BMC’s income from investments to drop by half

MUMBAI: In the backdrop of Covid-19 lockdown the Brihanmumbai Municipal Corporation (BMC) is taking every measure to increase its revenue, but the falling income from investments parked in banks in the form of fixed deposits remains to be an area of concern. According to estimates made by BMC in the 2021-22 budget, it expects to earn over ₹975 crore as income from investments, which is half of what it estimated in 2020-21 (₹1,828 crore). BMC has maintained that falling interest rate and repo rate since five years have been affecting its income from its own reserves.

In terms of exact quantum, BMC presently has ₹50,953.27 crore in reserves which are linked to various infrastructure projects and ₹26,682.95 crore locked in for pensions, provident funds and gratuity of its staff.

The major sources of revenue for 2021-22 for BMC include grant-in-aid on account of compensation in lieu of octroi at ₹10,583.08 crore, income from property tax at ₹7,000 crore, income from development plan department at ₹2,000 crore followed by income from interest on investments at ₹975.56 crore, income from water and sewerage charges at ₹1,598.08 crore. Overall, BMC expects a revenue income of ₹27,811.57 crore, which is ₹636.73 crore less than the budget of 2020-21.

Commenting on dip in BMC’s revenue from investments, municipal commissioner Iqbal Singh Chahal in his budget speech said, “Repo rate is consistently reducing. In January 2015, it was 7.75% which reduced to 4% in December 2020. Consequently, average interest rate on investment in-term deposit is reduced, which led to decrease in income from interest.”

Explaining further he said,

“The falling repo rate is something that is happening countrywide, and this loss of revenue cannot be attributed to anything considering it is falling for all. Another reason we have to understand is that whatever revenue we get in the form of investments is not realised entirely. There is 42% tax to be paid to income tax department, and what we will get after taxation this year is around ₹975 crore. If we get more, it will go into BMC’s kitty.”

A BMC official from finance department said, “A part of the income from investments is diverted towards provident fund, gratuity. Considering all those factors, we have prepared an estimation of over ₹900 crore. Another reason for income from investments going down is because the annual growth rate of the money parked in fixed deposits grew by 15% to 17% in the past, but it has come down to 6% and 3% in the past two years.

Also, the income in the form of interest from fixed deposits has been varying year-on-year as BMC has in the past withdrawn funds from its reserves for completion of infrastructure projects and other civic amenities.

BMC has proposed several measures to increase revenue such as introducing scrutiny fees for Mumbai Fire Brigade, and a fee regulatory authority to review taxes relating to BMC.

Rais Shaikh, Samajwadi Party (SP) corporator, said, “BMC should give a proper explanation on why there is going to be drastic fall in revenue from investments as I feel it is not only due to falling interest rates. What I understand is that BMC may also withdraw money from reserves, leading to fall in its principal amount. This trend of withdrawing money from reserves should be stopped, as it not only results in principal amount going down, but also in income from investments going down.”