THINKING AHEAD

THINKING AHEAD
Blighted by poor revenue collection, the BBMP has taken a leaf out of the Centre and state governments and presented its first Medium-Term Fiscal Plan. This details how the Palike mops up money to meet the city’s infrastructure demand. TOI deconstructs Plan Bangalore
S Kushala | TNN

Bangalore: A metropolis that’s bursting at its seams is forever short on meeting — and also forecasting — the infrastructure needs. Where people’s influx by the thousand is a constant, Bangalore civic agency’s demands, too, are always on the rise. Get a taste of this: the city needs drains which are double the length of the roads. This gives us a better picture of what the city needs and also tellingly explains how much money is required to execute plans.
Now kicks in the Medium-Term Fiscal Plan (MTFP), which, in a nutshell, is a roadmap to manage the finances for the next four years, based on the capital-investment demand. The MTFP is an intricate financial exercise carried out by the Union and state governments regularly. In a first for civic agencies, the Bruhat Bangalore Mahanagara Palike (BBMP) has unveiled the MTFP.
The BBMP’s 2009-10 budget has unspooled a plan to manage, reform and augment its revenues to meet infrastructure needs. The MTFP for 2009-13 gains heightened significance in the light of the economic slowdown that has impacted the BBMP revenues. The rationale is: people influx into Bangalore will increase and infrastructure has to keep pace. The most important problem is traffic, which has got a booster investment dose of Rs 6,000 crore. But recession and ebbing revenues should not scuttle infrastructure creation.
As per the BBMP’s own survey, its financial situation is under stress for many years now. There has been a 20-40% gap in the projected and actual revenue receipts in the past 10 years. Declining productivity of the public expenditure is adding to the already existing fiscal stress.
To bridge the revenue-expenditure gap, the organization has to resort to loan. Non-availability of loan at subsidised interest rates, and absence of government security for loans are also a matter of concern. As a result, debtservicing amount has increased.
Till 2011-12, an investment need of Rs 36,146 crore has been estimated, of which the BBMP can sustain only Rs 8,889 crore. But the infrastructure needs are too heavy for the investment capacity. Hence, infrastructure development activities with the help of private participation (Swiss Challenge method) have been suggested.
Laying out well-thought-out civic plans is half the battle won, but who’ll raise the money? And how? In the absence of sufficient funds, the apex civic agency is resorting to proper debt-management system, which is widely seen as a sensible solution. The Planning Commission has come out with parameters for limiting the debt stock that can be held; revenue receipts entail the BBMP to borrow up to Rs 5,200 crore and create capital assets. The present debt stock is Rs 1,081.28 crore.
HOW DOES
THE PLAN HELP? Medium-Term Fiscal Plan sets the key fiscal targets, and details the policy package necessary to achieve them
It’s updated every year, and dovetailed to the annual budgetary exercises
Resources generated or augmented as a result of measures undertaken to ensure fiscal discipline will be utilized by recasting the strategies for expenditure
BBMP’S
FISCAL POSITION
Budget outlay: Rs 4,238.41 crore; revenue projection: Rs 3,959.29 crore
Rs 2,857 crore for infrastructure
Major revenue channel: property tax target Rs 1,100 crore
Debts borrowed since 2000: as on March 31, 2009, debt liability was Rs 1,081.28 crore
Repayments so far: Rs 626.41 crore with interest being Rs 268.17 crore
FINANCE COMMISSION’S OBSERVATIONS
Most of the development projects undertaken by the urban local bodies are stalled because of financial constraints. The resource gap for BBMP in providing the drainage network, road-related infrastructure is huge. Municipal Bonds raised from the markets are another major potential option in the direction improving the fiscal health. These tax-free Municipal Bonds have good potential in bridging the resource gap and have been successfully implemented by some city corporations.