Budgetary allocation should be made to state govts to compensate the abolition of water cess


Mahesh Pandya of Paryavaran Mitra, Ahmedabad, has written to Prime Minister Narendra Modi, seeking his intervention on the decision to abolish water cess through the Goods and Services (GST) Act. Copy of the letter has been sent to Union finance minister Arun Jaitley, Niti Ayog vice chairman Dr Arvind Panagariya, and Union minister of environment, forests and climate change. Text of the letter:

Paryavaran Mitra is a Gujarat-based voluntary organization working on socio-economic issues since 1997.  Our organization is active in brining awareness in matters of environmental and climate change issues and imparting education on the same.

The Water (Prevention and Control of Pollution) Cess Act, 1977 (Water Cess Act, 1977), imposes levy and collects cess on the water consumed by industries and local authorities with a view to augment resources of central state boards for the prevention and control of water pollution, constituted under the Water (Prevention and Control of Pollution) Act, 1974 (Water Act, 1974).

Moreover, it provides rebate of 25 per cent on the cess payable by such entities if they install plants for the treatment of sewage.

The spirit of the Act is just not to augment the resources for prevention and control of water pollution, but also to encourage industries to install waste water treatment facilities.  While it helps monitor water used by the industries, it may also dismiss rebate if the industry uses water in excess of maximum quantity prescribed, thus putting a cap on overuse.

The Goods and Services Tax (GST) Act seeks to abolish cesses or surcharges that are levied as duty or excise or service tax under the Water Cess Act, 1977, for water consumed by certain industries and local authorities. In this context we believe that the spirit of the Water Cess Act, 1974 to save water and reduce pollution will be lost.

The cess is collected and credited to the Consolidated Fund of India, and it then paid to state governments for utilisation to prevent and control pollution under the Water Act, 1974.  With the abolition of water cess, there will be deficit of fund with state government to prevent and control water pollution.

We suggest that budgetary allocation be made to state governments to compensate the abolition of water cess, as it is an important funding source for preventing and controlling water pollution.

We also request you that a public consultation or expert consultation should be done before setting up alternative mechanism for the same. We would like to be present before you for further discussion.

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