How India’s Richest Civic Body Earns And Spends

The BMC’s budget for financial year 2020 breached the Rs 30,000-crore mark for the second time in three years

BMC Headquarters in Mumbai. (Source: <a href="">GPS/ Flickr</a>)
BMC Headquarters in Mumbai. (Source: GPS/ Flickr)

The Brihanmumbai Municipal Corporation’s budget for financial year 2019-20 breached the Rs 30,000-crore mark for the second time in three years even as India’s richest civic body’s revenue from real estate, one of its biggest sources of income, fell.

The corporation neither introduced new taxes nor increased existing tax rates, according to the budget compilation by CARE Ratings. The Goods and Service Tax compensation, property tax receipts, water and sewerage charges, receipts from sale of extra floor space to developers and investments account for almost 85 percent of BMC’s income.

The civic body, which now has accumulated reserves worth Rs 75,538 crore, will spend the largest chunk of its expected FY20 revenue income in on salaries, followed by infrastructure and sewage disposal.

Here’s how the BMC earns and spends its money:

How It Earns

BMC expects to earn a total income in excess of Rs 30,000 crore in FY20—that includes Rs 24,984 crore revenue and Rs 5,708 crore in capital receipts, mostly drawn from its reserve fund, according to CARE Ratings.

Its revenue income is pegged to grow 8 percent to Rs 24,984 crore in the 2019-20 budget estimate. The corporation’s revenue surplus more than doubled during 2016-17 to 2018-19 largely because of a fall in non-developmental expenditure.

GST compensation in lieu of phasing out octroi and other levies is expected to be its biggest source of revenue. It’s expected to grow 8 percent year-on-year in FY20.

For the second year in a row, revenue income from the real estate is likely to take a hit. Earnings from property tax and revenue from development plans are set to fall 13 percent and 4 percent, respectively, owing to a slowdown in the property market and issues relating to the imposition of capital value tax.

How It Spends

The BMC expects a total expenditure of Rs 30,686 crore in FY20, with revenue spend—largely salaries and operational expenditure contributing nearly two-thirds.

Revenue expenditure is budgeted to increase 22 percent year-on-year to Rs 19,206 crore in 2019-20. The corporation has budged for a capital expenditure of Rs 11,480 crore.

To be sure, the revised estimates at the end of the financial year have been lower than the budgeted amount in each of the last three financial years. The increase in revenue spend is largely due to implementation of the Seventh Pay Commission.

Establishment expenses, largely salaries and arrears to employees, and Rs 4,438-crore operational and maintenance costs contribute 90 percent of the revenue spend.

Roads and bridges and traffic operations will corner the largest share of its Rs 11,480 crore capital expenditure at nearly 20 percent, followed by allocation to the coastal road linking Marine Drive to the Bandra-Worli sea link, including an undersea tunnel. The allocation for the road has declined 6 percent in 2019-20 to Rs 1,600 crore compared with a 19 percent growth in 2018-19.

The BMC, which was known to spend more on education than roads, has cut its expenses on repairs to primary school buildings by 32 percent to Rs 261 crore in FY20.

Less Self Reliant Than Other Large Civic Bodies

BMC is the largest municipal Corporation of the country, in terms of income as well as the revenue surplus. But it’s less self-reliant on own sources of revenue and compared with other larger municipal corporation in Pune, New Delhi, Greater and Vishakhapatnam that generate nearly 90 percent of their income.