Delhi reels from policy hangover

Tax revenues of the Delhi government were dented after it abandoned the new excise policy on liquor in August 2022, so much so that recovery is not even projected in 2024-25.

However, the state government managed to maintain its revenue surplus over the years.

The state had projected ~9,454 crore from taxes on country spirits and foreign liquor as Budget Estimates (BE) during 2022-23. That was a substantial 73 per cent increase over the ~5,463 crore earned from this a year earlier due to the new excise policy.

The new excise policy, introduced in November 2021, made sweeping changes to the city’s liquor trade. The government exited the customer-end of the trade, shutting all state-run liquor vends, with sales exclusively handed over to private players.

Under the new policy, the Delhi government merged value-added tax (VAT) and excise duty with the licence fee and charged the money upfront rather than taking a cut per bottle sold.

\Following accusations of a scam in the policy and its modification by the lieutenant governor, the state government ended it and reverted to the old one in August 2022.

The government reduced revenues under this head by 31 per cent to around ~6,500 crore in the Revised Estimates (RE) of 2022-23, when the next year’s Budget was tabled. However, what came was around ~1,000 crore less than that.

Now, the government does not expect to garner even ~6,500 crore in 2023-24 and 2024-25.

The government had projected ~7,365 crore during 2023-24 but cut the projections by 18.5 per cent to around ~6,000 crore in the RE.

It estimated this revenue to increase by just 6.6 per cent to yield around ~6,400 crore during 2024-25 (compared to the RE of 2023-24).

However, the state had a revenue surplus of ~3,270 crore in 2021-22, constituting 0.4 per cent of gross state domestic product (GSDP). However, it was projected to rise to ~9,530 crore during 2022-23 (RE), accounting for 0.9 per cent of GSDP, and it stood higher at ~14,457 crore or 1.4 per cent of GSDP.

The state again showed a revenue surplus of ~4,966 crore (RE) this financial year, though slightly less than the ~5,769 crore as BE. The state government has projected a revenue surplus of ~3,231 crore during 2024-25. This was despite an announcement of ~1,000 a month to every poor woman and a dent in liquor revenues as cited above.