Here's why Mumbai's civic body had to go for doomed property tax hike

The BMC has reversed its decision to increase property tax for now, but the civic body is in dire need of funds owing to the several thousands crore worth of infrastructure projects it has undertaken. Property tax is the second-largest source of revenue for the BMC, but has been losing its glory over the last few years.

In budget 2023-24 which is Rs 52,619 crore, the BMC proposed Rs 27,247 crore for various infrastructure projects. Though the civic body had Rs 88,000 crore in fixed deposits (FDs), it needed Rs 1.25 lakh crore for infra projects and Rs 37,156 crore for pensions. As there are limited sources of revenue, the BMC is supposed to draw a whopping Rs 18,746 crore from FDs this year. The corporation proposed a 16 per cent hike in property tax to increase revenue.

But the state government, for the fourth consecutive year, did not approve a revision of property tax. Even the Capital Value-based property tax system introduced by the civic body failed. Then the corporation reversed the water tax hike this year, which also harmed its revenue structure.

The BMC has limited sources of revenue. File pic

In the financial year 2022-23, the civic assessment and collection department collected a total of Rs 5,350 crore, against the set target of Rs 7,000 crore. The situation was similar in the previous years too. Property tax is the second-largest source of revenue for the corporation, right after the state government compensation for octroi. However, the corporation has not been able to meet the property tax target for at least the last eight years and has seen a decline in overall revenue. To make matters worse, the state government didn't approve an 8 per cent yearly hike in water tax. Last year, the BMC increased the charges by 7.12 per cent and in 2021-22, water charges were increased by 5.29 per cent. Even this year, the BMC administration was ready to send a bill with an 8 per cent hike, but Chief Minister Eknath Shinde instructed the corporation not to raise water charges.

The last time property tax was revised was in 2015 and it was set for revision in 2020, but the COVID-19 pandemic derailed the plans. The state also waived tax for houses measuring up to 500 square feet, resulting in a slowdown of property tax collection. In the budget speech of 2022-23, civic chief I S Chahal had said that the drop in property tax collection was temporary, but the collection for the year has not improved. Meanwhile, disputed cases with various private and government organizations have resulted in pending tax amounting to Rs 17,000 crore.

"The BMC is responsible for the sorry state of affairs as it couldn't take timely steps to increase revenue. BMC often forgets that it is a local body and it does not need to incur costs which are not in its purview of work, like taking roads from other authorities to construct and repair… fancy projects like beautification or illumination…" said Asif Zakaria, former corporator. He added that the way BMC introduced a hike in property tax was not acceptable.

Rs 88K CR
Amount BMC has in fixed deposits

Rs 1.25L CR
Cost of the proposed infrastructure

Rs 37,156 CRORE
Amount that goes as civic pensions

5,350
Property tax collected in 2022-23