The challenge now is not just about delivering on electoral promises but also about balancing an already precarious fiscal equation that could see deficits skyrocket

Having swept the polls in the National Capital Territory (NCT) of Delhi with a clinching 2/3rd majority, Rekha Gupta-led BJP - government faces the daunting challenge of having to find money to fulfil its poll promises. Amongst others, the BJP had promised Rs 2,500 a month to women under Mahila Samridhi Yojana (MSY); Rs 21,000 to pregnant women; LPG cylinders for Rs 500 and free cylinder on Holi and Diwali; a stipend of Rs 1000 a month to SC students pursuing technical and vocational courses; free education for needy students from KG to PG;  free travel for students on Delhi Metro; Atal Canteens in Jhuggi Basti clusters providing nutritional meals for Rs 5 only; implementation of Ayushman Bharat scheme and additional cover of Rs 5 lakh for senior citizens. BJP had also vowed to continue all existing schemes such as free electricity and free water (for monthly consumption up to a specified threshold) run by the erstwhile AAP – dispensation under the then Chief Minister, Arvind Kejriwal. 

How much will these freebies cost?

Let us look at the Mahila Samridhi Yojana (MSY) under which the party has promised to give cash assistance of Rs 2500 per month to every woman. The number of women above the age of 18 years in Delhi is around 6700,000. @ Rs 2500 per month or Rs 30,000 annually to each woman, giving cash assistance to them all will require Rs 20,100 crore per annum (0.67x30,000). The assistance to pregnant women @Rs 21,000 per woman, taking a total of about 1500,000 pregnant women will cost around Rs 3150 crore annually. 

As for subsidy on LPG, take consumption of 4 cylinders (14 kg each) per household (HH) in a year. The current cost of supplying a cylinder is around Rs 1000. For two cylinders (Holi and Diwali) promised to be given free, the subsidy will be Rs 2000 whereas for the other two to be given @ Rs 500 each, the outgo will be Rs 1000. This gives an annual subsidy of Rs 3000 per HH.

The current population of Delhi is 330 lakh. Taking an average of 4 members per HH, we get a total of over 82.5 lakh HHs. Multiplied by Rs 3000 being the subsidy per HH, the annual outgo comes to Rs 2500 crore. Look at free education for needy students from KG to PG. According to the latest data available, around 10 per cent of Delhi’s population was considered below the poverty line in 2011-12. On this basis, the number of poor persons comes to 33 lakh (330x0.1). About one-third of this or 11 lakh would be persons in the studying age 4 – 25 years. Taking the average expense of educating a child in India at the bare minimum of Rs 20,000 per annum, the total annual expense on “needy students” in the city would be about Rs 2200 crore (0.11x20,000). The additional burden of these four promises alone on the Delhi government’s budget is Rs 27,950 crore (20,100+3150+2500+2200). Other freebies would bloat this figure by several thousand crore.  Let us take the total to be around Rs 30,000 crore.

What is the current state of Delhi’s finances?

For the current financial year (FY) 2024-25, the total expenditure of the Delhi government is estimated at Rs 76,000 crore. This includes revenue expenditure (RE) of Rs 61,000 crore and capital expenditure (CE) of Rs 15,000 crore. Against this, the total revenue receipts or RR (tax plus non-tax receipts including transfer from the Central government) is estimated at around Rs 58,000 crore. That leaves a revenue deficit or RD  (RR - RE) of Rs 3000 crore.     This is disconcerting when seen in the backdrop of Delhi’s potential to generate substantial surplus given two fundamental factors working to its advantage.

First, due to its special status of being NCT, three major functions namely law and order, police and land come under the Centre’s jurisdiction hence, the latter foots the bill for expenses on those functions. Second, Delhi being a major hub of economic activity, its propensity to garner its tax revenue in terms of higher GST collection besides VAT on petrol and diesel and excise duty and VAT on alcohol (these products are outside the GST regime) is greater.

The RD will increase drastically when we consider the cost of servicing the loans taken by various departments of the Delhi government such as the  Delhi Jal Board (DJB): over Rs 70,000 crore and Delhi Transport Corporation (DTC): Rs 60,000 crore (according to the CAG, these are cumulative losses of DTC as at end of FY 2021-22 and would have ballooned further during the following three FYs till end March 2025).

The liability for servicing those debts is vested entirely in the NCT government and should be reflected in its balance sheet. Look at the fiscal deficit (FD) which is the excess of total receipts over total expenditure. For FY 2024-25, it is estimated at Rs 18,000 crore which is 80 per cent higher than the FD during FY 2023-24 at Rs 10,000 crore. The surge is despite a steep reduction of over 30 per cent in CE from the budget estimate (BE) of Rs 22,000 crore for FY 2023-24 to Rs 15,000 crore for FY 2024-25.

If interest payments on loans taken by DJB and DTC (Rs 130,000 crore plus) which are merely adding to the mountain of debt on the books of those departments year after year are also included, the FD would be much higher. The situation had come to such a pass that the then CM Atishi had approached the Centre seeking a loan of Rs 10,000 crore from the National Small Savings Fund (NSSF). The precariousness of the state’s finances has a lot to do with the galloping freebies and irregularities and mismanagement in running various schemes and overall governance on a monumental scale. During 2024-25, the cost of free electricity and free water alone is estimated to be about Rs 11,000 crore. According to CAG, during 2015-16 and 2021-22, the losses of DTC went up by Rs 35,000 crore and that was due to both free bus rides and misgovernance.

Now, consider the impact of BJP promises. Modi has guaranteed that existing schemes won’t be discontinued. So, free electricity/water costing Rs 11,000 crore will stay. Add to this, the fresh guarantees which would be at least about Rs 30,000 crore. This takes the RE from Rs 61,000 crore during FY 2024-25 to Rs 91,000 crore during FY 2025-26 (assuming all other things remain unchanged). The RR is Rs 58,000 crore, we get RD of Rs 33,000 crore – up from Rs 3000 crore budgeted for FY 2024-25. 

The incumbent government has also promised to clean Yamuna River, clean the air, renovate/build roads, cleanse the drainage systems, build and renovate hospitals and schools in fact, take up and complete a host of physical and social infrastructure projects needed for ensuring a good quality life for Delhiites. That means even if CE is restored to 2023-24 level Rs 22,000 crore, that won’t be enough. Even with this insufficient level, the total expenditure will be Rs 113,000 crore. Minus RR of Rs 58,000 crore, we get FD of Rs 55,000 crore. Put simply, the Centre will have to arrange for at least Rs 55,000 crore to enable the BJP to live up to its promises for Delhi.

(The writer is a policy analyst; views are personal)