Mumbai: Poor income, losing octroi may cost BMC

Drying sources of income, possible scrapping of octroi in a year’s time, uncertainty over alternatives to replace the tax and pertinent hike in establishment costs may mean the BMC may find itself in a financially weak position soon.

It seems India’s richest civic corporation is on a sticky wicket, financially.

Drying sources of income, possible scrapping of octroi in a year’s time, uncertainty over alternatives to replace the tax and pertinent hike in establishment costs may mean the Brihanmumbai Municipal Corporation (BMC) may find itself in a financially weak position soon.

The possible scrapping of octroi, a source which accounts for nearly 40% of its income, with the introduction of the Goods and Services Tax (GST), and the uncertainty around the options to replace it, means the civic body may not be able to take up major projects any time soon.

The first signs of this coming instability were clear in Wednesday’s budget, where crucial departments such as water supply, stor m water drains and sewage have already seen reductions.

The uncertainty over octroi is not the only worry. The BMC’s incomes have experienced a rather drastic dip, forcing it to revise its expectations from its two premier sources — octroi and property tax.

Going by the collections and the trends so far, the civic body has now scaled down the expectations and said it will see at least a Rs 600 crore drop from octroi and Rs 110 crore from property tax.

Sources told HT that despite the scaling down, even these figures may be a tad unrealistic.

The BMC’s saving grace has been its income from the premium it levies for granting fungible floor space index (FSI), which is all slated to rake in over Rs 2,000 crore.

Another worry for the civic body is that the seventh pay commission, which is expected to be implemented by April next year, will burden its strained civic coffers further.

When the sixth pay commission was implemented in 2008, the BMC found itself strained by an additional Rs1,500 crore.

For an organisation which, in any case, finds itself to be spending nearly 70% of its total budget on employee salaries alone, the added burden may end damaging the civic body’s financial condition.

For the BMC, however, it is not as much any of these individual factors, but the timing that may affect its financial health and destabilise it too.