The Maharashtra government has introduced a 'drought surcharge' on a host of items ranging from fuel and liquor to cigarettes and jewellery to raise Rs 1,600 crore. The new taxes came into effect from Wednesday midnight.

The state has to bear a burden of more than Rs 3,330 crore. This includes Rs 1,072 crore for loss of crop, Rs 421 crore compensation to farmers hit by unseasonal rain, Rs 20 crore for repair of their homes, Rs 690 crore for crop insurance, Rs 60 crore for interest waiver on farmers' loans, Rs 117 crore for restructuring of loans, and Rs 950 crore for distribution of wheat and rice at Rs 2 and Rs 3 in 14 districts of drought-affected areas of Marathawada and Vidarbha under the food security bill scheme.

Maharashtra finance minister Sudhir Mungantiwar said the new tax system will be in place for the next five months till February-end, after which the government will rationalize it.

A surcharge of Rs 2 per litre would be levied on petrol and diesel in Mumbai. Its impact will be lower in rural areas as the local body tax (LBT) was scrapped in the remaining 27 corporations across the state on Wednesday. Sales tax on liquor, cigarettes and aerated soft drinks will be hiked by 5%, and VAT on gold, diamonds and jewellery by 0.2%.

"In the past six months, the state government has taken a decision for the welfare of the common man, especially distressed farmers. But following the hike in taxes, the government will be able to raise Rs 1,600 crore. People of Maharashtra are sensible enough to bear the hike for the sake of farmers," said Mungantiwar.

The state had scrapped LBT for traders with less than Rs 50 crore turnover from August 1, 2015. "This had come as a relief as prices of most goods reduced. No LBT was levied on liquor, cigarettes and soft drinks. We have, therefore, decided to increase the sales tax by 5% on these items. After five months, during the budget session, we will rationalize the tax system and come up with a long-term policy on the Goods and Services Tax (GST)," Mungantiwar added.