Saturday, March 25, 2006

Nothing but castles in the air

Nothing but castles in the air
The Times of India

Why should I care about the BMP’s budget?
Ultimately, it is our money. We are all shareholders in the government, and we can never sell our shares. So we might as well understand what is happening. Think of the budget as having two broad components:
The first is stuff like salaries, electricity and water bills, garbage disposal, maintenance works, interest costs etc. Whatever else happens, this has to be paid for. For the BMP, this comes to about Rs 300 crore.
The second is the development works to improve the city: laying new water and sewerage lines, building new roads etc. The amount of development works are huge, given how Bangalore is growing. However, our ability to take them on will depend on how much we can afford.

Is this a good budget?
No. While the development works possibly reflect the priorities of many Bangaloreans, the challenge is whether the BMP can actually deliver. And this is the fundamental issue with the budget: its credibility. Over the past 10 years, there is a consistent gap between what is planned, and what is actually delivered (see table).
The growing gap between budget expectations and the reality is dangerous for many reasons:
The BMP can only spend what it can raise. Take last year’s budget. Of over Rs 1,500 crore budgeted, the BMP raised only around Rs 900 crore. Given that the basic expenses of Rs 300 crore had to be met, most planned works could not be taken up.
It has been a consistent trend and it smacks of poor financial discipline. Pretty soon, the budget will no longer be a financial exercise, but an out-and-out political exercise.
This creates a long queue of unfinished works. Since everyone knows the money is not enough, there is a rush to ensure that their favourite work at least gets approved, if not completed. This creates a huge backlog, which results in hurried execution, poor quality etc.
It forces the BMP to borrow. Over the past five years, the BMP has increasingly relied on borrowed funds, creating a massive debt burden. And we have to bear a huge interest burden (at 8%, this will already be over Rs 40 crore this year).

What is wrong with borrowing?
Cities have to undertake large amounts of development works which need up-front investments that can only be repaid over time. But this requires careful planning for the next 5-10 years, and identification of right kind of works. Otherwise, borrowing will be done for wrong works, and city gets locked in financial indebtedness.

Why doesn’t the BMP learn from past mistakes.
It isn’t any one individual’s fault. The system is not structured for financial discipline. Everyone is putting pressure on the BMP to do more, and so every new commissioner or mayor wants to show they have done something.
It is hard for someone to say, ‘We didn’t make close to half of last year’s budget, so what’s the fun in increasing the budget this year. Let’s just make a realistic budget, and deliver on it.’ Chances are they will get transferred within a week.

Is this all BMP’s fault?
No. The state government is guilty on two counts.
First, it is not releasing enough funds to Bangalore. Under State Finance Commission guidelines, the city is due for large sums, but the state has consistently not paid, preferring to adjust this against several other accounts.
Second, the state is supposed to approve BMP’s budget every year. But it is not enforcing this, allowing BMP’s fiscal indiscipline to go unchecked.

Is it possible to reverse the course?
The National Urban Renewal Mission (NURM) aims to strengthen cities by providing funds while demanding major reforms. The BMP budget clearly expects substantial funds from NURM (Rs 217 crore), and suggests many of the required reforms are complete, and that the city is at the forefront of NURM, claims that are vastly exaggerated.
These reforms, if implemented correctly, can usher in an era of genuine change. However, the only ones who can change this are the citizens, because we are the only permanent players.
But citizens seem more concerned about what movies are showing. This budget will be forgotten by the weekend. Unless this changes, the BMP will dream on. And the citizens will continue to suffer from nightmares.

(The writer is founder, Janaagraha)


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