The state government is likely to increase Value Added Tax (VAT) by 1-2 per cent to shore up additional revenue to tackle recurring droughts in Maharashtra.

The government, which spent Rs 8,000 crore on drought-relief measures in 2014-15, believes the amount needed in the next financial year will be no less than Rs 10,000 crore. But the biggest challenge is, where will the money come from, as the Centre cannot entirely fund the state’s needs.

The state is not in favour of a complete loan waiver despite growing demands from the Congress-NCP. “A loan waiver is not going to help farmers. It will serve only 22 per cent farmers in the state. The rest will be out of loan bracket,” said an official.

“Preliminary reports indicate the number of villages to be covered for aid will go up from 15,000 to 25,000,” a highly placed source toldThe Indian Express.
In all, 40,000 villages in the state are reeling under drought. So far, villages shortlisted for compensation of crop loss during the kharif season was 15,000. But a decision to also add those affected by the rabi season will take that number up to 25,000.

“In the prevailing situation, there is no other way but to increase taxes. Some states have imposed taxes up to 15.5 per cent. Whereas, Maharashtra has enforced only 12.5 per cent VAT. If we can increase VAT by 1-2 per cent, the additional funds can be spent on the agriculture sector,” the source said.

While exploring various options, including seeking financial packages from the Centre, the state believes it will have to come up with a robust budget next year for the farm sector to ride out the crisis. In Marathwada, Vidarbha and parts of north and west Maharashtra, the drought has continued for the fourth consecutive year.