BMC Faces Tough Revenue Generation Amid Real Estate Crisis

Revenue generation has become one of the hardest tasks for the Brihanmumbai Municipal Corporation (BMC) considering the fact that its income over the past five years has remained more or less stagnant. In the first half of the last decade, the income increased by over 55 per cent. While octroi remained the main source of income, property tax and earnings through the development plan (DP) department declined sharply due to the real estate crisis. However, the factors that worsened the situation in the second half of the decade were waiving off property tax for small houses and the civic body's inability to come up with new sources of revenue.

In 2011-12, the total revenue and capital income was Rs 15,595 crore. In the next four years, though the octroi revenue remained the same, BMC's income rose sharply. In those five years, property tax rose from Rs 3,400 crore (2011-12) to Rs 5,700 crore (2015-16) and development department revenue increased from Rs 1,600 crore to Rs 6,000 crore. As a result, the total revenue generation increased by 55 per cent to Rs 24,267 crore.

However, the trend did not remain the same over the next five years. On the basis of the octroi collected over the previous years, the civic body claimed compensation from the state government, which increased at a rate of 8 per cent every year and saved the BMC. Meanwhile, the revenue from property tax and development tax decreased sharply. Though property tax collection crossed the Rs 5,000-crore mark every year, BMC found it difficult to recover the disputed tax. Even earnings from giving permissions for buildings reduced to Rs 1,500 crore/year, which is 25 per cent of that of 2015-16.

Over and above all of this, the civic body failed to explore new avenues for income generation. Ex-commissioner Sitaram Kunte and Ajoy Mehta had suggested collecting property tax from slums. Mehta had also proposed a 1 per cent surcharge on all property deals, but even that just remained on paper.

Revenue generation now an uphill task for BMC. While the first five years of the decade saw a 55 per cent increase in income, BMC was hit by the real estate crisis in the second half of the decade. The BMC has two income sources — revenue and capital. It earns about 98 per cent of its income through revenue, which comes from taxes and various charges.

Capital income includes grants, loans, premiums of land and buildings, which are usually not more than 10 per cent of the total capital revenue. Revenue expenditure is mainly for paying salaries, but a small portion goes to programme expenses, revenue grants, etc. Capital expenditure is spent on projects like roads, bridges, water tunnels, waste treatment plants, etc.

While the civic body waived off property tax for small houses, they failed to come up with new ways of generating revenue. This has put a significant strain on the BMC's financial health and its ability to fund essential projects and services.