Budget pushes VAT up on 32 items including diesel and CNG; cylinder subsidy withdrawn

The upcoming Commonwealth Games in Delhi are going to cost Delhiites dear. Finance Minister A.K. Walia presenting the Delhi Budget for 2010-11 in the State Assembly on Monday proposed to increase the Value Added Tax on 32 items including CNG, diesel, tea and household plastic goods besides doing away with the Rs.40 per cylinder subsidy on cooking gas to pay for development activities being undertaken for the international sporting event.

The opposition BJP MLAs walked out of the House as the Minister announced his plans to withdraw the subsidy.

In his post-Budget press conference, Dr. Walia said the Budget Estimate for 2010-11 was Rs.26,000 crore including Rs.11,200 crore for Plan expenditure, Rs.14,660 crore for non-Plan expenditure and Rs.140 crore for expenditure on Centrally-sponsored schemes.

Dr. Walia said most of the money proposed to be raised from the “growth Budget” would be spent on development of infrastructure and transport for the Games. “Because of the Commonwealth Games, the expenditure has gone up and so the subsidies had to be withdrawn. We have already spent about Rs.15,000 crore on Games-related projects. So the subsidy, except that which was for the poor, has been withdrawn.”

As an immediate fall-out of the Delhi Budget, the price of diesel in the Capital would go up by Rs.2.37 per litre and that of CNG by Rs.1.09 per kg. Incidentally, only two days ago Indraprastha Gas Limited had announced an increase of 50 paise per kg in the price of CNG. With all public transport vehicles on Delhi's roads running on CNG, the decisions could have a bearing on bus, auto-rickshaw and taxi fares. The subsidy on LPG cylinders has also been withdrawn and a cooking gas cylinder would now cost Rs.322.80 in Delhi.

Dr. Walia defended the removal of the subsidy on LPG saying all other States had done so long ago.

He said Rs.300 crore would be saved through an increase in VAT on diesel and CNG. “Today we need revenue for development as more infrastructure is to be added. We have exhausted our resources and spent the Rs.11,000 crore we had with us and also the money provided by the Union Government. Once the situation improves, we can restore some of the concessions.”

He said diesel was also being used to run expensive cars. “We also wanted to discourage this practice as diesel is more polluting.”

The Minister said from next year the General Sales Tax would also be implemented and so the Government had to remove the subsidies to do away with deviations. In the past four to five years there used to be an annual loss of over Rs.750 crore on this count, he said.

Dr. Walia said that for the poor there is no dearth of subsidy and essential items are still being sold at reasonable rates by the Government. Also, the number of old age pension beneficiaries is being increased from 2.50 to 3.50 lakh and Rs.420 crore has been set aside for this.

The money saved from subsidies would also be used for giving uniform subsidy to MCD primary school students who would now be given Rs.500 per annum (instead of Rs.200 so far) at par with the students of Delhi Government and government-aided schools. Also, students of Class VI to XII would now get Rs.700 per annum instead of Rs.500 so far and the scheme would benefit nearly 26 lakh children.

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