How can the BMC help Mumbai recover?

Isalyne Gennaro and Harshita Agrawal

Public health is an economic issue. The COVID-19 pandemic has made this abundantly clear. This is especially true of cities, the frontline of the pandemic. Take Mumbai; as on July 8, India’s financial capital was also its pandemic hotspot with 86,509 total confirmed cases. Reinvesting here and in other cities will be essential for kickstarting the economy — and doing so in a way that prepares us for the next public health crisis will have long-term structural benefits. However, here’s the problem: where will the money come from?

While the Brihanmumbai Municipal Corporation (BMC) has the largest budget of any municipal corporation in India, it also administers a population of about 13 million with one of the largest slums in Asia. The considerable short-term expenses for tackling the pandemic are coming from the BMC’s Rs 850 crore contingency fund. It spent Rs 95 crore between March and April to upgrade existing healthcare capacity and anticipated an additional spending of about Rs 200 crore over the next two months. Finding funding for medium- and long-term urban upgrades that will serve the dual purpose of making Mumbai more productive and more resilient to public health shocks will be trickier.

First, investing in public transportation systems is critical for easier mobility of workers. Mumbai’s local trains, often referred to as the backbone of the city, run at 2.6-times its existing capacity. Moreover, a shift to private vehicles has already led to massive negative externalities in terms of congestion and pollution.

The number of registered private cars and two-wheelers in the Greater Mumbai Metropolitan Region had increased from 800,000 in 2001 to around 2.3 million as of 2015. These additional vehicles contribute to the road congestion faced by commuters passing through or coming into the city.

On the public health front, the pandemic has shown the value of having a robust public transport system that gives urban populations multiple options for travelling safely without being packed together in a way that makes them vectors for disease spread. Major interventions are needed here: increasing the number and frequency of trains, integrating transit systems that are flexible and ensure last mile connectivity, such as ramping up bus fleets, adding routes and investing in electric vehicles, including rickshaws that keep the pollution in control.

Second, the BMC must prioritise spending on public services to improve standards of waste management, sanitation and slum assistance. Slum dwellers represent 42 percent of the population in Mumbai, and form a large chunk of the informal labour that contributes great value to the economy. The pandemic showed us how vulnerable they are to the lack of infrastructure and access to basic services — and the economic effect of the consequent reverse migration.

The BMC’s total expenditure on urban poor at Rs 9,664.32 crore is not a small sum. It represents around 28 percent of this year’s estimated expenditure, and cuts across funds of various departments, including water, slum clearance and upgrade, education and health. However, 80 percent of that money goes into operation and maintenance; only 20 percent goes into investments and capital works.

Generating revenue that can sustainably fund the capex needed in these areas calls for structural reforms. The Constitution defines the functions that municipal corporations must undertake to reinforce local self-governance; but it does not establish an accountable decentralised system that creates capacity at the local level. This is evident in the BMC’s dependency on the state government for its revenues. Thirty-five percent of the BMC’s revenue income comes from the state government as compensation for octroi, which was abolished in 2017 and replaced by the Goods and Services Tax (GST) from the central government.

Given that the state government faced a 60 percent reduction in revenues collected this year compared to March 2019, the BMC will probably not receive its share of funds from the state at least for the year 2020-2021. Such a hit reminds us of the importance of having economically autonomous cities to respond to crises. Without expanding its own sources of revenues, it is unlikely that the BMC’s current finances can support the recovery.

One way to improve revenues is to bolster property tax collection. Though collection has increased lately, the BMC still fails to get back the Rs 15,000 crore outstanding from non-payment and disputes. Using administrative and human resources more efficiently for collecting outstanding property taxes, while important, will not be adequate.

The 2016-17 Economic Survey showcases how tools based on Geospatial Information Systems (GIS) can improve maintenance of property records and help assess tax potential in Jaipur and Bengaluru. Using and institutionalising adequate land management tools can ensure reliable collection of revenues. The city authority must also consider monetising the land it owns as a steady source of large revenues.

Finally, the city would be better off by spending more of what it puts in the reserves every year, while building administrative capacity and financial literacy to do so. As of 2017, the corporation had Rs 61,510 crore as reserves, which continues to expand every year as the BMC fails to utilise all its funds.

This pandemic has showed that having large savings and a balanced budget doesn’t necessarily mean a city is in rude health. It has taught us that raising revenues from sustainable sources, streamlining processes, reinforcing financial literacy, autonomy of local administrations, and revising the current approach in planning expenditure are the foundational pillars of good urban governance.

(The authors thank Vaidehi Tandel for her inputs)

Isalyne Gennaro and Harshita Agrawal are associates at IDFC Institute, a Mumbai-based think tank. Views are personal.