In its Budget for 2003-04, the Tamil Nadu government has imposed additional taxes of Rs 430 crore (Rs 4.30 billion).

The overall deficit (budget estimates) for 2003-2004 is at Rs 1,295.15 crore (Rs 12.95 billion), but with the measures to mobilise additional resources it is expected to be reduced to Rs 865.15 crore (Rs 8.65 billion).

Meanwhile, the budget and the economic survey presented by the Karnataka government today painted a grim picture of the state's finances. But for software, whose benefits are confined to Bangalore, the state is faced with economic hardship.

Chief Minister S M Krishna, who also holds the finance portfolio, said additional resource mobilisation in the next fiscal would depend on the buoyancy of market forces.

He has, however, introduced a bitter dose of new taxes in the budget estimates for 2003-04. With the Assembly elections in mind, Krishna has outlined an ambitious spending programme aimed at redressing regional imbalances and shifting the emphasis to agriculture, the rural sector and the empowerment of women.

The Tamil Nadu government has decided to levy an additional tax of 12.5 per cent on phone rentals collected by Bharat Sanchar Nigam Ltd and cellular operators, a 5 per cent sales tax on electricity bills and an additional tax on cable operators.

Commercial taxes will contribute around Rs 200 crore (Rs 2 billion), and sales tax on electricity bills Rs 80 crore (Rs 800 million), taxes on vehicles, including the new anti-pollution "green tax" Rs 120 crore (Rs 1.2 billion), and the tax on cable operators Rs 30 crore (Rs 300 million).

The state has taken measures to settle the Sixth Pay Commission dues to government employees totalling Rs 1,800 crore (Rs 18 billion). It has agreed to settle arrears in respect of commutation and gratuity, and in part settle pay and allowances.

The reforms that the government has undertaken are expected to yield results by 2006-07.

On the revenue front, the state plans to move to the value-added tax regime. The initial revenue loss due to this shift is estimated at Rs 2,500 crore (Rs 25 billion) a year. The Centre has agreed to compensate around 100 per cent in the first year, 75 per cent in the second and 50 per cent in the third.

However, it is yet to commit any compensation for the loss of central sales tax revenue.

Costly debts of around Rs 1,045.89 crore (rs 10.45 billion) are proposed to be swapped with the new scheme announced in the Union Budget for 2003-04, and the average interest cost of the state government's debt is expected to come down from 13.5 per cent to 7 per cent.