tax money

New cess funds toilets and farmers, as Rs 1.3 lakh crore lies unused

The Comptroller and Auditor General has criticised the under-utilisation of cesses collected over the last two decades.

The term “SBC” – appearing on restaurant, telephone and club bills nationwide – refers to the Swachh Bharat Cess, one of 10 levies that go directly to the central government and are expected to reach Rs 1.65 lakh crore this financial year, 2016-'17.

The Rs 1.65-lakh-crore cess-collection is an increase of 22% from 2015-'16 and double the cess collection of Rs 83,000 crore in 2014-'15, according to an IndiaSpend analysis of budget data.

A warning over the use of these special taxes comes over the last decade, with at least Rs 1.3 lakh crore, or 41%, of cess collected but not used, according to this report from the government’s auditor.

India’s tax revenue is expected to increase 8.7%, from Rs 18 lakh crore in 2015-'16 to Rs 19.6 lakh crore (budget estimate) in 2016-'17; so cess collection will likely grow faster.

Apart from SBC, or Clean India Cess, meant to finance Prime Minister Narendra Modi’s favoured programme, other levies – lesser known siblings of taxes – are supposed to finance education, environment, agriculture, infrastructure, sanitation and communication.

As states get more money, Centre increases cess, which it does not share

The 14th Finance Commission recommended a transfer of 42% of tax revenue from Centre to states, up from 32%, stripping some of Centre’s revenues. To compensate, the Centre has increased cesses, which it does not need to share with the states.

Source: Union Budget 2016-17
Source: Union Budget 2016-17

“When more money is given to states, the union government will be short of revenue, and it may generate the required from tax instruments like cess, to achieve targeted spending on specific objectives,” Dharmakirti Joshi, chief economist at Crisil, a ratings agency, told IndiaSpend.

A cess is a tax that does not need a new law or act – and parliamentary approval – and is included in the Finance Act, meaning, through the budget.

Source: Union Budget 2016-17
Source: Union Budget 2016-17

While cesses for roads and sanitation have largely worked, those for secondary education, telecommunication, and research and development have not.

Success stories: Road cess, primary education cess, Swachh Bharat cess

A record Rs 73,000 crore was generated in 2015-'16 from road cess, an increase of 190% from Rs 25,121 crore in 2014-'15.

The tripling of road cess – which appears as additional excise duty on petrol and diesel – is due to the 75% drop in global oil prices, the benefits of which were kept by the government to address revenue concerns, as IndiaSpend reported earlier.

Source: Union Budget 2016-17
Source: Union Budget 2016-17

The estimate of road-cess collection in 2016-'17 has increased marginally to Rs 78,000 crore, since there is no prospect of any further decline in global oil prices. The allocation for roads and bridges tripled over this period, from Rs 34,000 crore in 2014-'15 to Rs 1 lakh crore in 2016-'17 (budget estimate).

As much as 90% of the cess collected for primary education was transferred to Prarambhik Shiksha Kosh (Primary Education Fund), a fund specially created for primary education development. Between 2004-'05 and 2014-'15, Rs 1.4 lakh crore from Rs 1.54 lakh crore collected was used to fund primary education.

The Swachh Bharat cess was levied from November 2015 to ramp up toilet construction nationwide – nearly 16 million were constructed over two years, according to the government; 95 million need to be built over the next three – and meet the government’s target of making India open-defecation free by 2019.

Source: Lok Sabha Question, answered by Minister of Drinking Water and Sanitation on March 3, 2016.
Source: Lok Sabha Question, answered by Minister of Drinking Water and Sanitation on March 3, 2016.

As of February 2016, about 10 million toilets were constructed since March 2015, up from 5.8 million in 2014-'15 and five million in 2013-'14.

Swachh Bharat cess levied in a telephone bill.
Swachh Bharat cess levied in a telephone bill.

What did not work: Environment cess, secondary education cess

Since 2010-'11, the government collected Rs 28,000 crore through the Clean Environment cess (earlier known as the Clean Energy Cess), but less than half the money was transferred to the National Clean Energy Fund to fund research and innovation.

Source: Report No. 50 of 2015 on Audit of Union Finances, Comptroller and Auditor General of India; Lok Sabha Question, answered by Minister for New and Renewable Energy on 10th March 2016. Note: NCEF = National Clean Energy Fund
Source: Report No. 50 of 2015 on Audit of Union Finances, Comptroller and Auditor General of India; Lok Sabha Question, answered by Minister for New and Renewable Energy on 10th March 2016. Note: NCEF = National Clean Energy Fund

Finance Minister Arun Jaitley doubled the clean environment cess – also known as coal cess – from Rs 200 per tonne to Rs 400 per tonne of coal, lignite and peat.

Less than half the cess collected – Rs 39,000 crore from Rs 66,000 crore between 2002-'03 and 2014-'15 – to enhance communication services in rural regions was utilised.

As for the secondary and higher education cess, despite collecting Rs 64,000 crore over the decade ending 2014-'15, no special fund was created, and it isn’t clear how the money was used.

Government auditor points to irregularities in using cess

Over the last two decades, no more than 41% of Rs 3.1 lakh crore collected through four cesses was used, according to the Comptroller and Auditor General, the auditor of the government.

The CAG recently critiqued the central government – the Congress-led United Progressive Alliance, as well as the Bharatiya Janata Party-led National Democratic Alliance – for under-utilising cesses collected over the last two decades.

Of Rs 5,700 crore collected as research and development cess, Rs 1,228 crore, or 21%, was utilised over 18 years, from 1996-'97 to 2014-'15.

Source: Report No. 50 of 2015 on Audit of Union Finances, Comptroller and Auditor General of India.Note: Environment: 2010-11 to 2015-16, primary and secondary education: 2004-05 to 2014-15, R&D cess: 1996-97 to 2014-15, USO Fund: 2002-03 to 2014-15.
Source: Report No. 50 of 2015 on Audit of Union Finances, Comptroller and Auditor General of India.Note: Environment: 2010-11 to 2015-16, primary and secondary education: 2004-05 to 2014-15, R&D cess: 1996-97 to 2014-15, USO Fund: 2002-03 to 2014-15.

“The possibility of the diversion of funds for purposes not mandated under the Finance Act cannot be ruled out,” the CAG report said.

The last budget also increased service tax from 14.5% to 15% on select services by levying 0.5% Krishi Kalyan (farmers’ benefit) Cess, which the government has promised to spend on agriculture.

“The use of cess should be temporary and with a specific purpose. If it is a permanent feature of the tax model, it is nothing but equivalent to a higher tax rate,” said Crisil’s Joshi.

Indirect taxes are levied on both the rich and the poor alike, taxing those meant to be beneficiaries of such taxes.

This article first appeared on Indiaspend, a data-driven and public-interest journalism non-profit.

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Relying on the power of habits to solve India’s mammoth sanitation problem

Adopting three simple habits can help maximise the benefits of existing sanitation infrastructure.

India’s sanitation problem is well documented – the country was recently declared as having the highest number of people living without basic sanitation facilities. Sanitation encompasses all conditions relating to public health - especially sewage disposal and access to clean drinking water. Due to associated losses in productivity caused by sickness, increased healthcare costs and increased mortality, India recorded a loss of 5.2% of its GDP to poor sanitation in 2015. As tremendous as the economic losses are, the on-ground, human consequences of poor sanitation are grim - about one in 10 deaths, according to the World Bank.

Poor sanitation contributes to about 10% of the world’s disease burden and is linked to even those diseases that may not present any correlation at first. For example, while lack of nutrition is a direct cause of anaemia, poor sanitation can contribute to the problem by causing intestinal diseases which prevent people from absorbing nutrition from their food. In fact, a study found a correlation between improved sanitation and reduced prevalence of anaemia in 14 Indian states. Diarrhoeal diseases, the most well-known consequence of poor sanitation, are the third largest cause of child mortality in India. They are also linked to undernutrition and stunting in children - 38% of Indian children exhibit stunted growth. Improved sanitation can also help reduce prevalence of neglected tropical diseases (NTDs). Though not a cause of high mortality rate, NTDs impair physical and cognitive development, contribute to mother and child illness and death and affect overall productivity. NTDs caused by parasitic worms - such as hookworms, whipworms etc. - infect millions every year and spread through open defecation. Improving toilet access and access to clean drinking water can significantly boost disease control programmes for diarrhoea, NTDs and other correlated conditions.

Unfortunately, with about 732 million people who have no access to toilets, India currently accounts for more than half of the world population that defecates in the open. India also accounts for the largest rural population living without access to clean water. Only 16% of India’s rural population is currently served by piped water.

However, there is cause for optimism. In the three years of Swachh Bharat Abhiyan, the country’s sanitation coverage has risen from 39% to 65% and eight states and Union Territories have been declared open defecation free. But lasting change cannot be ensured by the proliferation of sanitation infrastructure alone. Ensuring the usage of toilets is as important as building them, more so due to the cultural preference for open defecation in rural India.

According to the World Bank, hygiene promotion is essential to realise the potential of infrastructure investments in sanitation. Behavioural intervention is most successful when it targets few behaviours with the most potential for impact. An area of public health where behavioural training has made an impact is WASH - water, sanitation and hygiene - a key issue of UN Sustainable Development Goal 6. Compliance to WASH practices has the potential to reduce illness and death, poverty and improve overall socio-economic development. The UN has even marked observance days for each - World Water Day for water (22 March), World Toilet Day for sanitation (19 November) and Global Handwashing Day for hygiene (15 October).

At its simplest, the benefits of WASH can be availed through three simple habits that safeguard against disease - washing hands before eating, drinking clean water and using a clean toilet. Handwashing and use of toilets are some of the most important behavioural interventions that keep diarrhoeal diseases from spreading, while clean drinking water is essential to prevent water-borne diseases and adverse health effects of toxic contaminants. In India, Hindustan Unilever Limited launched the Swachh Aadat Swachh Bharat initiative, a WASH behaviour change programme, to complement the Swachh Bharat Abhiyan. Through its on-ground behaviour change model, SASB seeks to promote the three basic WASH habits to create long-lasting personal hygiene compliance among the populations it serves.

This touching film made as a part of SASB’s awareness campaign shows how lack of knowledge of basic hygiene practices means children miss out on developmental milestones due to preventable diseases.


SASB created the Swachhata curriculum, a textbook to encourage adoption of personal hygiene among school going children. It makes use of conceptual learning to teach primary school students about cleanliness, germs and clean habits in an engaging manner. Swachh Basti is an extensive urban outreach programme for sensitising urban slum residents about WASH habits through demos, skits and etc. in partnership with key local stakeholders such as doctors, anganwadi workers and support groups. In Ghatkopar, Mumbai, HUL built the first-of-its-kind Suvidha Centre - an urban water, hygiene and sanitation community centre. It provides toilets, handwashing and shower facilities, safe drinking water and state-of-the-art laundry operations at an affordable cost to about 1,500 residents of the area.

HUL’s factory workers also act as Swachhata Doots, or messengers of change who teach the three habits of WASH in their own villages. This mobile-led rural behaviour change communication model also provides a volunteering opportunity to those who are busy but wish to make a difference. A toolkit especially designed for this purpose helps volunteers approach, explain and teach people in their immediate vicinity - their drivers, cooks, domestic helps etc. - about the three simple habits for better hygiene. This helps cast the net of awareness wider as regular interaction is conducive to habit formation. To learn more about their volunteering programme, click here. To learn more about the Swachh Aadat Swachh Bharat initiative, click here.

This article was produced by the Scroll marketing team on behalf of Hindustan Unilever and not by the Scroll editorial team.