AAP's freebies likely to burn a hole in exchequer’s pocket

According to senior Delhi government officials, the government had set a revenue target of Rs 30,000 crore for the current financial year and sources said it is likely to miss it by over Rs 3000 crore.

The AAP government’s move to subsidise power and water is likely to affect its financial health.

MLAs-of-Delhi-during-a-session-of-the-state-assembly-Raj-K-Raj-HT-Photo

According to senior Delhi government officials, the government had set a revenue target of Rs 30,000 crore for the current financial year and sources said it is likely to miss it by over Rs 3000 crore.

“Subsidy is only going to put tremendous pressure on the financial health of the government and ultimately people will be burdened with it. Subsidy might work for a short period of time but can’t be a long-time solution,” said a senior Delhi government official.

At the same time, the process of power tariff revision for 2015-16 is already under way and the power distribution companies have already filed their claims.

If the regulator increases power tariff, the government will have to provide another set of subsidy to slash the bills by 50 per cent, putting additional burden on it.

The Delhi government is expected to spend Rs 2,768 crore per year on power and water subsidy, which would further add to the financial woes of the government.

Sources in the government said Value Added Tax (VAT) collections had seemed healthy initially but the rate of collection started showing a dip after prices of petroleum products declined. While the VAT target for this year was Rs 21,000 crore, it has been increased to Rs 30,000 crore for the next financial year, which officials feel will be difficult to meet.

Not only this, collections from stamps and registration fee were also on the lower side.

As against a target of Rs 3,500 crore, the revenue department had collected approximately Rs 2,390 crore till January 31. “There is a huge slump in the real estate sector so people are not buying or purchasing properties. Stamp duty collection has come down due to that. An increase in circle rates has not been able to increase our revenue,” said a senior Delhi government official.

“If you want to do an audit, do it first. Then come to the conclusion whether tariffs can come down or not. At a time when coal prices have doubled, how have they arrived at this figure of slashing power and water bills by 50%? Ultimately the funds for the subsidy will have to be borne by the government and hence either tax will be increased on people or the government will stop taking up developmental projects,” said a power sector expert.