Mumbai: Richest civic body now dependent on compensation

With traditional revenue streams drying up, Mumbai’s civic body, the richest in India, faces budgetary challenges

In the absence of new revenue sources, the Brihanmumbai Municipal Corporation will heavily depend on compensation from the state in lieu of the Octroi tax, in addition to fixed deposits, in the coming financial year. More than 70 per cent of income may come from these two sources.

Last  year, the BMC presented a budget worth Rs 52,619 crore with estimated income from revenue sources, funds from fixed deposits, and interest on deposits. The primary revenue source was compensation from the state government after the Octroi tax was replaced with GST in June 2017. The BMC has been receiving this compensation with an eight per cent increase annually. For 2023-24, the income from compensation is Rs 12,344 crore, along with R18,746 crore from fixed deposits and Rs 1,707 from interest, making a total of Rs 32,797 crore, which is two-thirds of the entire budget.

Though the BMC has a dozen other revenue sources, including property tax and development, which were prominent in the past, the overall income from these sources now comprises merely one-third of the overall budget, according to a source in the BMC. Even next year, the corporation will rely on compensation, which is not a direct income source. The BMC expects more than R13,331 crore from compensation in 2024-25. As other sources like property tax and development plans are drying up, and there are fewer chances of new/innovative sources of income, the civic body has to depend on compensation and its fixed deposits in various banks.

BMC property tax collection woes

The BMC collected merely Rs 30 crore in property taxes in January making it a total of Rs 665 crore. Till December 2023 the BMC had managed to collect only Rs 638. Every year, the total tax collection reaches up to Rs 1,000 crore in January as the corporation gears up to reach its target amount. The BMC estimated Rs 6,000 crore from property tax this year by increasing it by 16 per cent. However, at the end of the 10 months of the financial year, the corporation only achieved 10 per cent of the collection target.

Rs 12,344 cr
Income from compensation in 2023-24

Rs 52,619 cr
The budget presented by civic chief last year

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