After earning high returns from octroi and development charges during the economic boom years, the country’s richest municipal corporation, the Brihanmumbai Municipal Corporation (BMC), finds itself in a tight spot with the US-led recession beginning to impact India. The slow growth rate of octroi, combined with the slump in the realty sector, has got the civic administration worried about how it will reach its revenue target of over Rs 16,000 crore in the remaining three months of the current fiscal (2008-09).

Senior civic officials agree that the economic recession in the West will affect the next financial year’s budget but have refrained from forecasting that the burden will be passed on to the citizens. “The Western recession has had some impact on collections, particularly on octroi and development charges, compared to last year. Although some departments may not be able to achieve the increased targeted income set for 2008-09, the revenue collection will be the same as last year. So there wouldn’t be huge losses,” Additional Municipal Commissioner R A Rajeev told a press conference today.

Every year during the budget session, the targets of income earning departments like octroi, property tax, development charges, water and sewerage are increased, keeping in mind the high growth rate and development needs of the nation’s commercial capital. Octroi, which is the largest income earner for the BMC, is reeling under low growth rates this year due to the slowdown.

The dip in trade too is worrying civic officials as the target of Rs 4,600 crore remains to be achieved by March 31, 2009. “If the recession continues for another few months, it will be difficult to achieve the target. Moreover, the civic administration has additionally fixed a target of Rs 5,300 crore for the financial year 2009-10,” said an official from the octroi department.

The total octroi collection till December 15 stands at Rs 3,267 crore, a rise of Rs 434 crore from last year’s figure of Rs 2,833 crore. However, due to a fall in crude oil imports, the overall growth has dipped to 15.33 per cent from last year’s 22 per cent.

The development plan and building permission departments, too, are struggling to meet the target of Rs 887 crore. Development charges, which account for 25 per cent, and premium on buildings, which contribute 60 per cent, have not able to pool in the revenue as builders are not coming forward with new plans.

“For the last three-four months, there has been a dip in building proposals and we are, therefore, not able to collect as much development charges and premium as expected,” pointed out DP Chief Engineer Ashok Shintre.

The department has so far been able to collect around Rs 600 crore and is already thinking about a mid-year revision of the target of Rs 1,254 crore. “If the recession continues for long, then there is no option but to revise the targets. We had a great year in terms of revenue till early this year as the realty sector was at an all time high. But the market slump has just dipped the income,” rued Shintre.

Builders, brace for hike in scrutiny & devp charges
The BMC is banking heavily on revision of development charges, which are currently at Rs 250 per sq meter. It had proposed a revision of Rs 850 per sq meter, which is awaiting the final approval of the state Urban Development Department.
“We are in talks with the State authorities to approve the proposal soon so that we will be able to fill in the income gap which is created due to the recession,” said DP Chief Engineer Ashok Shintre. The civic administration is also considering doubling the amount of scrutiny fees, which are charged at every step during verification of building plans and construction until the last approval of Occupation Certificate is given.
Currently, the scrutiny fees are approximately Rs 2/ sq feet (residential), Rs 4/ sq feet (commercial) and Rs 3/sq feet (industrial). Senior civic officials said that the rates are too low and may be hiked by two or even three times in the coming months.