Which cash cows will fill BMC's coffers in 2022-23?

Discount in premiums for builders and octroi compensation save the year for BMC; property tax collection becomes a trickle in past 2 years

With the inflow of Rs 13,200 crore through premiums from builders and Rs 10,583 crore towards octroi compensation, the BMC’s coffers have swollen so far this year, but the picture won’t be this rosy in the next financial year. The country’s richest civic body is yet to zero in on a solid source of revenue as premiums won’t yield the same result next year. In what may trouble the corporation, it could not earn revenue through pending dues from the state as BMC hasn’t formed a fee revision authority yet as declared in the last year’s budget. Also, it is struggling to collect enough property tax, one of its fatter cash cows.

Property tax and development charges have remained the main sources of revenue after octroi was discontinued in 2017. Though receipts from the Development Plan fetched Rs 6,284 crore in 2016-17, the revenue began sliding due to the deteriorating real estate market and the corporation could collect only Rs 1,200 crore in 2020-21. But developers were turbocharged after the state government offered a 50 per cent discount on premiums in this financial year. “Till now, Rs 13,200 crore has been collected through premiums. As per current estimation, the BMC may collect Rs 3,000 crore more till March-end,” said BMC Commissioner I S Chahal.

While premiums and octroi compensation have helped the BMC achieve its target of Rs 27,811 crore for 2021-22, it will require tax reforms to keep up the momentum. On the one hand, property tax collection has stagnated, while on the other, the state did now allow BMC to increase it for two years owing to Covid. Also, waving tax on properties up to 500-sqft homes reduced the collection further. The BMC could collect only Rs 3,780 crore of property tax till January against the target of Rs 7,000 crore. The overall pending amount stands at Rs 20,000 crore.

There isn’t much success in collecting the pending dues from the state and forming a fee revision authority. BMC commissioner said that the total outstanding dues from the various departments of the state government amount to Rs 5,274 crore, including Rs 3,630 crore from the education department. “A lot of correspondence has already been done to recover dues from the state government and we are hopeful,” said a senior BMC official.

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