BMC struggles to cope with falling income
In 2015-16 it will earn about Rs2,350cr less than expected from its two biggest sources of income, octroi and dvpt charges; 2016-17 could be even worse
The country’s richest civic body has serious cause for concern about its financial health. Based on its 2016-17 budget, presented on Wednesday, the Brihanmumbai Municipal Corporation’s (BMC) accounts paint a worrisome picture, with dipping incomes and a dearth of new sources of money. Worried that this will take a toll on the city’s infrastructure development, BMC chief Ajoy Mehta has asked senior officials to present proposals for new charges and taxes.
Here’s how sharp the dip is: last year, while presenting its budget, the BMC anticipated that its income from octroi, its single biggest income source, would be Rs 7,900 crore. However, as of January 1, the BMC had raked in only Rs 4,737.48 crore. While it hopes to close this gap by March 31, even by its own estimates, it will still have a deficit of at least Rs 1,250 crore. The bad news is that this trend is likely to continue. In the coming year, the BMC expects to earn just Rs 7,000 crore from octroi, Rs 1,000 crore less than last year’s estimate.
It’s a similar story for the development charges that the civic body accrues on premiums it collects for allowing builders to use fungible floor space index (FSI). It expected to earn at least Rs 5,900 crore from these charges when it prepared the budget last year. However, with the real estate industry in a slump, this income source is also expected to fall by least Rs 1,100 crore.
So, where does this leave the city? In a spot of bother, by the civic chief’s own admission. A closer look at the BMC’s list of income sources reveals that a major chunk – nearly 70% – comprises income from taxes. Of this, over 51% comes from just octroi and development charges.
This over-dependence has curtailed the civic body’s spending power immensely. The BMC has been relying on its income from development charges to create a special development corpus to fund big-ticket infrastructure projects such as the coastal road and the Goregaon-Mulund Link Road.
In his budget speech, Mehta repeatedly drew attention to this state of affairs. “On one hand, there is a continuous fall in income from major sources, while on the other hand, there may not be sufficient reserve funds available to meet capital works expenditure. Therefore, it has become extremely essential to restrict expenditure within revenue resources.”
This, however, is another sign of civic neglect. Since 2013, the civic body has been unable to meet its income targets from various sources. This neglect has now forced Mehta to urgently explore other sources of income.