With falling incomes, here’s why Bengaluru’s BBMP needs a new revenue model

By Renuka Viswanathan and Basavaraj Mudigoudar

The latest BBMP budget is a sorry saga of unrealized aspirations and overblown expectations.  The figures reflect as well as conceal the dismal condition of the fastest growing metropolis of the country and the failure of its civic body to meet even the basic needs of a clamorous population.  Year after year, receipts fall far below projections.  Resources raised are wasted on inflated, poor quality works. And no investment is made in health and educational facilities for common people.

Like other civic bodies, the BBMP too depends, to an equal extent, on its own resources and those that flow from the state and Central governments. Unconditional Finance Commission grants are one dependable source of fixed income. While the state government channels funds to the BBMP for special purposes and the Central government focuses on problem areas like urban health. The real test of fiscal performance is, however, growth in revenue, which has been the BBMP’s greatest failure. No new revenue source has been identified in Bengaluru, which is growing by leaps and bounds.

On the other hand, existing tax handles and revenue channels have all dried up in recent years, forcing the hapless residents, who pay property tax, to take on the growing costs of civic administration.  BBMP’s total dependence on property tax can no longer be concealed. Receipts shot up by 45% in 2016-17 only because property tax rates were increased. Since then, receipt growth has slumped to 10% last year and fallen to 0.8% this year.  Almost every other revenue source, tax and nontax, has become dormant. 

All local bodies raise respectable revenues from advertisement taxes. Till very recently, Bengaluru was awash with garish flexes, sporting the faces of known and potential political figures and agents. However, the Palike recovered little money from this source.  Bylaws were openly flouted and demand was never raised to collect legitimate revenue. The unwillingness of BBMP and its political masters to discipline themselves has forced the High Court to enforce a total ban on advertisements till the Palike formulates appropriate bylaws. Inordinate administrative delay means that one elastic revenue source continues to languish and ad agencies lose money and jobs. 

Another remunerative revenue handle for an expanding city is license fee from commercial concerns.  Resources raised under this head should ideally mirror the spurt of economic activity, but here again, BBMP has come to a standstill. Businesses have mushroomed in residential areas in total violation of existing guidelines. So much so that it is impossible now to bring order into the chaos.  Communities band together and negotiate their own compromises with potential vendors.  And BBMP is neither able to modify its guidelines, nor can it license and regulate businesses, which have been around for years.  A lucrative field for corrupt middlemen but no source for honest revenue.

The BBMP has not succeeded in raising rents from property and market stalls hired out in its many facilities all over the city, even when they are located in prime areas.  No wonder they remain filthy and ill-maintained, not a source of revenue but a drain on resources.

Pervasive bungling of revenue-raising policies has resulted in dependence on a single tax handle – property tax.  Poor management has transformed this elastic resource base to a stagnant (perhaps declining) pool of revenue. Property tax expected to be collected in the current year is below the levels budgeted in 2015-16. Procedures for fixation and collection are mired in corrupt administrative practices despite online self-assessment mechanisms. Much more could certainly be realized (without raising rates) to meet the exploding demands of Bengaluru.

When revenues are not realized, expenditure necessarily suffers.  The squeeze is felt in infrastructure spending, but the brunt is borne by social sectors like education, health and social welfare. 

Once a paradise for pedestrians, Bengaluru has today become a byword for potholes, encroached footpaths, unlit lanes, overflowing and clogged drains. It has become the city of nightmares.  Infrastructure management is fragmented among various departments and agencies of the state and civic administrations. All of which, seem to be in damage-control mode, forever reporting to an exasperated judiciary.  In the BBMP budget, there are at least four accounting heads for public works, (zonal works, Central projects, road infrastructure and storm water drains). The most visible of these is “zonal” public works.  Zonal fund allocation is unconnected to planning need-based works; the public procurement law is ignored during project execution.  Sub-budget heads list bundles of ward works without transparency or logic and spending stays between 58% and 65% of budgeted levels.

Rampant underfunding of social sectors (education, health and social welfare), the linchpins of our welfare state, is ignored by the state government, political leaders at all levels and citizen activists.  Educationists promote municipal schools to ensure accountability and service delivery. Yet, BBMP constructs no new schools and allots 0.5% of its budget to the sector. Does the government department regulating education inspect the crumbling walls, filthy toilets, overgrown grounds, broken desks and leaky roofs of BBMP schools?  Rs 10 crore has been set aside for maintaining schools but only Rs 2 crore is spent.  A decade after 110 new villages were added to the metropolitan area, which have been generating resources for the Palike, have no new municipal schools catering to migrants from impoverished districts of Karnataka.

There is more bad news from the health sector. The BBMP is ideally supposed to spend Rs 31 crore on medical health institutions, which is lower than the Rs 37 crore spent 4 years ago.  Bengaluru, like other urban areas, is served by the Centrally funded National Urban Health Mission.  A primary health centre in the city is meant for 50000 residents, but even the PHCs of Central Bengaluru, (which alone fall under BBMP control), bear a much heavier burden.  BBMP has not increased their number, nor have they opened new ones in the areas added to the Palike more than ten years back (areas which have given a boost to BBMP revenues, also areas which have been swamped by migrating families). The city is sitting on a dynamite from the health point of view, as it has failed to serve the city’s “vulnerable population” under the Health Mission by not appointing sufficient community health workers (ASHAs).

The direct impact of inefficiency in revenue generation is on the downtrodden citizens of society, pourakarmikas, women, SCs, STs and OBCs. 23% of the budget, earmarked for welfare schemes, suffers the first cut, when own revenues fall.  It is no surprise that spending on this area is less than 50% of the planned figure.

Our city regularly faces the wrath of the public, the High Court and even the National Green Tribunal, but has not yet found a workable solution to its garbage problem.  The one critical budget head under solid waste management relating to collection and removal of garbage shows expenditure higher than budget provisions, even as garbage collectors remain unpaid for months at a time. Rs 375 crore provided for this activity is far lower than the amount spent in previous years (when there were large payment arrears).  What these presages is not clear, since garbage collection practices are under constant overhaul. Does it mean that the poorest civic workers must wait for payment for work done next year too?

There are many easy, implementable solutions to the city’s mounting civic woes. Why do policy makers, people’s representatives and officials refuse to take them?

For 2019-20, the data is drawn from the Revised Budget Estimates of Bbmp for 2018-19 and Budget Estimates for 2019-20 as approved by the Taxation and Finance Committee on 13/2/2019 and presented to the Council on 18/2/2019.  For earlier years, data is drawn from Bbmp budgets available on the website bbmp.gov.in  

Renuka Viswanathan is a former Secretary, Government of India and Cabinet Secretariat and Organising Secretary of the Aam Aadmi party Karnataka. Basavaraj Mudigoudar is the organising secretary of AAP. Views expressed are authors' own