Source: 
Author: 
Ajit Ranade
Date: 
10.10.2020
City: 
Mumbai is the richest municipality in India with a budget whose size dwarfs many state government budgets. For instance it is 50 per cent larger than the state budget of Goa. It can legitimately brag about many excellent hospitals, which provide highly subsidised healthcare services to the poor and vulnerable. Patients flock to Mumbai’s hospitals from across the country, and the city does not discriminate against anybody. The doctors, nurses, ward staff are all dedicated and constantly fighting uphill battles against rising caseloads, inadequate infrastructure, long working hours and funding shortage.

Wait a minute. Is Mumbai not the richest civic body in the country? And it has funds shortage? Despite sitting on real estate whose value if greater than gold? How come?

The answer, dear reader, is a bit complicated. Despite having responsibility of providing governance services like water, sanitation, garbage collection, traffic management, schools and, of course, hospitals and a hundred other services, the city has very little autonomy in how it collects its revenue. Before the national rollout of Goods and Services Tax (GST), it used to get nearly Rs 8,000 crore revenue through octroi. That had to be sacrificed as a pre-condition for signing up to GST. Now the city gets a share of GST that comes to the state. For that the city has to depend on the kindness and generosity of Mantralaya. That’s because there is no automatic and uncontroversial formula. What if all the other 23 municipal corporations also start asking their share of GST? On what basis to give Mumbai more than a lion’s share?

OK, if not GST, is there not any other method? Well, there is property tax. But these rates too are decided by Mantralaya, not the corporation per se. Only one sixth of the revenue comes from property tax, even though the market value of Mumbai’s real estate is surely in tens of trillions of rupees. Thanks to the pandemic and lockdown, during the month of April the city had nearly zero registrations of property, causing a steep fall in property tax collection. For past three years the city has witnessed declining revenues from property taxes, since the real estate sector is plagued with many problems, like stuck projects, banking woes and slump in demand. It is unlikely that we will see a quick revival in the fortune of the real estate sector. The state government has wisely decided to cut the stamp duty to 2 percent as a stimulus measure. But the impact on the economy and tax collection is yet to be seen.
The city also has a unique source of income, called interest on fixed deposits. Yes, this is possibly the only government in the world which collects interest income of more than Rs 2,500 crore annually, from fixed deposits, which are probably close to more than Rs 30,000 crore. Why so? Presumably that corpus is to fund pension of retired employees. But such is the dire situation in Covid times that the city had to break some of the FDs.

Thus we are led to a rather sorry state, where the municipal commissioner, the executive boss of the city, has had to write to the chief minister that the city cannot fund the 5,000-bed contagious diseases hospital. This is badly needed in the times of the pandemic. Not just the city or state, but the whole country needs to step up expenditure on healthcare. It has to double, or even triple. That includes hospitals, equipment, training for medical and paramedical professionals, primary clinics, and subsidy on health insurance to the poor and needy. Why is Mumbai shying away from taking the lead?

Mumbai’s aggregate income is about 2 per cent of national income, i.e. around Rs 4 trillion. If it has genuine revenue autonomy as envisaged in the historic 73rd and 74th constitutional amendments, then it should have garnered at least a modest 10 per cent of local income as a tax base. That would be a budget of Rs 40,000 crores. Surely that would suffice to fund a 5,000-bed hospital, which is going to be around for at least 50 years. This is an investment into the city’s future, and can surely be funded with some incentive thrown in for commercial usage of the land.

The city hopes to build a nine kilometre coastal road for Rs 13,000 crore, which will benefit mainly car owners. There are also other competing demands on funds, for projects such as the underground metro and trans-harbour link. It may be prudent to put the Covid hospital much higher up on the priority list. If this means higher property taxes or parking charges, so be it. The city must assert more autonomy, and wean away from too much dependence on the state government.

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