Governments that announce freebies during polls are discovering they have to find innovative ways to meet their promises.
The Karnataka government has announced that it will charge a cess from customers on all e-commerce orders. The money collected from this cess will be used for the benefit of gig workers that deliver orders. The cess will be charged on all kinds of e-commerce orders including food delivery, quick commerce, traditional commerce, and even cab and auto rides.
“The Labour department of Karnataka has decided to impose cess on every transaction on aggregators platforms like Zomato, Dunzo, Swiggy, Zepto, Ola and others such,” Karnataka Labour Minister Santosh Lad said. “The money which will be collected will be used for the Welfare fund for Gig workers. We are not charging for products or goods which consumers purchase, wit will be charged only on transport,” he added.
The decision to impose this additional cess comes after the Karnataka government had announced several freebies in the recent assembly elections. The Congress government had promised every female head of the family Rs 2,000 a month, every unemployed diploma holder Rs 1,500 per month, and graduates Rs 3,000 a month. In addition, the government allowed women to travel for free in the buses run by the state government, and every family was provided 200 units of power for free.
All this had meant that the government had no money left for any developmental activities. In July last year, Karnataka Deputy Chief Minister DK Shivkumar had told MLAs that the government wouldn’t be sanctioning any money for development work in their constituencies, because it had spent all its money in trying to fulful its pre-poll promises.
Since then, the Karnataka government had looked to get creative in ways of raising money to fund its promises. The government had recently added a 2% cess on OTT subscriptions and movie tickets to support film workers and ‘cultural activists’. It now seems to be adding a similar cess on all e-commerce orders.
But there may be downsides to adding such a cess. For starters, adding a 2 percent cost to all e-commerce orders will make e-commerce orders more expensive for end-users, who’ll have to bear this burden. Bengaluru is the startup capital of India, and it will now have the unenviable distinction of having the most expensive e-commerce orders in the country. This could make it difficult for new startups, especially in the D2C space, from starting their operations in Bengaluru.
Also, it’s not clear if the stated purpose of the cess — the welfare of gig workers — will be fulfilled with this new initiative. Gig workers are not traditional employees — they have the flexibility of working when they like, and often use these e-commerce jobs as stop-gaps between more traditional forms of employment. Also, there’s no career progression possible in most of these delivery jobs — it doesn’t make much of a difference whether you have one year of experience or twenty while delivering goods, and most gig workers look to upskill on the side through skill development and courses to find other jobs. Providing gig workers the benefits associated with traditional jobs might disincentivize them from upskilling themselves and eventually moving into higher-skilled forms of employment.
And the involvement of the government in most areas doesn’t exactly lead to a rise in efficiency. There’s usually rampant corruption in government schemes, and it’s unclear how much of this cess will actually reach gig workers. For decades after independence, India’s private sector had been constrained by Nehruvian socialism which had discouraged industry and all but crippled India’s growth. It appears that Congress governments — even in 2024 — are making the same mistake.