Though the budget presented by the state chief minister SM Krishna, who also handles finance portfolio, proposed a four per cent ST on software, Mr Krishna reiterated the state's commitment to pursue an IT-driven growth.

Nasscom president Dewang Mehta has called the move ``unfortunate''. He said, ``(This is) not because the industry does not want to pay tax, but because it will lead to unnecessary harassment of small software companies. It is not a matter of quantum, we are not shy of paying 2 per cent or 4 per cent tax but we do not want to be harassed on such issues. We did not expect this kind of tax recommendation on software industry from the forward-looking Governemnt of Karnataka.''

"Now I want to consolidate and move forward towards e-governance and bio-informatics," Mr Krishna said. As part of this, a branch of the Indian Institute of Information Technology (IIIT) will be set up in Hubli besides setting up technology incubation centres at Belgaum, Shimgoa, Gulbarga, Bellary and Gadad which will become operational in the year 2001-02.

But the fiscal constraints faced by the state government seem to have forced Mr Krishna to impose taxes on the entire new economy sector including mobile telephony, Internet service, cable TV, etc.

The budget has proposed an annual tax of Rs 2,500 on mobile phone service, Internet service, Internet cafes, information kiosks, e-commerce, air taxi and helicopter services, clubs including recreation clubs, gymnasium, events, pageants and fashion shows.

The other people caught in Mr Krishna's expanding tax web include cable TV operators in the state. Cable TV operators in Bangalore will have to shell out Rs 3,000 per month as composition amount instead of the existing Rs 1,500 while operations in other muncipal corporations will have to pay Rs 2,000. For other places in the state with a population of more than 25,000, the monthly levy is Rs 1,500 while it is Rs 600 for towns of less than 25,000.

The chief minister has also promised to bring e-governance in the functioning of the government. As a first step the government has proposed to issue smart optical card-based driving licence and registration certificate. The project will be implemented under the BOOT system without expenditure to the government. The government also hopes to provide online connectivity between state headquarters and 125 talukas in a few months time. It has also decided to computerise the inter-state check-posts to cut down the present repetitive stoppage of goods and vehicles.

Aiming for a zero-revenue deficit by 2004-5, Mr Krishna also plans to bring down fiscal deficit to 3 per cent of the gross state domestic product in the same year. For 2000-01, the fiscal deficit has been pegged at Rs 4,148 crore.