How are India's large municipal corporations fairing?

On Tuesday, Rajya Sabha passed the Delhi Municipal Corporation (Amendment) Bill, 2022, clearing the path for the reunification of three municipal corporations of Delhi into a single entity. 

The decision comes a week after Lok Sabha passed the bill for the unification of the municipal corporation’s South, North and East divisions, which were split nearly a decade ago.

While defending the move, the finance minister informed the Rajya Sabha that the new entity would be “efficient and provide better services”.

But how the country’s major municipal corporations are faring financially. Let us see. 

BMC had presented a budget of Rs 45,949.2 crore for 2022-23, whereas the combined budget of the three municipal corporations in Delhi was a little over Rs 17,000 crore.

The total outlay for Bengaluru’s Bruhat Bengaluru Mahanagara Palike (BBMP) was Rs 10,482.5 crore for 2022-23, whereas Amdavad Municipal Corporation (AMC) had a budget of Rs 8,807 crore for the year. Pune Municipal Corporation had a budget of Rs 8,592 crore for 2022-23.

It remains to be seen if the reunification will improve the finances of Delhi’s civic body. An RBI analysis of 2017-18 data of 221 municipal bodies across the country found that nearly half the bodies were under high fiscal stress, given their limited ability to raise their own revenues.

An ICRIER study in conjunction with the fifteenth finance commission found that for most of the large entities -- barring Delhi -- own revenues as a proportion of total revenues had declined.

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For instance, in the case of Mumbai, own revenues accounted for 97.6 per cent of total municipal revenues in 2012-13, but the ratio declined to 73.1 per cent in 2017-18.

Bengaluru’s contribution to municipal revenues was 44.1  per cent in 2017-18 against 49.6 per cent in 2012-13. The rest was being funded from state transfer.

Civic bodies have long been criticised for their inability to raise revenues from property taxes. An OECD report from 2017 had found that the average property tax collection in OECD countries was 1.08 per cent of GDP. In contrast, India had a ratio of 0.2 per cent.

An earlier study in 2016 had found that Pune collected four times as much property tax per capita than Delhi. Bengaluru’s per capita property tax revenue was triple of the national capital.

A recent RBI study had found that 70 per cent of surveyed urban local bodies had reported a worsening of revenues and an increase in expenditure during the pandemic.
 

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