brought down to say 7 per cent, and then the agri infra cess of three-four per cent has been added on that, resulting in the net price remaining around the same for most goods.
“What we are essentially doing is carving out the cess from the customs duty only for the purpose of funding infrastructure in the agriculture sector,” Sitharaman told News18. “The important part is that the end consumer is not going to pay one rupee more. The reduction in customs and the imposition of the cess cancels each other out and is not going to burden the consumer,” she added.
Explaining the rationale behind the move, she said she wanted to create a separate fund for agriculture, which has been one bright spot in the economy that was hit hard by the Covid-19 pandemic.
"There is an immediate need to improve agricultural infrastructure so that we produce more, while also conserving and processing agricultural output efficiently. This will ensure enhanced remuneration for our farmers," Sitharaman had said in her budget speech.
AIDC of Rs 2.5 per litre has been proposed on petrol and Rs 4 per litre on diesel. Other items like gold and silver will have a cess of 2.5 percent, alcoholic beverages will have a cess of 100 per cent, crude palm oil will have a cess of 17.5 per cent and there will be a cess of 20 percent on crude soyabean and sunflower oil.