Mumbai civic polls: Freebies by political parties will cost you Rs1,000 crore annually

Even though they were not able to fulfill a majority of the promises they made ahead of the previous elections, both the Shiv Sena and Bharatiya Janata Party (BJP) are now making new announcements that would reduce the revenue of one of Asia’s richest civic body— the Brihanmubai Municipal Corporation (BMC) – and probably burden the taxpayers.

The Opposition parties like the Congress, too, are not far behind in their bid to lure voters. What the political parties, however, are not telling the voters is the burden of their election promises will come on the civic body, which could be struggling for revenue because of certain reasons including the freebies.

With octroi, its main source of income, to be abolished with the introduction of goods and services tax, the civic body will have to give up on Rs900 crore. The BMC earns about Rs610 crore from the street tax the BJP has promised to be waived off. Further, it also earns a revenue of Rs350 crore by charging property tax on houses below 500 sqft, which the Sena has promised to waive off. The offers by the parties directly target the BMC’s second highest revenue source – property tax collection.

The Centre has planned to impose the GST from July, after which the BMC will have to abolish octroi. It will mean the civic body will have to lose about Rs7,000 crore revenue annually.

If it has to waive of street tax and property tax, the civic body may have to sacrifice revenue of about Rs1,000 crore. With the real estate sector going through a slowdown, the revenue from the sector is already low. If it loses the revenue further, the civic body will have to either increase the taxes and duties or slash the funds spent on development works, point out civic officials.

In a game of one-upmanship, both the BJP and Sena have announced sops for voters.

The BJP has promised to do away with street tax – a component of property tax that is 14.33% of the total revenue.

The civic body earns about Rs600 crore from the street tax component every year that the BJP has promised to be waived off. The BJP also promised exemption from property tax for houses below 600 square feet.

The Sena has promised to exempt property tax that is levied on houses below 500 square feet. These properties are currently charged only notional tax and the revenue collected from these 14.98 lakh properties below 500 square feet is about Rs350 crore.

Not just this, the Sena has also promised that houses below 700 square feet will get discount on property tax, which will further mean loss of another odd Rs100 crore.

The Congress has announced free water upto 90 litres per person per day and also discounts in property tax.

Implementation of these promises of the current alliance partners – as their future together is yet to be decided – will mean amendment to the Mumbai Municipal Corporation Act. The civic body may also have to resort to increase in tax rates to recover Rs1,000 crore loss that will have to be eventually borne by citizens living in houses of more than 700 square feet or will mean big ticket projects to be done away with.

A senior civic official on request of anonymity said, “It is not easy to implement this, as it will clearly be a major loss of revenue to us, especially at a time when the civic body will be dependent on the state government after the octroi is abolished. The burden of this loss will then have to be borne by other property owners living in houses over 700 square feet for no fault of theirs.”

Will this ensure better quality services to the citizens, with reduction in revenue collection by the BMC?

Even currently, the citizens question the quality of services offered to them, with potholed roads and lack of open spaces, won’t the freebies affect the quality, even further?

Citizen activist Nikhil Desai said, “This is a political gimmick. We want better roads and footpaths. The promises made during last election are yet to be fulfilled. Now they are promising us freebies at a cost of BMC’s revenue, which will eventually mean shoddy services for us.”

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