Merged Delhi civic body’s first major test: Set financial mess in order

Till fresh elections are held, the MCD will be administered much like the New Delhi Municipal Council -- one of the richest civic bodies in the country, without an elected wing
The three civic bodies have a total liabilities of over <span class='webrupee'>₹</span>16,415 crore including <span class='webrupee'>₹</span>3,472 crore loans from Delhi government (Representative photo)
The three civic bodies have a total liabilities of over 16,415 crore including 3,472 crore loans from Delhi government (Representative photo)
Updated on May 23, 2022 03:47 AM IST
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One of the foremost challenges before the unified administration is going to be setting the finances in order and optimise resource utilisation as the three separate bodies have run into major losses and carry massive deficits and liabilities incurred over the past decade.

Till fresh elections are held, the MCD will be administered much like the New Delhi Municipal Council -- one of the richest civic bodies in the country, without an elected wing. Senior officials who spoke on condition of anonymity said the transition period could be used to bring in reforms, revise levies that have not been changed for decades under pressure from elected councillors, and introduce several revenue generation measures.

The three civic bodies have a total liabilities of over 16,415 crore including 3,472 crore loans from Delhi government.

KS Mehra, who was the last commissioner of the unified MCD, said the new administration should focus on increasing revenue, making the local body self-reliant and ensure better allocation of resources. “The unified MCD never had issues related to shortage of resources for development work, education or salaries. It can be achieved again if all the resources are optimally utilized,” he added.

“If the parties start with manifesto promises such as no rise in taxes and no charges for services. and if the special interests leading to leakage in revenue sources remain, then how can the MCD improve its financial condition?, said Mehra, and added that it depends on the wisdom of officers in charge and their assessment of situation to check if the taxes need to be increased.

The three MCDs have salary and pension liabilities of 1,694.7 crore, which has led to several strikes by the civic staff in the previous years. The contractors are owed 1,665.9 crore while other arrears stand at 9,580.7 crore, according to a report submitted by the civic bodies to the central government.

The report also states that even after the reunification of the corporations the existing internal incomes and grants will not be able to make unified corporation sustainable. The projected income is 7,200 crores, with grants of 4,000 crore -- still short of the current expenditure of 12,500 crore.

Officials said despite a financial package by the Centre, the MCD will have to restructure its finances to become sustainable.

Taxes: Revision and unauthorised colonies

Officials said the in the last decade the commissioners of the three corporations have proposed introduction of new taxes such as the professional tax, betterment tax besides revisions in property tax rates among other charges like theatre tax, education ces. However, most of these proposals were shot down by the councillors. “While the values of properties of people have gone up significantly over the last decade, tax rates remain the same. Under the transition phase with special officer in-charge, there will be no direct political intervention so many of the difficult steps will have to be recommended. Periodic tax revisions are necessary to maintain the financial health of the civic bodies which are primary service providers to the city and everyone suffers if the local body has financial crisis,” official stated.

Another senior municipal official said that while services and ownership rights have been extended to unauthorised colonies, the property tax collection from the 1799 unauthorized colonies has remained minimal. “Some commercial properties in these areas have started paying taxes but the property tax net needs to be widened to include all the residential properties. This vast revenue resource remains untapped due to politicians opposing the new tax collection in these areas. The categorization of plot areas in such colonies is low and on an average people will be paying Rs300-500 per year in tax returns,” official said. Official added that this can be run on the basis of scheme on which power discoms give electricity connections without recognising any ownership rights.

Municipal valuation committee (MVC) reports

While Delhi government has constituted the 5th Municipal Valuation Committee (MVC) in November last year, which is soon expected to submit its recommendations on the revision of various factors used to calculate the property taxes in the city, the three civic bodies have still not been able to fully implement the 3rd MVC recommendations. In the past, the committee reports have largely remained on paper.

A senior municipal official from the property tax department said that the tax structure is still based on first municipal valuation committee report. The three civic bodies cleared the implementation of tax hikes as per third MVC but most of these tax hikes have also been rolled back in October 2021. “A lot of revenue can be generated by simply implementing the MVC recommendations,” the official said.

Garbage user charges and waste bye-laws

Though the Solid Waste Management (SWM) Bye-laws (2018) for the National Capital Territory of Delhi (NCT) mandate a user charge and user fee for garbage collection by the municipality, the corporations have not been able to levy them for residents. According to the SWM bye-laws, under the residential category, municipal bodies are allowed to charge 50 per month for dwellings up to 50 sqm area, 100 for 50 to 200 sqm area dwelling units, and 200 for houses above 200 square metre area.

Redevelopment of prime properties

Post trifurcation of erstwhile MCD in 2012, the municipal bodies inherited a large number of high value properties ranging from the 19th-century heritage Town Hall in Chandni Chowk, former Cup & Saucer restaurant next to Connaught Place to the 90-acre complex of Rajan Babu hospital on Mall Road, old staff quarters on Bungalow Road, Model Town and Minto Road among others. A large number of these sites have remained vacant or underutilized over the last decade. A senior official said that in many cases the proposals for redevelopment of properties are in final stage and these pockets of land can provide the initial boost for increasing corporation revenue.

Municipal bonds

The three corporations in 2018-19 roped in independent agencies to assess their credit ratings. SDMC had applied to float bonds worth Rs500 crores for application was moved in October 2018 but the move was not approved by Delhi government. A municipal official said that the corporation can also float project specific bonds to raise revenue. “The credit rating of unified MCD will be much better. We can seek investments from people in assurance of guaranteed returns,” he added.

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