Taxing times? BMC revenue dips, Mumbaiites may have to pay the price
Mumbai civic chief says alternative sources of revenue must be looked into to increase civic incomeUpdated: Feb 02, 2018 23:36 IST
The Brihanmumbai Municipal Corporation (BMC) tabled its annual budget with an outlay of Rs27, 258 crore, which is 8.4% higher than last year’s. However, the country’s richest civic body has serious reason to worry about its financial health. The budget on Friday paints a worrisome picture — the civic body’s incomes are dipping and it is struggling to tap into newer sources of income. This can’t be the good news for tax-paying citizens.
Here’s how sharp the dip is — the civic body anticipated at least Rs4,997 crore from the development charges on premiums that it collects for allowing builders to use fungible floor space index (FSI). However, with a slump in the real estate industry, this source is expected to see a sharp dip of at least Rs1,050 crore. Another revenue source, property tax, also showed a dip of Rs247 crore.
The dip in the revenue has pushed the civic body to take a hard look at how much it can spend. It means that the civic body must either find new ways to increase its income or ways to fund its infrastructure projects by borrowing from different sources. In either case, citizens will have to bear the burden. There are no imminent plans to increase taxes. However, if the decline in revenue continues, citizens may be looking at a taxing time ahead.
Over the years, development charges have gone into the civic body’s special development fund, which is used to pay for big-ticket infrastructure projects such as the Coastal Road and the Goregaon-Mulund Link road. However, with a dip in the income revenue, the BMC has proposed tapping into its reserves to fund major infrastructure projects. “The increased capital spending is due to a greater emphasis on capital works [construction], clearing the pending liabilities and the upcoming mega projects. We propose to meet increased expenditure by withdrawing Rs2743.96 crore from our special funds,” said civic chief Ajoy Mehta.
Last year too, the BMC had linked its fixed deposits (FDs) to the budget. However, it had not mentioned their allocation.
Experts said they don’t support this idea. “Tapping into the FDs is an easy way out and won’t help the BMC develop financial discipline. There are other ways to fund infrastructure projects, such as bonds or borrowing. The civic body should opt for a public-private partnership for its mega infrastructure projects. Even Hyderabad had high FDs, but opted for bonds to finance infrastructure projects,” said economist Abhay Pethe.
Since 2013, the civic body has been unable to match the target income it hopes to collect from all its sources. Mehta, in his budget presentation, mentioned adding other revenue sources. In a bid to zero in on alternative sources of income, the civic body has proposed to increase the license fee, charges or the non-tax revenue. The suggestion, which could evoke a strong reaction from the elected representatives, includes hiking the rates for medical services at civic hospitals by 20% for Mumbai residents and 30% for those who do not live in the city.