While first five years of the decade saw 55% increase in income, BMC was hit by the real estate crisis in the second half of the decade
While the civic body waived off property tax for small houses, they failed to come up with new ways of generating revenue. File pic
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.
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In 2011-12 the total revenue and capital income was R15,595 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 R3,400 crore (2011-12) to R5,700 crore (2015-16 ) and development department revenue increased from R1,600 crore to R6,000 crore. As a result, the total revenue generation increased by 55 per cent to R24,267 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 R5,000-crore mark every year, BMC found it difficult to recover the disputed tax. Even earnings from giving permissions for buildings reduced to R1,500 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 1 per cent surcharge on all property deals but even that just remained on paper.
BMC's earnings and expenditures
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: This includes grants, loans, premiums of land and buildings, which are usually not more than 10 per cent of the total capital revenue. Revenue expenditure: Mainly for paying salaries but a small portion goes to programme expenses, revenue grants etc. Capital expenditure: This money is spent on projects like roads, bridges, water tunnels, waste treatment plants etc.
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