After presenting the annual Budget for the capital, Delhi finance minister Ashok Walia in a conversation with FE Kakoly Chatterjee explained why he removed subsidies, increased VAT rates on a large range of items, the current fiscal position of Delhi, his take on implementation of GST and preparations for the Commonwealth Games with Excerpts:
With food inflation at double digits and wholesale index at 9.8%, what is the rationale behind increasing taxes and withdrawal of subsidies?
We have not increased the prices of basic food items such as rice, wheat, pulses so that the common man is not affected. If prices of food items had been increased it would have put pressure on the common man. However, we are not really happy about reducing LPG subsidy but we wanted money for the development work going on in the city including that of the Commonwealth Games. These steps were necessary to generate revenues and reduce the gap between expenditure and revenue.
Is there a possibility of any roll back of the tax rates in the near future?
Currently our financial situation is very tight so there is no question of any roll back at the moment but gradually as our financial situation improves we will look at continuing with our concessions once again.
To what extent will the state finances improve with the new taxes?
We are looking at a hike in tax collection by 18% during the next financial year at Rs 15,582 crore as compared to Rs 13,000 crore during 2009-10. We are expecting to collect higher VAT at Rs 12,000 crore this year as compared to Rs 10,000 crore collections during 2009-10. With an increase on VAT from 12.5% to 20% on diesel, the state is going to earn around Rs 850 crore. After withdrawl of the Rs 40 subsidy on LPG cylinders the state will save Rs 160 crore. Increased price of water and bus tariff will also lead to more collection.
You have traveled a long way handling the finances of the Delhi government. What have been the milestones?
Around three years back, during the financial year 2007-08 we had an opening balance of Rs 11,000 crore. However, for the last 3 years we have been spending an average of Rs 3,000 crore to Rs 4,000 crore on Commonwealth Games. We are tightly placed now because expenditure has gone up considerably and the opening balance for next year has shrunk to Rs 211 crore.
Do you think GST will be implemented as schedule?
I am optimistic that GST will be implemented next year as scheduled. With regard to Delhi, when VAT was implemented in 2005 most of the items were at the lower side of the band. Earlier, other states imposed higher rates, Delhi continued to give sops. The change in the state levy (Delhi hiked its VAT rate to 20% from 12.5% in the recent Budget) would remove the deviations for implementing GST.
What steps are you taking to deal with the power shortage?
Delhi has invested Rs 1,500 crore in Bawana power plant and Rs 570 crore in Jhajjar (both in Haryana). While the former will supply 750 mw from September this year, the latter will supply 500 mw from October. Though the capital does not have to make investments in Dadri plant, it will get a supply of 700 mw from the current year.