With rise in capital expenditure and shrinking income sources, the Brihanmumbai Municipal Corporation (BMC), the country’s richest municipal corporation, is facing a financial pinch which could impact development works in the city. BMC Additional Municipal Commissioner (Projects), P Velrasu talks to Laxman Singh over how the civic body plans to tide over this problem and create sustainable revenues sources for the future.
What are the financial constraints that the BMC is facing at this point of time?
The BMC has suffered a lot due to the Covid-19 outbreak and the subsequent lockdown. A large chunk of our property tax collection happens in March, when we collect nearly 30 per cent of our annual property tax. However, due to the lockdown, this collection was affected. As of now, this year we have received almost Rs 3,200 crore, which is close to our target of Rs 5,400 crore. The corporation will also see a reduction in development plan charges, as we have given 50% concession and other incentives for developers. It needs to be seen if more developers will come forward to comply with the scheme, thereby increasing revenue. The original target of revenue from the DP department was Rs 3800 crore. Now, with the concession and the Covid-19 situation, it has been revised to Rs 2,200 crore. Till February, an income of Rs 1,200 crore income was received. The decline in interest rates on investments is also affecting us. Current interest rates have come down by up to 4 per cent from 6.5 per cent, causing us losses of about Rs 650 crore due to fluctuation in interest rates. Broadly, our revenue has not been affected much, except for losses that we may face in expected revenue from development plan charges and income earned through interests on investments.
What are the plans to improve property tax collections? In 2022, GST compensation from the Centre in lieu of octroi abolition will stop. Are we looking for other avenues of income?
As per the Mumbai Municipal Corporation Act, 1888 the revision of property tax should take place every five years. It was scheduled to take place in 2020-21, but it could not happen due to Covid-19. Now, the revision will be done in 2021-22. Under the act, the tax can be increased by up to 15% after revision. Once revision takes place, the revenue from property tax will increase. Also, there is a huge amount (about Rs 15,000 crore) of property tax is pending from litigation and disputes. We expect some results on some of the litigation by this year. There is no history of auctioning any property of owners that had not paid their taxes. However, we have recently got approval to enforce such action rules for auction. As per those rules, we may start auctioning the property, which will give more teeth to the department. For disputes that are not sub-judice. we are taking hearing and trying to resolve it as early as possible. The corporation is also working on other areas like redevelopment on municipal lands that are leased under Vacant Land Tenancy (VLT) policy. From the new VLT policy, we can get about Rs 450 crore this year. We are also looking at exercising the option of investing in bonds. It is a cost-effective option and other major international cities have adopted this method of fund raising.
The BMC has proposed to set up an independent Fee Revision Authority (FRA)? How will it function?
An average citizen pays the BMC in three ways, namely property tax, water charges and sewerage charges. Revision of property tax can take place once in five years, while we hike water and sewerage charges by 8% every year. For water, the BMC spends Rs 20 per thousand litres, but we charge citizens only Rs 5 per thousand litres. There is a huge gap and we are charging a very minimal market fee. It is the same with our lease land rents and other service fees. The proposal of setting up a Fee Revision Authority in the budget is to decide on these pricing arrangements. But the concept has to be discussed with all stakeholders. It is a long-term objective. It might take its own time, but we need to think on that line for sustainable revenue sources. If you leave the issue of pricing with the Municipal Corporation, we have the tendency not to hike charges for various reasons. Internationally, having an independent pricing authority is pretty common and we should have one such body in BMC as well.
With a dip in revenues, how will the BMC ensure the completion of capital-intensive projects like sewage disposal project, Goregaon-Mulund Link Road (GMLR), Desalination Plant and the Coastal Road?
I will start with Mumbai Sewage Disposal Project (MSDP-II) as in any city, sewage treatment is critical. The project will cost about Rs 20,000 crore. There are two components of it. It entails the actual construction cost of around Rs 9,700 crore, and it will take five years to build. The other component is operation and maintenance for 15 years, for which we will require Rs 10,300 crore over that period. For immediate construction, the cost works out to Rs 1,000-2000 crore, which we can manage easily. The Goregaon-Mulund Link Road (GMLR) and Coastal Road projects have been linked to fungible FSI (Floor Space Index) revenue separately. Like MSDP, both projects will take about five years each, so every year our fund requirement will not be more than Rs 1,000-2,000 crore, which we can manage.
What are the long-term plans to make Mumbai flood free city?
We have to undertake a broad range of measures. The concept of a ‘Sponge City’ entails that water pouring down during the monsoon should not travel very far. It has to be absorbed locally, retained for some time and then released slowly. In many international cities, they make local ponds and store water. The building construction materials are such that they absorb a lot of water and each of the buildings have some water storage structures. Even public amenities like footpaths and roads can absorb water. They then create underground water storage tanks in areas where flooding is an issue. Canada, Shanghai, and Tokyo have such storage tanks. The size of such tanks is designed as per the intensity of the rain and expected days of such rainfalls. When we do all these things together, it takes us towards the concept of sponge city. We have to do it consistently. Mumbai has seen a lot of concretisation. To become an effective sponge city, Mumbai might have to undo some of the things it has done in the past.