How to Reform BBMP’s Perpetually Flawed Budgets – Part II

DISSECTING BBMP'S 2020 BUDGET

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[In Part 1 of this analysis, I discussed budget figures for 2020-21, and how resource mobilisation of the BBMP can be bettered. This concluding part is on suggestions to improve the finances of the civic body and how that can translate to efficiency.]

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A major source that the BBMP should tap for revenue — after property taxes and leasing advertisement hoardings — is to monetise its real estate through lease and rentals.

Revenue from lease and rentals

  1. BBMP reportedly owns more than 20,000 properties across the city and most of them in prime locations. The rentals fixed are abominably low because of two reasons. One is that these rental/lease agreements were entered into long ago and for periods extending anywhere between 33 and 99 years, and have not been revised. The original lessee in most cases has let it out at far higher rents, but the BBMP is poorer for that. Again, the role played by the concerned revenue officers is suspect.
  2. To increase revenue, the first step should be to identify all properties that BBMP owns, publish it on its website and ensure that it is under constant public gaze. All details regarding these properties should be made available.
  3. Issue notices to lessees demanding a revision of the rates.
  4. When BBMP is suggesting that the zonal classification is to be based on the guidance value of the area and correspondingly the base rate of property tax is to be fixed, it can adopt this procedure while fixing the rental value. And this is exactly how it should be done.
  5. Once rentals are fixed, there must be a provision in the lease agreements to automatically revise on a pro rata basis these rentals as and when the Government revises the guidance value every year, through its Department of Stamps and Registration.
  6. As a prelude to this a list of all properties owned by BBMP zone and ward wise, detailing the area of the property, location and the present revenue generated, should be uploaded on to the website
  7. The estimated potential from this source is Rs. 2500.00 crore (against the collection of less than Rs.200 crores). 
  8. Thus the shortfall from this source is Rs. 2300.00 crores. 

Revenue from state government grants

The 74th Amendment to the Constitution proposed that the State Government should devolve financial resources from the State to the local bodies to ensure their financial self sufficiency. In addition to this, the Amendment also proposes decentralisation of power to the local bodies so that the real aspirations and requirements of the citizens can be realised. As part of this, it recommended the transfer of 18 activities to urban local bodies in order to ensure that these services come under the direct control of the ULBs. 

In reality, however, the State Government, to retain political control, has never been serious about implementing these provisions. As a result, all ULBs are at the mercy of the State Government for their financial survival. We can very well imagine the havoc that such a system can create and the stranglehold the head of the government, the Chief Minister, retains on local bodies. Successive Chief Ministers have used the carrot of additional grants which they grandly announce in the annual state budget or prior to the elections, but its actual disbursement is dependent on political expediency. Under these circumstances the need for mandating the devolution of funds through the mechanism of the State Finance Commission becomes imperative.

Decentralising Financial Control

According to the budget estimates the total amount available with the State Government for undertaking developmental works is pegged at more than Rs. 2.4 lakh crore. Clearly, the State government should not be the sole decision-maker when it comes to the deployment of these funds. Thet should be deployed to reflect the aspirations of the citizens through the three-tier government namely, the gram panchayats and the associated Zilla panchayats for the rural areas and the urban local bodies as represented by the Town Municipal Councils, Nagarapalikes etc. Therefore, as per the provisions of the 73rd and 74th Amendment, there must be a mandated devolution of funds (just as in the case between the Center and the States). Now let us see how this could be arrived at.

Out of the total available resources of Rs. 2.4 lakh crore, let’s set aside 60% for the State and the other 40% (about Rs 96,000 crore) to the Gram Panchayats and ULBs. Karnataka’s rate of urbanization is 40%, and 40% of the urban population lives in Bengaluru. Thus the share of Bengaluru is 16% of Rs. 96,000 crore, which works out to Rs. 15,360 crore. This is what our elected representatives, cutting across political affiliations, should project in the form of a white paper to the State Government and place it before the State Finance Commission for approval.

That will be the real beginning of financial autonomy of not only the BBMP but also of all ULBs in the State. Of course it also means stripping the stifling grip that the State Government has over the three-tiers of government in our Federal structure. Whether politicians, schooled as they are in the old “carrot and stick” policy, are prepared to give up this is a moot point. But a beginning has to be made and the sooner it is done the better it will be for all of us. ( Perhaps as an interim measure the government should be persuaded to give an untied minimum annual grant of Rs.7500 crores to the BBMP without any preconditions till the State Finance Commission delivers its directive.)

Revene Shortfall

Let’s now calculate the total shortfalls in Revenue Collections:

  1. Revenue shortfall from Property Taxes Rs 5,000 crore
  2. Property Tax Collection Rs 2,100 crore
  3. Revenue from Advertisement hoardings Rs 3,000 crore
  4. Revenue shortfall  from leased Properties Rs. 2,300 crore
  5. Mandated devolution from State Government             Rs 15,360 crore 

Total                                                              Rs 27,700 crore

It may take about three years to reach this level of realisation. If implemented, let us see what difference it makes to the finances of the BBMP. In addition to lending a badly required element of certainty, the above proposals will increase the total available amount to around Rs. 30,000 crore per annum (taking into consideration the other receipts like building license fees, betterment charges etc). This will be assured without being dependent on the political expediency.

To-do List

Just imagine what BBMP can really do with this kind of funds available at its disposal. It can create separate departments for lake maintenance with a budget of around Rs. 750 crore for maintenance of lakes and their interconnecting channels. 

Similarly a separate Tree Authority with a specific budget provision of say Rs. 500 crore can do wonders to recover and maintain the green cover and creation of urban mini forests. 

It can take up measures to create hawking zones in all the wards, build night shelters for the homeless, build transit homes for migrant workers, establish crèches for children of these migrant workers, take up affordable housing for the urban poor utilizing the encroached land identified by the A T Ramaswamy Committee Report and provide housing for all, provide 100% underground drainage for our city, replace all overhead power lines with underground cables and take up the care of stray animals by building proper shelters. 

It can also build suitable infrastructure to make public transport a viable option for commuting in and around the city. It could provide  a well designed, tree lined network of footpaths so that it can become a part of the first/last mile connectivity. 

The list is endless and everything will be within the realm of possibility. It can improve the conditions of its schools and build new ones. A network of well equipped primary health centers  can be established.

Certain unscientific practices like special ward-wise grants being allotted on an adhoc basis – like allocating Rs. 10 crore to a developed ward like Basavanagudi and Rs 50 lakhs each for many outlying wards – should be given up. Rather, a ward development index based on various development parameters should be created. This should form the basis of budget allotment for ward works. 

Same will be the case for all urban local bodies in the State. Their development can even decongest Bengaluru while bringing about a more balanced and equitable development of our State.


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About N S Mukunda 5 Articles
N S Mukunda is a resident of Bengaluru, working president of Loksatta Party - Karnataka, and the founding president of Citizen Action Forum (CAF).

3 Comments

  1. Very very informative. I am amused why such a big amount money doesn’t excite our corporators and mayors.

  2. Very informative and researched. Autonomy of institutions, whether BBMP or the Police, devolution of powers in our three tier governance mechanism, as stated in the article, all together represent a mature democracy. As citizens, we must be aware and press for these reforms.

  3. Electrol reforms are the need of hour,if we can get good corporators,MLA, MP,These things can be acheived, we have clean political system just like Our LAKES ,both need a change very badly.

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