The Reserve Bank of India (RBI) report titled ‘Own Sources of Revenue Generation in Municipal Corporations: Opportunities and Challenges’ emphasizes the need for comprehensive reforms in municipal corporations (MCs) to improve their own revenue generation.
- It highlights the importance of tax reforms, rationalizing user charges, and strengthening collection mechanisms to address financial inefficiencies.
- The report analyzed the budgetary data of 232 MCs, covering over 90% of India’s total municipal corporations.
Municipal Corporations Revenue Sources:
i.While MCs show surplus revenue accounts, they MCs rely heavily on transfers from higher governments, limiting their financial autonomy.
ii.MCs’ revenue receipts rose by 20.1% YoY (Year-on-Year) to Rs 1.7 trillion in FY24, up from Rs 1.42 trillion in FY23 and Rs 1.37 trillion in FY22.
iii.The share of own resources in municipal revenue receipts increased to 61.9% in FY24 (Budget estimates), up from 59.7% in FY23 (Revised estimates).
iv.Revenues, impacted during 2020-21, recovered in FY22-23, but remain concentrated, with the top 10 MCs accounting for 58% of total municipal revenue.
v.MCs’ revenue expenditure grew by 13.9% to Rs 1.49 trillion in FY24 from Rs 1.31 trillion in FY23 and Rs 1.23 trillion in FY22.
MC’s Budgeted Surplus:
i.The consolidated budget of MCs shows a surplus, but it decreased from Rs 4,914 crore in FY19-20 to Rs 1,034 crore in FY20-21. The FY23-24 budgeted surplus is Rs 20,819 crore.
- The surplus in 2023-24 was budgeted at above Rs 1,000 crore in states like Maharashtra, Gujarat, Karnataka, Madhya Pradesh, Haryana, and Telangana, led by Maharashtra (Rs 11,104 crore).
- The surplus in MCs in Delhi, Andhra Pradesh, Rajasthan, Odisha, West Bengal, and Tamil Nadu was placed in the range of Rs 100 crore (Tamil Nadu) to Rs 687 crore (Delhi).
- MCs in Tripura, Jharkhand, Himachal Pradesh, Bihar, Chhattisgarh, Jammu and Kashmir, Uttar Pradesh, and Kerala budgeted for a revenue deficit in the range of (-) Rs 2 crore (Tripura) to (-) Rs 789 crore (Kerala) for 2023-24.
As of March 2024, the total municipal bonds outstanding at Rs 4,204 crore was just 0.09% of the total corporate bonds outstanding.
MC’s Borrowings:
i.Borrowings from financial institutions rose substantially from Rs 2,886 crore in 2019-20 to Rs 13,364 crore in 2023-24, comprising about 5.2 per cent of total municipal receipts. Odisha and Telangana MCs reported the highest borrowings relative to their revenue, with figures of 14.4 per cent and 15.1 per cent, respectively.
ii.The report suggests that measures like Geographic Information System (GIS) mapping and digital payments could improve property tax collection.
iii.Timely and direct transfers from state governments are vital for MCs’ financial stability.
iv.Regular formation and timely implementation of State Finance Commissions (SFCs) recommendations are crucial for proper state funding.
