Municipal corporations in India are gasping for funds
- An RBI analysis has concluded that the combined budget of all the municipal corporations in India is smaller than that of Central & State governments.
- Reveals how municipal bodies are increasingly dependent on fund transfers from State & Centre, while their revenue earning capacity is limited.
Issues faced by Municipal Corporations
- Curtailed revenue raising powers: Their revenue raising powers are curtailed due to which they don’t have funds to carry out their activities.
- Expenditure on administrative expenses: 70% of funds Municipal Corporations get are spent on salaries, pensions and administrative expenses with the rest left for capital expenditure.
- Very low taxes earned by municipal corporations: The tax revenue of municipal corporations formed 31-34% of total revenue in the 2018-20 - low compared to many other countries and it also declined over time.
- Huge dependence on property taxes: In 2017-18, the property taxes formed over 40% of the municipal corporations’ own tax revenue but it was much lower compared to OECD countries.
- High dependence on transfers: The revenue raising potential of municipal corporations is limited whereas they rely highly on transfers from centre and states.