Once again, sanitation workers in East Delhi have given the rallying cry for a citywide strike that may cause a shutdown in the Capital. Once again, municipal corporations are pleading helplessness and accusing the Delhi government of not releasing adequate funds. Like smog in the winter air, some things in Delhi have become alarmingly predictable.
The sanitation workers’ strike in East Delhi over non-payment of salaries is the fifth such agitation in the past two years, highlighting the gravity of the financial crisis in the EDMC (East Delhi municipal corporation). Its northern counterpart, NDMC, does not fare any better and has repeatedly failed to pay salaries to its employees regularly. While the BJP-ruled municipal corporations put all the blame for the financial crisis on the AAP-ruled Delhi government, numbers suggest a very different picture.
In 2012-13, the first year after the trifurcation of the unified MCD, the EDMC’s finances were perfectly in order. Its income was about Rs 1,534 crore against an expenditure of Rs 1,523 crore – a surplus of Rs 11 crore. Fast forward to 2017-18, when EDMC expects to generate an income of Rs 1,579 crore against an expenditure of Rs 3,822 crores -- a whopping deficit of Rs 2,243 crore. Clearly, the EDMC has done remarkably well on one front – spending the money it never had. But what explains this complete stagnation in revenues?
The municipal corporations have two main sources of revenue – “own revenues” that they generate directly by levying taxes, fees or user charges, and “grants” they receive from external bodies, primarily the Delhi government.
First, let’s look at the grants.
The EDMC received a grant of Rs 270 crore from the Delhi government in 2012-13. In comparison, it received Rs 702 crore (over three times) in 2015-16, and Rs 605 in the first nine months of 2016-17. However, the overall revenues stagnated, pointing towards a dismal performance in shoring up its own revenues – a result largely of inefficiency in tax administration and an unwillingness to take the political risk associated with increasing tax rates.
Let’s look at property tax, one of the major contributors to revenues globally. In Delhi, only 10% of property owners pay property taxes. To track down defaulters and shore up revenues, the MCDs initiated a project to digitise property tax records in 2015. The project is progressing at a snail’s pace and only a third of the records have been digitized. Further, multiple proposals to hike property taxes have been rejected by EDMC councillors, who are unwilling to stand up to any opposition from residents. The corporations are yet to act on the Delhi government’s proposal to implement property tax in unauthorised colonies.
Besides property and other obligatory taxes, the corporations have the legal authority to introduce around eight discretionary taxes such as professional tax, betterment tax, etc. However, they currently levy only two types of discretionary taxes. The corporations have been equally lethargic on various proposals to increase parking charges, or to impose user charges for garbage collection.
What makes the bad situation worse is that their finances of the corporations are shrouded in secrecy since they do not release quarterly or even annual detailed statements of income and expenditure. This prevents regular public scrutiny.
In the present crisis, the corporations are frequently blaming the Delhi government for not implementing the recommendations of the Fourth Finance Commission that gives them a greater share in state tax revenues. However, the Commission also recommends a greater share for the Delhi government in the Central government taxes at par with other states, and therefore its recommendations cannot be implemented selectively but only after agreement between all parties concerned.
EDMC’s sanitation workers have clearly, and understandably, had it enough this time. But it’s the citizens of Delhi that need to say enough is enough to the deep financial mismanagement in MCDs, and demand far-reaching reforms that usher in accountability and financial transparency in the local governments of the national capital.
Jasmine Shah is a Fulbright-Nehru Scholar and an urban expert (@jasmine441).