Hindustan Times ST (Mumbai) - Live
Why BMC’s FDs are making news, and should they be spent?
FDS ARE WORTH OVER A HUNDRED THOUSAND CRORES AND KEPT IN VARIOUS BANKS
Saurabha Kulshreshtha and Yogesh Naik
MUMBAI: The Brihanmumbai Municipal Corporation’s status as the country’s richest civic body is all too well known. Part of the corporation’s wealth is its fixed deposits worth over a hundred thousand crores kept in various banks. It’s this kitty which is now being eyed by the political class.
In his speech on Thursday kicking off multiple projects in the city, but also the BJP’s civic campaign, prime minister Narendra Modi made a reference to the “money that is being kept in banks instead of being used for the city’s development.” He said this while taking a dig at the Shiv Sena (UBT) which has controlled the BMC for close to three decades. “Keeping money in banks is not going to benefit the citizens of Mumbai and that money should be used for their benefit.” In saying so he was echoing the demands of several political parties, including his own and that of the Shinde faction of the Shiv Sena, that the BMC’s FDs should be used for various city projects.
But is this Rs one hundred thousand crore tied up in FDs really so expendable?
According to experts who understand the BMC’s finances, it would be a misreading to say that money was just sitting in the bank and should be made available to sundry projects. A big chunk of this money is already tied up with the coastal road which is the BMC’s premier infrastructure project and upgrade of sewage treatment plants, says P. Velarasu, additional municipal commissioner (projects). Another 30-40 per cent of this money belongs to the civic staff and is used to pay out their pension, provident fund monies and gratuity. The kitty also includes deposit money paid by contractors over which the BMC has no right.
Retired bureaucrats advise caution saying that the use of FDs for projects could lead to a financial crisis for the BMC. Former municipal Commissioner V Ranganathan says, “Part of fixed deposits is for employees’ dues like PF and gratuity and this must be kept secure. At present, the economy is doing well and the revenue has increased, but when the economy slows down the revenue too will fall and the BMC must be prepared for that day. With octroi abolished, there is no direct source of income for the BMC. The civic body has to be judicious about how the money is spent.”
A former civic commissioner echoed this idea of restraint and speaking on the condition of anonymity, pointed out that the BMC has many responsibilities and needs to keep a sizeable contingency fund for emergencies like the pandemic. “Funds from the FDs should be used only for emergencies and for long term projects and not for general development work,” he stressed. “BMC should in fact save money every year so that it can be used to undertake long term infrastructure projects like renewal of old Tansa water pipeline, sewerage projects etc. General development works should be done through the annual budget.”
About 20 years ago, the BMC had a near-financial emergency when it went into deficit of Rs 645 crores, and only sustained fiscal prudence by successive municipal chiefs resulted in the corporation regaining its fiscal health. One of them, Subodh Kumar, introduced the concept of fungible FSI which earned the BMC nearly Rs 3000 crore. Parking norms were also changed which earned the BMC an additional Rs 750 crore in the very first year. Eventually, by 2002, the BMC deficit was wiped off.
The prime minister’s comments have generated political heat in Mumbai because just 4 days ago, on January 16, Shiv Sena (UBT) MLA Aaditya Thackeray had alleged that the BJP leadership was eying BMC’s FDs.
Arvind Sawant, Shiv Sena (UBT) MP and chief spokesperson, said the BMC’s FDs were an example of the Shiv Sena’s good governance practises. “The BMC was in deficit 25 years ago when Shiv Sena came to power. Now it has FDs of more than Rs hundred thousand crores. That should be a matter of pride, not criticism.”
Mumbai BJP president Ashish Shelar however said that the money can be utilised for various development work. “Prime minister said that money can be used for benefit of people. According to the BJP, Mumbai needs various projects and municipal corporation can use those funds for protection of the city’s environment, etc,” he said.