NEW DELHI: The year 2009 saw an increase in the rates of power and water besides bus and metro fares. And in 2010, diesel may get dearer.

Suffering revenue losses, the Delhi government is planning to do away with the subsidy offered on Value Added Tax (VAT) charged on diesel. While the proposal for withdrawing subsidy on diesel is still at a planning stage, prices of certain other commodities are set to increase for sure.

Officials said the government has proposed a one-point hike for all those commodities with a VAT base rate of 4. "The VAT rate has been hiked to 5 for all those commodities that have a base rate of 4," said a senior government official. Sources in the government said Delhi has been charging a 4 per cent VAT on diesel while the tax fixed by the empowered committee of state finance ministers, in 2005, is 20 per cent.

One reason being cited for doing away with the subsidy is the fact that the government is facing a deficit of Rs 1,650 crore due to these subsidies.

"We have been facing a loss of Rs 1,110 crore per year as when we had implemented VAT we had reduced the rates voluntarily. However, we were assured by the Central government that we would be compensated for the loss. Later on, the government refused to compensate us. Everyone felt the need to reconsider the issue. We might consider the matter in the next financial year," said a senior government official.

Currently, the government is not charging any VAT on foodgrain, as against a fixed slab of 4 per cent. In addition to this, 4 per cent VAT is being charged on Compressed Natural Gas (CNG), which is a deviation from the 12.5 per cent slab fixed by the committee in 2005.

The VAT levied on diesel in the capital, which is 4 per cent, is less than the 8.5 per cent charged in states such as Punjab and Haryana.