A close look at the revenue collection, the expenditure of the civic body and the impact of the pandemic on the implementation of the budget as the PMC is likely to have revenue collection less than 50 per cent of its estimated target in the current fiscal.
The Pune Municipal Corporation (PMC) administration will on Friday submit a draft budget for 2021-22 to the standing committee of the civic body so that it could be tabled in the general body for its final approval. Here is a close look at the revenue collection, the expenditure of the civic body and the impact of the pandemic on the implementation of the budget as the PMC is likely to have revenue collection less than 50 per cent of its estimated target in the current fiscal.
The PMC has an annual budget of Rs 7514.31 crore for 2020-21. The civic body has been able to implement around 60 per cent of the budget in the last few years leading to criticism over inflating the budget than the realistic situation. The pandemic has further affected the budget implementation leading to a financial crisis for the civic body as it could get revenue collection of Rs 3,285 crore till now and is expected to generate another few hundred crores by the end of the financial year. The expenditure has been Rs 2,992 crore which includes Rs 860 on development works and the remaining was spent on meeting daily needs for the smooth operation of the civic body.
Property Tax is the largest revenue source for PMC
The maximum revenue to the civic body used to be from Local Body Tax (LBT), which was replaced by Goods and Service Tax (GST), followed by Property tax. However, the Property tax took over as the main revenue source for PMC and Rs 2,320 crore was set as the target revenue collection from it for 2020-21 which amounted to 31 per cent of the total collection. It is the largest direct tax collection for the PMC. However, the PMC administration has so far managed to collect Rs 1370.99 crore from property tax that too after the collection of Rs 487 crore by implementing an amnesty scheme. The civic administration has been conducting surveys across the city to identify unassessed properties to bring them into tax ambit.
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Dependency on GST
The PMC is very dependent on Rs 2077.91 crore but is an indirect source of revenue. The GST collected by the union government is sent to the civic body via the state government. The GST is the second-largest source of revenue of 28 per cent for the PMC but the civic body has to wait for it. Fortunately, its uninterrupted transfer from the government helped the PMC sail through in the pandemic year.
Building Permission Charges
The worst-hit revenue source in the pandemic year has been the Building Permission charges. The impact of slowdown in the real estate industry due to pandemic has led to a drop in proposals of infrastructure development in the city resulting in a decrease in revenue collection. The PMC had set a target of Rs 1,000 crore from Building Permission charges for the current fiscal which is 14 per cent of the total revenue target. However, the real estate slowdown has impacted the direct source of revenue for the PMC.
Other sources
The revenue from other small sources combined together contribute 12 per cent of the total revenue collection for the PMC. These include Parking fees, License fee, Entry fee, Renting civic properties, Advertising fees. There have been efforts by civic administration to increase revenue from the other revenue sources category but the elected representatives have been opposing the move citing the additional burden on the citizens. This direct revenue source has large potential to help the civic body raise its income source.
Water Charges
The Water charges contribute 6 per cent in the revenue target and the PMC had started the process to seal the leakages in it by implementing an ambitious 24*7 water supply scheme that includes metering water supply to each consumer. The scheme is yet to pick up due to hurdles in its implementation.
Loans and Municipal Bonds
The PMC has to rely on raising funds to the tune of at least 5 percent for meeting the expenditure on development projects. It has been mainly relying on loans and recently took to municipal bonds to raise funds for 24 by 7 water supply projects.
Government Funds
The civic body has been witnessing faster growth from the last few years and is under pressure for taking up mega infrastructure projects mainly for traffic and transport, water supply and sewage treatment. The PMC has to reach out to the state and union government for financial assistance to take up the projects and meet the expectations of citizens. It has been hoping to raise 4 percent revenue from government financial assistance.
Capital Expenditure suffers
The financial crisis has a major impact on the development works of PMC in the current fiscal. The PMC had estimated an expenditure of Rs 3630.80 crore for infrastructure work in the city in 2020-21 which is 48 per cent of the total expenditure. However, the shortage of funds restricted the expenditure to Rs 860 crore which is less than 24 per cent of the projected expenditure. The state government too had directed to cut down the expenditure by 40 per cent and the PMC was able to reduce it by around 75 percent for the year.
High Administrative Expenditure
The PMC has managed to reduce its administrative expenditure to Rs 2,132 crore so far in comparison to the estimated Rs 3,883.49 crore for the financial year. However, it is 55 per cent of the total revenue collection so far. The budget has estimated around 50 per cent on administrative expenditure and is likely to be at least 60 per cent by March end, which is higher than the estimate. The administrative expenditure mainly includes 25 per cent for payment of salaries to civic staff, 18 percent of maintenance, fuel and health facilities, 4 percent for electricity charges followed by one percent each for water charges, ward-level works and loan repayment.
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