The Times of India      03.02.2011

MUMBAI: While exploring fresh sources of revenue to boost income, the BMC's budget for the financial year 2011-12 may pump at least 30% of the expected increase into ongoing infrastructure projects. By doing so, the city's financial budget will be able to reduce its dependence on internal loans, which are already scarce from frequent use to meet past budgetary requirements, officials said. This augurs well for the financial health of the BMC and will keep the latest budget realistic.

Over the last two years, the recession-hit BMC regularly withdrew funds from special funds created as part of its long-term fiscal policy. "To ensure that we kept our expenditure within the estimated income and Mumbaikars did not get burdened by additional taxes, a sizeable amount of Rs 3,105 crore of accumulated surplus and various Special Funds had to be withdrawn. This helped us to avoid a deficit-like situation," said a senior civic official.

Under section 109 of MMC Act, there are limitations on the loan amount the corporation can raise internally. Last year, too, the then commissioner had made it clear "that it was not possible for BMC to regularly meet its capital expenditure by way of loans". "This is not the ideal situation for the country's richest municipal corporation to be in", he had said. But all that could change in the latest budget to be announced on February 4.

With limited borrowing options, the BMC will also have to restrict its expenditure and introduce cuts in its 'A' budget, mostly meant for operating and maintenance of common services like mechanical and electrical, laundry transport and others. At least 20% of 'A' budget could be restricted and pumped into capital expenditure, which is used on ongoing projects. The other options left to raise income are limited, officials said. The upper cap on road tax has reached its maximum limit in 1999, education cess too cross the maximum mark in 2002. The only scope is general tax, by as much as 24% and fire tax by 1%. But both these options were ruled out in last year's budget. Though there is also scope for increase in water charges and street light tax. To overcome a massive deficit in early 2000, the BMC has revise rates of octroi and property taxes at least three times.