March 24 : Something is not right about the Delhi Budget presented by the Sheila Dikshit government on Monday. This is mainly because its key elements make it difficult for residents of India’s capital to observe the “pay as you go” principle. Fundamentally, the principle suggests that you dip
into your pocket each time you make a purchase, rather than defer payment, and generally avoid buying when you don’t have the money. The time-honoured idea of living within your means is a variant of the same thought. In India and other poor societies, however, this pragmatic view of sound financial management is of necessity overlooked by elected governments simply because there are far too many people who cannot get basic food, shelter, health and education on account of acute poverty — caused usually by historically-determined structural or systemic distortions. The government must bail them out by picking up a part of the tab and offer them goods and services at lower prices. But the way Delhi finance minister A.K. Walia’s Budget has gone, it is likely to seriously discomfit even those in Delhi who would otherwise not be in need of subsidy for a range of goods and services. This is saying a lot, considering that Delhi is a high-income city and purchasing powers here are way above the national norm.
Dr Walia’s tax collection drive across a broad spectrum of 32 commodities and services comes in the wake of the Delhi government raising water and transport tariffs and the price of milk only recently. Imposing VAT on something like CNG, on which the city’s public transport runs, is likely to have a cascading effect on price of all commodities, not to mention passenger fares. Arguably, Delhi’s municipal water is the most polluted among Indian cities chiefly because treated water (the capital city has more sewage treatment plants than anywhere in India) frequently mixes with muck, and the civic authorities appear clueless on how to rectify matters. So it is anybody’s guess why the water tariff has been hiked. The state government’s fresh imposts come on the heels of an already-disconcerting food inflation situation nationwide, exacerbated by provisions of the Union Budget announced only a few weeks ago. Delhi’s finance minister would, therefore, do well not to regard his tax proposals in isolation. Since Delhi and the Centre are both run by the Congress, the message to people down the line will be one of his party’s failure to ease their economic burden at a time of serious price-related difficulty. It will be deemed insensitive of the chief minister if she calculates that her government will be able to ram the taxes through as the next state election is almost four years away.
The Commonwealth Games in October 2010 have been offered as the rationale for imposts with the help of which the infrastructure for the CWG is to be brought into shape. This is a shoddy excuse. If the government had commenced the CWG preparations two years ago, it could have distributed the taxation to raise resources over time instead of projecting a stiff imposition in the last year. Besides, the failure to execute a host of projects on schedule has led to cost overruns that benefit only contractors, some of whom could be in cahoots with decision-makers. Why should the citizen have to bear the burden of this executive irresponsibility? The state government can scale down imposts on a variety of goods and totally exempt a few. The revenue shortfall to meet CWG-related expenses could be met through loans from the public and corporate bodies. A good proportion of these could be offset through commercial earnings, such as advertising, during the Games.
