Unable to meet revenue targets, BBMP relies on grants

BBMP Budget 2015-16 to 2018-19 Analysis by B.PAC

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74th Amendment of the Constitution provides for the Local Government, that is to say, the constitution and powers of municipal corporations, improvement trusts, district boards, mining settlement authorities and other local authorities for the purpose of local self-Government or village administration.

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To aid local governance, Corporation Fund – Section 149 details the fiscal responsibility of the BBMP.

All money received by or on behalf of the corporation by or under this Act or any other law, all taxes, tolls and other imposts, fines, fees, penalties paid to or levied by it under this Act, all proceeds of land or other property sold by the corporation and all rents accruing from its land or property and all interests, profits and other moneys accruing by gifts or transfers from the Government or private individuals or otherwise shall constitute the corporation fund”

How a budget document is prepared?

KMC Act Section 166 – Every year there will be a budget prepared by the commissioner Estimates and expenditure, income prepared by the commissioner, provision to be done by January 15th and submitted to the standing committee. This document is presented before the Tax and Finance Standing Committee. Standing Committee during the review they call the various bureaucrats and officers and other standing committees for the clarifications.

The cash balance should not be less than 1,00,000, according to the Act, cannot show deficit.

The copies of the standing committee report will go to all 198 councilors for them to prepare.

Usually, by 1st week of February, Standing Committee Chairman will present before the council and debate, deliberate on the estimates, incomes etc.

The corporation can send it back to the standing committee for amendments if any within an estimated time. Clarifications and revisions should be done before the budget is adopted by the council. The final budget should be finally, 21 days before March 31st should be passed and sent to the government for approval. Based on the estimates, and modifications if any, state government should pass it within 60 days or it will be deemed accepted. Once approved by the government, it will be sent to the corporation to be implemented from 1st April [Financial Year].

Analysis

[Source: BBMP Budget Estimate Books 2015-16, 2016-17, 2017-18 and 2018-19]

Table 1: Financial Position of BBMP from 2016-17 to 2018-19

Estimates

Opening

Closing

[In Lakh Rupees]

Balance

Receipts

Total

Payments

Balance

Budget Estimates for 2016-2017

495

899,148

899,643

899,441

202

Revised Estimates for 2016-2017

495

681,895

682,390

681,996

394

Budget Estimates for 2017-2018

394

999,581

999,975

999,455

520

Revised Estimates for 2017-2018

394

751,398

751,792

751,353

439

Budget Estimates for 2018-2019

439

932,248

932,687

932,553

134

Budget vs Actual

  1. For the Year 2017-18, the revenue shortfall Budget vs Revised Estimates (RE) was 24.8% and for the year 2016-17 the shortfall was 24.16%.Actual Revenue in 2016-17 was Rs 657,238 representing a shortfall 26.90% against budget for 2016-17.

  1. It can be seen that BBMP consistently falls short of its revenue targets by about 25% when comparing Budget vs Actuals.

  2. This continuous shortfall in Revenues creates an acute cash shortage and seriously impacts the BBMP’s ability to take up development projects and complete them successfully.

  3. Revenue Growth- The Actual Revenue growth for the year 2016-17 is 25.29% over 2015-16 Actuals, 14.33% for 2017-18 RE and the Projected growth is 24.07% for year 2018-19 over 2017-18 RE with Revenues budgeted at Rs. 9322 Cr.

  1. Given this past trend of serious revenue shortfalls, the 2018-19 Revenue assumptions in the budget are aggressive with no of clear revenue enhancing strategy.

  1. Revenue Composition:

Table 2: Actuals for years 2015-16, 2016-17 & Revenue Estimates for the years 2017-18.

Revenue Composition

[In Lakh Rupees]

Year on Year

2015-16 [A]

2016-17[A]

2017-18 [RE]

Tax Receipts

140,639

175,301

180,427

Non Tax Receipts

70,955

71,859

59,350

Grants

223,535

319,959

386,523

Other

89,450

90,118

125,098

Total

524,579

682,390

751,398

Table 3: Revised and Budget Estimate of Revenue Composition in Percentages

Revenue Composition in Percentages for Revised Estimate of 2017-18 and Budget Estimate of 2018-19

 

 Revenue Composition %

2015-16 A

2016-17 A

2017-18 RE

2018-19 B

Tax Receipts

27%

27%

24%

30%

Non Tax Receipts

14%

11%

12%

17%

Other Tax Receipts

14%

11%

9%

11%

Grants

43%

49%

51%

39%

Miscellaneous

3%

3%

3%

4%

Total

100.00%

100.00%

100.00%

100.00%

  1. Actual Tax /RE Receipts have been consistently short compared to Budgets over 2015-16, 2016-17, 2017-18 .

  2. The dependence on state and central grants increased during this period from 43% in 2015-16 to 51% in 2017-18 RE .

  3. Concrete steps have to be taken to increase the tax and non tax and other receipts receipts, it has been consistently declining over the last three years from 55% in 2015-16, 49% in 2016-17 and 45% in 2017-18.

  1. However in 2018-19, tax, non tax and other receipts have gone up to 57% in the Budget with no clear strategy as to steps to be taken to realise the budgeted numbers. In case there is a shortfall development works will seriously suffer since no grants have been provided for either.

Payments:

The table below gives the break up of all the spending trends of major departments over the years 2015-16 to 2018-19.

Table 5: Payments Composition

Payments Composition

2015-16

2016-17

2017-18

2017-18

2018-19

[In Lakh Rupees]

[A]

[RE]

[BE]

[RE]

[BE]

General Administration

69,234

67,233

76,241

75,305

84,370

Finance & Accounts

154,052

81,345

49,278

59,230

52,356

Lakes

4,259

8,171

11,322

22,321

10,725

Estate & Management

7,275

5,450

4,024

7,024

7,041

Solid Waste Management

53,937

63,989

91,400

110,709

106,688

Road Infrastructure

44,417

98,789

61,546

79,266

58,568

Education

1,038

2,880

7,937

4,021

5,801

Urban Forestry & Environment

1,034

1,539

7,758

4,155

4,626

Horticulture

4,598

7,937

17,761

13,120

15,616

Storm Water Drain

14,856

18,688

35,505

33,662

26,846

Others

165,094

326,044

609,808

381,650

547,679

Total

519,793

681,996

999,455

751,353

932,553

Table 6: Payments Composition %

Payments Composition %

2016-17 A

2017-18 [RE]

2018-19 [BE]

General Administration

12%

10%

9%

Finance & Accounts

13%

8%

6%

Lakes

1%

1%

1%

Estate & Management

1%

1%

1%

Solid Waste Management

11%

15%

11%

Road Infrastructure

10%

8%

7%

Education

0%

1%

1%

Urban Forestry & Environment

0%

1%

0%

Horticulture

1%

2%

2%

Storm Water Drain

4%

4%

4%

Others

47%

51%

59%

Total

100%

100%

100%

  1. There was a payments shortfall of 40.97% comparing Budget vs Actual Payments 2016-17.

  2. In the year 2017-18 major shortfalls have been in the Lakes, Road Infrastructure and Storm Water Drains.

B.PAC recommends that there be a robust debate in the BBMP Council on Revenue enhancement strategies and clear steps be laid out for the benefit of citizens as to how to achieve these Revenue Goals.

Write to forbangalore@bpac.in with your observations and comments.