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Covid-19: Drop in civic revenue to affect urban projects

Radheshyam Jadhav Pune | Updated on June 23, 2020 Published on June 23, 2020

The Brihanmumbai Municipal Corporation (BMC), Asia’s richest civic body with a budget of ₹33,441 crore for 2020-21, had planned a drive to collect at least 10 per cent of the ₹15,000-crore outstanding property tax. However, the Covid-19 outbreak has not only put a break on its plans, but the civic body also fears the outstanding tax amount might multiply because of the crisis.

Property tax has not only been a major source of municipal revenue in India as in other countries, but is the only major source of municipal revenue for urban local governments, said an Indian Council for Research on International Economic Relations (ICRIER) report titled ‘State of Municipal Finances in India’. However, municipal revenue continues to account for a small share of the GDP in India, remaining stagnant at around 1 per cent of GDP during the period from 2007-08 to 2017-18.

Property tax, profession tax, entertainment tax, grants from the State and the Centre including GST grant, and advertisement tax, are some of the major revenue sources of civic bodies. Non-tax revenues largely comprise user charges (including for water), fees, and rentals from municipal property.

“Now, the civic bodies will have to look for other resources to earn revenue,” said Hemant Rasane, chairman of the standing committee in the Pune Municipal Corporation (PMC) which has an annual budget of ₹6,000 crore. The PMC plans to sell some of its property, including flats and shops, to raise funds to undertake infrastructure development projects.

Development projects hit

With the Covid-19 outbreak, all revenue resources are blocked and civic bodies are struggling to cope with the situation. Urban planner Aneeta Gokhale-Benninger said the direct impact of shrinking revenue will be on development works in cities. Municipal bodies across India are already struggling to collect taxes and implement development projects; the Covid-19 crisis will only worsen the situation, she said.

Even though per capita municipal expenditure has increased in India, it still lags far behind that of other countries. According to McKinsey’s estimates, India’s annual per capita spending in cities in 2010 stood at $50. This is much less compared to the $362 in China, $508 in South Africa, and $1,772 in the UK.

According to government sources in Maharashtra, many small civic bodies are struggling to pay the salaries. Many civic bodies have already started revising their budget outlays, and the majority of the new infrastructure projects planned for this financial year will have to be scrapped, one of the State government officials said.

Published on June 23, 2020
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