On the verge of bankruptcy

On the verge of bankruptcy

The city's three BJP-run municipal corporations are blaming Delhi's AAP government for withholding funds needed to pay their employees' salaries.

Just three year after the trifurcation of Municipal Corporation of Delhi, the move is being blamed for the severe funds crunch faced by two of the three corporations. The split means that the financially stable south Delhi no longer ‘subsidises’ services elsewhere in the capital. 

The North Delhi Municipal Corporation has supported the claim that the three civic bodies should be reunified as two of them are on the verge of bankruptcy. But the move cannot be seen in isolation as the civic agencies are heading for elections in 2017.

At present, all the three municipal corporations are run by the Bharatiya Janata Party: the party would want to retain control over them and reunification may seem the most convenient option to tackle opposition parties, the Congress and the Aam Aadmi Party.

The corporations have been blaming Delhi’s AAP government for not releasing the funds due to civic agencies. Instead of giving grants-in-aid to help corporations tide over their financial crunch, the AAP government had set up a committee to scrutinise their accounts. It has directed the ‘fact-finding’ committee to submit its report within a week.

The city government may be buying time to divert the attention of the employees who have threatened to go on an indefinite strike starting January 27 over unpaid salaries.

One manifestation of the crisis was seen on January 14 when employees of the East and North Corporations took to streets demanding salaries, clearance of arrears and regularisation of contractual posts.

The three mayors met Lieutenant Governor Najeeb Jung on Friday and told him that Deputy Chief Minister Manish Sisodia has no legal right to set up a committee to audit corporations’ accounts.

North Delhi Mayor Ravinder Gupta, East Delhi Mayor Harsh Malhotra and South Delhi Mayor Subhash Arya, said that accounts of municipal corporations are already audited by the Comptroller and Auditor General of India.

Ravinder Gupta has also written to Chief Minister Arvind Kejriwal, seeking implementation of the January 7 orders of the court which directed the Delhi government to release the funds due to the civic agencies. He argued that withholding funds was contempt of court by the Delhi government and the Chief

The mayors reminded the LG that the corporations were struggling to pay salaries to their staff, pensions to the beneficiaries and carrying out development work.
They wanted the LG to persuade the Delhi government to pay funds as per the Third Delhi Finance Commission and also implement the recommendations of the Fourth Delhi Finance Commission.

On Wednesday, the three mayors and Delhi BJP chief Satish Upadhayay also met President Pranab Mukherjee and asked him to direct the city government to release the funds to the corporations.

Satish Upadhyay, who is also a councillor, says that the AAP government has to accept responsibility of providing funds to the BJP-run corporations as pointed out by the Delhi High Court. He says the Fifth Finance Commission should be set up within eight weeks as directed by the court.

Delhi High Court recently asked the Aam Aadmi Party government to revise the cap it has put on the number of pensioners under its jurisdiction. At present, over four lakh people get a pension from the city government.

The direction may help the three corporations. Among themselves, they are supposed to give pensions to over two lakh beneficiaries of their welfare scheme.
But, as a senior official with the North Delhi Municipal Corporation says, around 80,000 beneficiaries have not been given pensions for over two and a half years. Similarly, East Corporation has not been able to give pensions to over 30,000 people for the past three years.

The trifurcation in 2012 might have been an astute political move by the then
Congress government to make inroads into the BJP -run MCD, but the councillors now say it was not in the public interest.

At that time, as the MCD was being split, the Delhi government promised to provide adequate financial aid to the three new civic agencies.

And during the tabling of the recent 2016-17 Budget, the chairman of the standing committee of North Corporation Mohan Bhardwaj said that as per the recommendations of the Fourth Finance Commission, Delhi government owed Rs 729 crore to the civic agency.

“The court’s order for payment of these funds gives testimony to this claim. Had Delhi government paid the corporation its due funds, the civic agency’s budget loss would have been Rs 538 crore instead of Rs 1,750 crore,” he said.

While the North and East Corporations are pressed for cash, the South Delhi Municipal Corporation is self-sufficient. The North civic agency needs Rs 171 crore a month to pay salaries to its over 70,000 employees - that's nearly Rs 2,100 crore annually. The East Corporation requires over Rs 100 crore month to pay salaries and pensions to its over 30,000 employees.

It's not just that the city government is reluctant to release funds to the three corporations. Some Delhi government departments have also been conveniently evading property tax – a major source of revenue for the MCDs.

Shared blame

But the municipal corporations cannot lay the entire blame on the city government as underperformance in revenue generation by the municipalities is one of the main causes for their present predicament. They need to put their own house in order.

Not only have they failed to bring more properties under the tax net, they have also not been able to generate sufficient revenue from their own resources – like advertisements, licensing, and renting out banquet halls and community centres.

And they are inefficient in collecting property tax. For example, there are over 10 lakh properties within the North Delhi Municipal Corporation limits, but only 3.5 lakh
pay property tax, says a senior official.

The North and East Corporations have prepared a list of government departments and real estate developers who are major property tax and service charge defaulters, owing crores to the civic agencies.

According to the corporations, Unique Property Identification Code (UPIC) is the way out as it aims to streamline database of properties under the jurisdiction of civic agencies.

At present around 35 per cent property owners of North Delhi pay property tax and with the UPIC system more properties will fall under the ambit of property tax, says an official. Experts say that the trifurcation has led to an increase in the expenditure for carrying out development work, but the delivery of services has not improved.

“The expenditure has risen but the revenue has not increased,” says a North Corporation official. They say that reunification of the civic agencies is the only way out to extricate them from their financial troubles.

“The trifurcation was an illogical move because the number of zones under the three civic agencies remained the same as they were under the unified MCD - 12 zones. Instead of the trifurcation of the unified MCD, the city government should have increased the number of zones for greater division of labour,” says a senior North Corporation official.