Having returned to power with a thumping majority late last year,the last six months of this year has certainly been decisive for the Sheila Dikshit government. The administration implemented tariff hikes and withdrew subsidies across various utilities and services power,water,bus services,and Value Added Taxes (VAT) on various items. Burdened with rapidly depleting financial reserves,both Dikshit and Finance Minister A K Walia have indicated that the new year is likely to bring in more such hikes. The measures that we took,such as withdrawing subsidies on power or hiking water tariff and bus fares,were long overdue, Walia says. They could not be implemented earlier due to various reasons. More such measures are in store,particularly regarding certain subsidies. We would also like to raise VAT slabs on certain items but the ultimate decision lies with the chief minister. The Dikshit administration got to the task at hand immediately after the general elections in May. Faced with a deficit of nearly Rs 400 crore in tax collection in the first quarter,the government withdrew a Rs 200-crore subsidy on power,in effect since 2004,but decided to continue with another subsidy that rewards low power consumption. Amid protests by the Opposition BJP,Dikshit had told Newsline,People have to learn to pay for services they use. For instance,many people still view water as a commodity that they do not have to pay for. That perception has to change. Experts agree. Abheek Barua,a senior economist with HDFC Bank,says: Conventional wisdom dictates that subsidies on utilities lead to non-optimal consumption. So a certain complacency and an attitude of gross wastage sets in at the consumers end. This has been observed as far as water and power tariffs are concerned,not only in Delhi but in many other states as well. Withdrawing subsidies is one way of ensuring scarce resources are better utilised. Walia puts the hikes into perspective: Truth is,our reserves are running out and our biggest losses were being incurred by the Delhi Transport Corporation (DTC) and Delhi Jal Board (DJB). We had to take a Rs 25,000-crore loan from the Centre for these two agencies. And we are paying an interest of Rs 2,700 crore on that loan. Expenses of over Rs 15,000 crore for the Commonwealth Games next year have only exacerbated the need to bring in more revenue. Rajeev Kumar,of the Indian Council of Research on International Economic Relations,says: Users have to start paying the actual cost of these services. It makes sense to have subsidies in public health and public education since it benefits the society at large,but that does not hold true for water or power.
