Running on deficit budgets, city corpns struggle to take up new works, pay salaries in Karnataka

Hubballi: Poor management of self-generated funds and taking up of development works beyond their financial capacity have put all the 11 city corporations (excluding BBMP) in the state under severe financial stress, forcing them to run a deficit budget, according to data available with DH. 

As per a document from the Urban Development department accessed by DH, eight of the 11 city corporations need at least Rs 1,648 cr to tally their balance sheet. 

While data on the precarious financial situation of eight city corporations are available, senior officials of the Urban Development department said the remaining three city corporations are also facing a similar fund crunch.

Mysuru, the second richest city corporation after Bengaluru, has the highest deficit of Rs 942 crore, almost three times its revenue (Rs 392 crore for the year 2025-26), followed by the twin cities of Hubballi-Dharwad (Rs 289 crore deficit) and Mangaluru (Rs 207.52 crore).

Mysuru City Corporation Commissioner Shaikh Tanveer Asif, however, disputed these figures. "Mysuru is among the best performing corporations in India and there is no dearth of funds for development work," he said.

The Hubballi-Dharwad Municipal Corporation generates around Rs 321 crore funds via collection of taxes and other means. However, its general funds expenditure, including committed annual maintenance, pending bills, ULBs contribution for various projects/schemes and other expenditures, is around Rs 610 crore. 

Acknowledging fund deficit hampering works in the twin cities, HDMC Commissioner Rudresh Ghali said that out of the Rs 120 crore pending dues to contractors, the civic body was able to clear only bills worth Rs 25 crore. "As clearing of dues is delayed, there is resistance from contractors to take up new works," he said, adding that these dues had been accumulated over the years.

Deficit of funds has not only impacted fresh development works — as contractors are not willing to participate in tender process till their dues are cleared – but also has affected payment of salaries to permanent employees of civic bodies. The Hubballi-Dharwad Municipal Corporation was unable to pay three months of salaries and pension to its 1,500-plus staff due to shortage of funds and implementation of the Seventh Pay Commission.

Urban Development Minister Byrathi Suresh, however, said there was no dearth of funds with city corporations to take up works. "The state government has allocated Rs 2,250 crore for the 11 city corporations to take up development works. Tenders for various works have been called for and in the next 15 days works will commence."

Multiple sources in various city corporations blame the state government for non-release of funds under various schemes and forcing them to pay salaries of staff resulting in a deficit budget.

The State Financial Commission (SFC) had instructed all the city corporations to clear salaries and arrears for January-March 2025 from their general funds. Additionally, the SFC in its April 1, 2025, recommendation has stated the urban local bodies (ULB) have to manage 15% to 20% of their salary expenditure from their own sources.

"There is a huge demand for development works, while the tax net and collection of taxes is very poor. The state government is also not releasing sufficient funds on time and instructing the ULBs to manage using their own funds," said a revenue officer at a city corporation in north Karnataka.

Mangaluru City Corporation (MCC) Commissioner Ravichandra Naik said he has asked his officials to cut down unnecessary works and concentrate on most important tasks like desilting of storm water drains, rain preparedness and others. While the MCC generates around Rs 278 crore from its own sources, it requires Rs 502 crore to implement ongoing civic work and other projects.

A senior officer in the Urban Development department, who did not wish to be named, said all the ULBs are under tremendous pressure from elected representatives to take up "emergency work" even though they don’t have required funds. "Financial management of almost all the city corporations are in very bad conditions," said the official.