Mumbai civic chief justifies using cash reserves for mega projects

Ajoy Mehta said the move would instil financial discipline

By its own admission, the Brihanmumbai Municipal Corporation (BMC) is struggling to fund its big infrastructure projects such as Coastal Road and sewerage disposal. The financial condition looks worrisome as the BMC recorded a decrease in its revenues, partially owing to its inability to tap into new sources of income.

Municipal commissioner Ajoy Mehta presented the 2018-19 BMC budget on Friday. (Satyabrata Tripathy/HT Photo)

To make up for the deficit, the BMC will tap into its reserves of Rs69,000 crore.

A day after he presented a rationalised budget at Rs 27,258 crore, civic chief Ajoy Mehta sought to justify the necessity of using fixed deposits for mega projects. He said the move would instil financial discipline.

The civic body has faced flak for keeping the cashpile in nationalised banks, especially when the city continues to face many civic problems. The BMC will use Rs2,743.96 crore of the reserves for mega infrastructure projects.

Soon after the announcement on Friday, questions were being raised about sustainability and lack of financial discipline in using fixed deposits. However, Mehta on Saturday ruled out such problems. “It is sustainable because infrastructure projects are planned once in five years, and it pays you back for next 100 years. For the first five years, you are always short of cash and you have to inject cash. So instead of injecting that cash from outside (through borrowings), we are using our cash reserves. Second, reserves are lying in bank accounts which can be used at low interest rates and borrowing from outside at high interest rate, doesn’t make a good business sense,” Mehta said.

He said “Each amount is linked a project so these reserves are not wasted into funding day-to-day expenditure. I was very clear that these reserves will be used for projects that will give long-term benefits.”

The dip in its revenues has pushed the civic body to reconsider its expenditure and look for additional sources of income. One controversial move was to hike charges for medical services in government hospitals. Explaining the rationale behind the proposal Mehta said, “The whole issue is that these services need to be upgraded. For example, we hardly get Rs300 crore from hospitals, while the budget for them exceeds Rs3,000 crore... A marginal increase is always made. Otherwise, the BMC will never be able to improve its services.”