BBMP heading towards a financial crunch

BBMP heading towards a financial crunch
By Satish Shile, DH News Service, Bangalore:
The new government has directed the Bruhat Bangalore Mahangara Palike (BBMP) to draft an amendment to the Karnataka Municipalities Act 1976, to enable collection of property tax.

The State government deferred the implementation of the new system and decided to go-ahead with the existing system. However, the Palike could not continue the old system as the existing law does not support it. As a result, collection of property tax for the year 2008-09 has been affected.

As per State Government instructions, BBMP officers have to draft an amendment enabling property owners to pay tax as per the previous system. Officers have found it tricky to draft an amendment to suit the present
condition.

A senior officer in the Palike said, “Within Palike limits, two systems were followed to collect property tax in the previous year. In new areas Capital Value System was followed while in old areas tax was collected through SAS under Annual Rental Value. Now it is difficult to draft an amendment to accommodate both systems to continue under one umbrella - BBMP. This is something where one local body will have two systems.”

Howsoever difficult the task is, the Palike has to find a way as it has been in a difficult situation without its major source of income - property tax.

It has been 75 days since the Palike stopped collecting property tax. Following the governor’s direction, the Palike did not begin to collect tax. With that, it lost major source of revenue.

The Palike needs at least Rs 50 crore per month to meet its requirements. A major portion goes towards salaries, pension and clearing loans. The total borrowings of the Palike stands at Rs 700 crore. Approximately Rs 7 crore is required to clear electric bills. More than Rs 5 crore is required to maintain parks and lakes in Palike limits.

Besides, it also has to take care of daily expenses like maintenance of vehicles, clearing phone bills.

“These are necessities. The Palike cannot ask its employees to wait for salaries or can’t run the show without clearing power bills. Going by the present situation, it is certain it will be very difficult to manage in the coming days,” said a senior officer in BBMP.

Looming crisis
The Palike could handle the situation for last two months as it had surplus Rs 130 crore money collected from various sources in the previous year. However in the coming days, it will be difficult to clear bills of various works, the officer said.

As a measure to handle the situation, the Palike has to borrow loans to take care of basic necessities. “Even if we borrow Rs 100 crore, it will be sufficient only for two months. After that once again the Palike has to approach banks. The solution for the crisis is to start collecting property tax,” he said.