Punjab MCs’ own revenue collection dips, reliance on govt aid up: RBI
As the Punjab Government prepares to hold elections to the municipal corporations of Amritsar, Jalandhar, Phagwara, Ludhiana and Patiala later this month, a recent report by the Reserve Bank of India (RBI) points towards decline in own revenue of municipal corporations in the state, and their growing reliance on grants from the Centre, state government and finance commissions.
While the municipal corporations in the state were revenue surplus in 2021-22 (by Rs 13 crore), these became revenue deficit by Rs 184 crore in 2022-23. The own revenue of the municipal corporations in the state has declined from Rs 1,430.32 crore in 2021-22 and Rs 1,403.31 crore in 2022-23, to Rs 1,247.18 crore in 2023-24.
On the other hand, the establishment expenditure (salaries, wages and pensions) of these urban local bodies increased by 48 per cent between 2019-20 and 2023-14. The total revenue receipts, including grants received from Centre and state, went up by only 21.2 per cent.
The report released recently also points out that though property tax is the biggest contributor to the own income of corporations, its collection in Punjab is among the lowest in the country. Water and drainage taxes contribute 7.65 per cent to the own taxes of these local bodies. The report also shows that Punjab is the sixth lowest in its share of collecting fees and user charges, as percentage of its own revenue. The RBI report has recommended that the local bodies should have the autonomy to set own rates of user charges.
The government has started geo-tagging properties in the state to plug loopholes in property tax collection. Recently, the state Finance Department had also asked the Local Bodies Department, besides other departments, to suggest increase in user charges to enhance revenues. The RBI has culled the data after undertaking a study on the finances of 232 municipal corporations in all states.
It highlights growing dependence on the transfer of funds from the Centre and state governments, besides the funds allocated by the 15th Finance Commission and the grants allocated by the State Finance Commission.
“Municipal corporations need to augment their own revenue sources for greater operational and financial flexibility. By optimising property and water taxes, increasing non-tax revenue (user charges) and adopting transparent governance practices, urban local bodies can improve their finances,” the report says.
While the municipal corporations in Gujarat, UP, Telangana, Madhya Pradesh and Maharashtra have started issuing Green Municipal Bonds to finance projects with positive environmental impact, Punjab may also examine this, it adds.
