The Brihanmumbai Municipal Company’s (BMC) plan to drift municipal bonds to lift Rs 4000 crore, stems from the pinch the nation’s richest municipal company is feeling as a consequence of falling revenues and its failure to faucet into newer sources of revenue.
Whereas the BMC has failed to satisfy its income targets since 2012, the hole between its expectations and actuality has by no means been as stark as in 2021. For the monetary yr of 2020-21 the BMC is gazing a shortfall of almost Rs 11,000 crore, after failing to generate solely Rs 11,616 crore as revenue from taxes, charges and premiums as towards the income goal of Rs 28,448 crore.
For the reason that discontinuation of octroi in 2017, the BMC has needed to rely largely on property tax as its income supply, which makes up 24 per cent of its revenue. Nonetheless, the gathering of property tax is riddled with points: there are pending litigations, and as a consequence of a scarcity of robust legal guidelines towards non-compliance, the listing of tax defaulters is lengthy. To mop up income from the property tax, the BMC in 2019 had seized moveable properties resembling vehicles and helicopters. Nonetheless, none of those have been auctioned until date.
So as to add to those issues, in 2019, there was confusion over exempting homes lower than 500 sq. ft from property tax. The civic administration has now clarified that solely the final part of the property tax shall be exempted for homes as much as 500 sq. ft. With lower than two months for the present monetary yr to finish, BMC has now begun to situation property tax payments to those homes.
The precise property tax collected until December was solely Rs 734 crore, towards the estimate of over Rs 4,000 crore. The actual property droop additionally contributed to a gradual drop within the revenue from premiums. The revenue from actual property premiums fell to Rs 708 crore as of December 2020, as towards the goal of Rs 3,879 crore.
Whereas the BMCs revenue is struggling to satisfy the goal, the spending on capital works has already overshot as of December 2020. In opposition to the goal of Rs 5,744 crore, BMC has incurred capital expenditure of Rs 5,875 crore as of December 2020. “Our capital expenditure is pretty much as good as final yr, and all work has taken off post-monsoon. If we exclude the Rs 1,800 crore we spent on Covid-19, our expenditure for different departments and tasks has not suffered in any respect,” stated P Velrasu, extra municipal commissioner.
Capital expenditure refers back to the cash spent on buying, creating, upgrading and sustaining bodily property, and is the parameter to look out for to gauge the bills on infrastructure. The quantity spent on salaries, pensions, administrative bills, curiosity is termed as income expenditure, which is kind of the mounted outgoing of any entity.
The shortfall in income has pressured the civic physique to organize a plan of cost-saving in all departments. Forward of the finances 2021-22, BMC has sought departments to seek out new sources of revenue and strictly implement the prevailing ones. The dip within the income supply has pushed the civic physique to take a tougher take a look at how a lot it will probably spend. It means both the civic physique should discover new areas to extend its revenue or discover a strategy to fund its infrastructure tasks.
Implementation of the rise within the lease, hire and premiums of all vacant land tenancy properties, by means of which BMC expects to mop up Rs 500-600 crore yearly, reducing down administrative expenditure together with electrical energy, web and transportation payments, emphasis on property tax assortment and reformation in tax assortment mechanism, implementation of property and market redevelopment coverage, the introduction of fireplace service charge amounting to Rs 50 crore yearly, are a couple of steps more likely to be proposed within the upcoming finances.
“The concept BMC is sitting on money reserves is fake. It is likely to be true 5 years again, however not anymore. Tapping into new income sources, disciplined spending, streamlining of administrative expenditure, municipal bonds, levying prices, the entry charge for the floating inhabitants that makes use of BMCs infrastructure, amongst others, are a number of the strategies,” stated a senior civic official.
In 2020-21, the then municipal commissioner, Praveen Pardeshi dipped into the reserves to withdraw Rs 4,380 crore. If the BMC continues to dip into its accessible reserves of ?52,286 crore in each finances, the reserves are certain to run dry in a few decade with the civic physique’s growing expenditures. The BMC has one other Rs 26,382 crore in its reserves which can’t be utilised even in emergencies because it has been allotted for dedicated liabilities like provident fund, pensions, gratuity and different deposits.
For the primary time because it was advised by former BMC Commissioner Sitaram Kunte in 2014, the BMC is contemplating elevating municipal bonds. “BMC can not ceaselessly faucet into its reserves. Presently, BMCs credentials are good and we will get an rate of interest of 6-6.5 per cent if we float the bonds now. The bond interval shall be 10-15 years,” the official stated.
Elevating of municipal bonds is available in with warning. “The cash raised from these bonds should be linked with the precise deliberate future tasks. In any other case, these earnings would go waste within the routine work like repairs of drains or roads amongst others,” stated a senior official
