“from deficit to surplus: a realistic and achievable roadmap to make mcds financially...

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DRAFT

“From Deficit to Surplus: A Realistic and Achievable Roadmap to make MCDs

financially self-reliant”

Table of Contents

Our Vision ................................................................................................................................................ 3

We believe .............................................................................................................................................. 3

What we want to achieve? ..................................................................................................................... 3

1. 2000 cr/yr for development of Infrastructure Deficit Areas ....................................................... 3

2. Timely wages and Arrears of Sanitation Workers and other Municipal Employees .................. 4

3. Primary Health ............................................................................................................................ 4

4. To restore and enhance the monthly pension to Rs2,500 for 2.25 lakh needy persons ............ 5

5. Primary Education ....................................................................................................................... 5

6. Issue vending license and identify vending spaces for 5 lakh Street Vendors ........................... 6

7. World class scavenging and Solid Waste Management .............................................................. 7

Some other key facts .............................................................................................................................. 8

1. Transparency and accountability: ............................................................................................... 8

2. Lack of innovative ideas to improve revenue generation: ......................................................... 9

3. Property Tax .............................................................................................................................. 10

4. Toll Tax Collections: .................................................................................................................. 10

5. Outdoor Advertisement ............................................................................................................ 11

6. Revenue from Car Parking ........................................................................................................ 11

How to achieve it? ................................................................................................................................ 12

1. Property Tax Reforms ............................................................................................................... 12

2. Development of Land Bank as an Annual Revenue Generation Resource ............................... 12

3. Municipal Bonds and Credit Rating ........................................................................................... 12

4. Street Vendors License ............................................................................................................. 13

5. Transparent Toll Tax Collections ............................................................................................... 14

6. Outdoor Advertisements .......................................................................................................... 14

7. Parking Charges ......................................................................................................................... 16

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The Three Municipal Corporations across Delhi are struggling to meet their objectives and

have failed to even come close to the promises made to the Delizens.

The common cause put across by the Municipal councillors and the officers of the MCD is

the lack of fund and lack of political synergy between, State, Centre & the Municipal

Corporations. The said reasoning is nothing but an alibi far from reality and the given

excuses are nothing but an ‘eyewash’ to cover for extensive pilferage and plundering of

public funds and thereby stifling the revenue potential that the MCD could have earned on

its own.

The current leadership is bankrupt with regards to fiscal sapience that is required to bring

out the MCD from the current mess. While a local street vendor, a housewife or a

businessman knows how to maintain a balance between expenses and income, however,

the BJP ruled MCDs have failed to attain this basic understaing.

Few of the major causes which have brought the MCD to disrepute and ridicule of the

people of Delhi are listed below:

1. Extensive pilferage in implementation and collection of the revenue from existing

resources;

2. Lackadaisical planning & management of the funds allotted by centre and state;

3. Lack of innovation and failure to generate additional revenue potential without

creating a burden on people;

4. Rampant corruption, nepotism and lack of political will to take action;

5. Lack of vision & political will to implement key guidelines;

6. Inefficient human resource and infrastructure management;

7. Complete lack of planning & co-ordination within the MCD as well with other

Government bodies;

8. Failure to engage and connect with employees, citizens for their participation in

many key initiatives taken by Municipalities themselves, State & Centre;

9. Undue delay and reluctance in implementation of the Fourth Finance Commission by

Delhi Government;

10. Projects not moving from drawing boards;

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It’s no denying that currently there is a gap in the financial requirements of the Municipal

corporations and the same not being filled-in either by the State or the Central Government

as both have deeply politicised the municipal organisation by constant rope pulling for their

own petty benefits, It’s a reality that presently the municipal corporations of the National

Capital are being governed and guided in most inept manner. There is tremendous potential

and opportunities available with the corporations provided that vision of performance and

transparenct public service replaces the current red-tapism. Also, the majority of the

requirements of the corporations can be easily met within, and without being unduly

dependent on grants being doled out as alms.

The rightful and just financial commitments that are to be met through pool of Centre and

State Government treasury, needs to be collected in time-bound manner and utilized

judiciously in planned and focused manner than indulging in often repeated passing the

buck game of “MCD has not got funds on time or MCD has not got enough funds”.

Our Vision

We will be focusing on fiscal management of the 3 municipal corporations essentially

through two platforms, i.e. Protecting and safeguarding the “Interest of Delizens”, especially

those belonging to economically weaker sections and “Make the MCDs financially self-

reliant-From Deficit to Surplus”

We believe

“Real, sustainable transformation of the 3 Delhi Municipal Corporation can only be

achieved by sound financial management and developing internal capacity & governance

through synergy with all stake holders…the most important of which are Delizens

themselves!”-And this is achievable in a time frame of two years only.

What we want to achieve?

1. 2000 cr/yr for development of Infrastructure Deficit Areas

Annual funds of Rs2000 crores for development of infrastructure deficit areas of Delhi,

particularly the Unauthorised Colonies and the Slums.

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2. Timely wages and Arrears of Sanitation Workers and other Municipal Employees

Sanitation Workers are provided uninterrupted wages and arrears immediately released.

Sanitation workers, and other employees of the Municipal Corporations should be paid

wages on time. All pending arrears to Sanitation Workers be released. The pending arears to

sanitation workers are as follows:

a) North DMC- 550.07 crores

b) South DMC- 547.30 Crores

c) East DMC- 461.82 crores (All Employees)

Total pending arears thus is 1,559.19 crores in all the MCDs.

3. Primary Health

Public health systems are different from private health providers in that they are supposed

to promote health and prevent disease in addition to providing healthcare.

Public health requires a systemic view with appropriate backward and forward linkages at

different levels- primary; secondary and tertiary- of healthcare delivery. Role of primary

health centres to provide information, screen for risk factors, provide curative services at

the primary level and triage patients for appropriate level of healthcare. Moreover, primary

health centres should be equipped to expand healthcare delivery during epidemics and

other health emergencies.

Instead of concentrating on its core area of Primary Health, the Delhi’s Municipal

Corporations (falling under the jurisdiction of North MCD) has six big hospitals under it

costing around 652 crores per year (51.3% is salary). MCDs have been resisting transfer of

these Hospitals to Delhi Government. Delhi Government can use its funds to further

develop these hospitals, which otherwise are in depleted conditions. This amount thus

saved by the MCDs can be used to set up a robust first line of defence as primary health

centres.

‘Health for All’ will be the mantra for the municipal bodies and guiding principle for all

municipal health programmes and would be supported through CSR programmes. All health

facilities will be transformed into comprehensive Primary Health Centres adequately

equipped to act as first response centre. Ward Committee would play a fundamental role in

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monitoring and planning of health services. No user fees would be charged in any health

centres. Essential medical supplies will be provided in adequate quantities and at no cost to

the patients through better and efficient running of MCD dispensaries

4. To restore and enhance the monthly pension to Rs2,500 for 2.25 lakh needy

persons

To restore and enhance the monthly pension to Rs 2,500 of two lakhs twenty-five thousand

needy persons @ 800/ ward by spending Rs 675 crores/ year. Pension given by the

councillors to needy persons in their wards (800 Pensions per ward) has been with-held

since last 44 months in the East Delhi, 27 Months in North Delhi and 20 months in South

Delhi Municipal Corporations.

5. Primary Education

Following startling features indicate the plight of municipal corporations run primary

education in Delhi.

a) Number of students in South DMC have dropped by 56,703 in last 5 years

b) More than 100 schools in South, 262 schools in East and most of the schools in North

Delhi Municipal Corporations do not have Fire NOC.

c) 205 schools in South and East Delhi do not have Delhi Jal Board Metered

connections.

d) Primary School infrastructure is in shambles. School buildings, Toiles, Desks, school

uniforms, textbooks etc are way behind the standards of a National Capital.

Primary Education will be the focus and additional revenue generated will be spent

adequately and wisely on it. Improvement of facilities, through enhanced funding in MCD

primary schools through a unique Donor Programme- “Shiksha Nayaks”, by involving the

citizens in this noble cause. Such programs have been successfully implemented by the

municipalities in Karnataka and they would be studied and implemented with required

amendments.

The objectives of the Donor programme would be improving the infrastructural facilities and

overall development of the primary schools. A separate civil task force (or society) would be

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formed to monitor receipt and finance details. Under the Societies Act donors are subject to

exemption from Income Tax under Section 80G. Various options can be offered to donors:

i) If the 2nd party (the donor) wishes to avail the benefits of I.T. exemption and use

his own contractors for fulfilling the works, then he should remit his funds

directly to Society and execute the work. The work would be supervised by the

officials and payments would be made to the contractor.

ii) If the Donor desires to contribute funds to a particular work in their choice of

school, the estimates will be prepared by the Engineers of MCD and the said

work will be carried out by the Society as per Government Rules and necessary

payment will be released by the Donor (I.T exemption, the funds flows needs to

be confirmed once with the authorities).

iii) If the Donor is not interested in IT Exemption under 80 G and desires to execute

the work by hiring a Contractor as per his selection of school, he can carry out

the work by obtaining necessary No Objection Certificate from the Society and

necessary supervision will be done by the Engineering Section Heads of MCD.

iv) The Primary School may be named after the donor who donates Rs. 5,00,000 /-

for a period of 2 years and if he is interested, the Primary School may be named

after the donor who donated Rs.10,00,000 /- for a period of 5 years . The donor

would have first right of refusal for continuing their name after the naming

period expires, however this would be subject to all conditions of contract being

fulfilled.

6. Issue vending license and identify vending spaces for 5 lakh Street Vendors

Street Vendors (Protection of Livelihood and Regulation of Street Vending) Act, 2014 was

legislated by the Union Congress Government. It mandates for identification of proper

vending spaces and issuing vending license by the ULBs @ 2.5% of the total urban

population. Delhi thus qualifies for around 5lakh vending spaces and licenses.

Following is the number of official vendor licence holders in Delhi:

S.

No.

Municipal

Body

Number of

vendors having

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license

1. SDMC 4412

2. EDMC 1742

3. North DMC 7680

4. NDMC 700 (approx.)

But all the ULBs in Delhi have issued only 14,534 vending licenses. It has resulted in an

inspector raj where-in each of these 5 lakh vendors end up paying Rs150 to Rs1000 per day

to municipal and police authorities. If Street Vendors Act is implemented and Rs1000/month

is charged from each of the vendor, MCDs can collect Rs600 crores per year. Using this

money, we can pay the arears of sanitation workers (Rs1559.19 crores) in two and a half

years! A win-win for everyone.

7. World class scavenging and Solid Waste Management

There is a huge shortage of jetting machines, trucks, loaders, bulldozers , suction machines

in Municipal Corporations.

As per the 'Delhi Citizens' Handbook 2016' prepared by 'Centre for Civil Society', the

Municipal Corporations were unable to utilise funds allocated under the Centre's Swachh

Bharat Mission (SBM).

North DMC (DEMS) Unspent Amount

4267.66 Lakhs 2015-16

4600 Lakhs 2016-17

2745 Lakhs 2017-18

Similarly, South Delhi Municipal Corporation (SDMC) managed to only spend 0.25 per cent

out of the total received amount of Rs 31.63 Crore in 2015-16.

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Some other key facts

1. Transparency and accountability:

Two out of the three Delhi’s

Municipal Corporations are

not able to pay their wages

in time. Arears due to

Sanitation workers, since

they regularised, are

pending in all the three

Municipal Corporations.

Pension given by the

councillors to beneficiaries

in their respective wards (800 Pensions per ward) has been with-held since last 44

months in the East Delhi, 27 Months in North Delhi and 20 months in South Delhi

Municipal Corporations. While corporations in Delhi are in a huge financial distress,

but on the other hand, with better transparency and accountability, the Mumbai

Municipal Corporation has no dearth of money and has a surplus fixed deposit of

Rs51,000 crores (even though such a huge amount lying idle in the banks is also

equally undesirable). The reason for this is perhaps the following table as indicated

in the Economic Survey 2016-17. Mumbai stands first in the ranking of transparency,

accountability and participation. And Delhi is sixth from the bottom. This clearly

reflects poor and opaque revenue collection.

In a report in Times of India published on 11th May 2016 it has been reported that a

total of 1,332 cases of corruption were reported in three municipal corporations of

Delhi in the last three years, of which 630 have been investigated and mere 24

officials penalised.

In the same report a statement made by the Minister of State for Home has been

reported as under:

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"In the last three years, a total of 1,332 cases have been reported in three Municipal

Corporations in Delhi and 630 cases have been investigated," Minister of State for

Home Haribhai Parathibhai Chaudhary said during Question Hour.

The Minister also said that a total of 79 officials were booked by the CBI and Anti-

Crime Bureau in 42 cases registered by them in the last three years.

2. Lack of

innovative ideas to

improve revenue

generation:

Delhi’s 4th Finance

Commission (March

2013) while analysing

the finances of Delhi’s

Municipal

Corporations has

observed that:-

“…in case of MCD, the tax collection

is around two-third of the total

internal revenue indicating that it is

totally dependent on taxes and is not

mobilising revenue from other

sources like user-charges, rentals etc.

for increasing the internal revenue

further.” It would be interesting to

see here the performance of another

ULB from Delhi in this regard. The chart/s for New Delhi Municipal Council (NDMC)

under the Union Government points some interesting facts. The NDMC, unlike

Delhi’s Municipal Corporations, is self-dependent with 94% of its revenue mobilised

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from internal sources. Besides, 84% of this revenue is Non-Tax revenue. Around 450

crores are earned annually by the NDMC through rental income.

While 14% of Delhi Metro Rail Corporation (DMRC) is funded by GNCTD, 2% is

stipulated from property development. Above Table also clearly indicates that DMRC

had annual earnings up-to Rs130.94 crores from Leasing out Property. Despite

having huge land banks available, Delhi’s Municipal Corporations have failed to

realise this potential. Even for the Hong Kong Metro’s annual revenue, 35-40% is

contributed by property rentals.

3. Property Tax

Following table depicts the property tax

collection details from Delhi’s Municipal

Corporations. Property Tax rates have

remained unchanged since last many years. It is

mentioned in the 4th Finance Commission

(2013) Report that only one-third of eligible

properties are in tax net. Thus, Rs1,600 crores

of Property Tax are just 33% of the Property Tax

potential. If we can take it to 80% using GIS

and other modern technology, it can be

increased by Rs2,278 crores to Rs3,878 crores per year.

4. Toll Tax Collections:

Toll Tax collections also have been fraught with

corruption and opacity. The South MCD had asked

in 2014, Sriram Institute for Industrial Research

(SIIR) to conduct a survey of number of vehicles

entering Delhi and the amount of Toll Tax which

can be collected. SIIR suggested that the yearly

estimated revenue collection should be Rs1922 crores. The table of Toll Tax collection

depicts only 42% of the potential with a shortfall of 1135.12 crores last FY alone. Even if we

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set aside 3% collection charges and 15% contractor’s profit, the annual collection should be

Rs1574 crores. This is a shortfall of 50%!

5. Outdoor Advertisement

This is another area, where there is an

enormous scope. Last few years, collection

figures and variation also indicates grave

irregularities.

6. Revenue from Car Parking

There are many technological innovations

for enhancing revenue from Car Parking.

Following is the revenue collected and the

variations as seen in outdoor advertising

revenue collection depicts a sorry state.

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How to achieve it?

1. Property Tax Reforms

Following table depicts the property tax

collection details from Delhi’s Municipal

Corporations. Property Tax rates have

remained unchanged since last many years. It is

mentioned in the 4th Finance Commission

(2013) Report that only one-third of eligible

properties are in tax net. Thus, Rs1,600 crores

of Property Tax are just 33% of the Property Tax

potential.

If we can take it to 80% using GIS and other modern technology, it can be increased by

Rs2,278 crores to Rs3,878 crores per year.

2. Development of Land Bank as an Annual Revenue Generation Resource

Huge land bank is available with Delhi’s Municipal Corporations. As indicated above, New

Delhi Municipal Council (NDMC) draws around 450 crores annually from rental income. Even

the DMRC uses land as a resource, both as capital and revenue. But the Delhi’s Municipal

Corporations hardly uses its vast land banks to generate revenue.

3. Municipal Bonds and Credit Rating

To begin with, soon after bringing in transparency and accountability, steps should be

undertaken to get Credit rating from reputed credit rating agency.

Municipal City Development Bonds should be introduced in the open market after taking all

corrective steps and approvals, so that the dependency on state and centre financing can be

avoided. Similar approach had been taken Ahmedabad Municipal Corporation successfully.

These initiatives have been successfully adopted in developed nation and Municipal

corporations in Tamil Nadu, Karnataka and Andhara Pradesh had benefited from them.

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The tax-free City Development Bond

issued by the Municipal Corporation

of Hyderabad to the tune of Rs.82.5

Crores during March 2002 is one

such example. The bond issue was

assigned CRISIL rating AA+(SO) and

ICRA rating LAA+(SO). The bond

proceeds are dedicated to the

financing of development projects

including traffic and transportation

projects to decongest the city—road widening, junction improvement, development of

parallel roads, slip roads and link roads, signalisation of intersection etc. storm-water

drainage, sewerage and solid waste management, modern lighting and slum up gradation,

etc. Hyderabad City Development Bond have been evaluated as the best-rated municipal

bond in the country.

The Credit rating would also help the municipal corporation to attract FDI in their plans and

funding through national & international financial institutions

4. Street Vendors License

Street Vendors (Protection of Livelihood and Regulation

of Street Vending) Act, 2014 was legislated by the Union

Congress Government. It mandates for identification of

proper vending spaces and issuing vending license by the

ULBs @ 2.5% of the total urban population. Delhi thus qualifies for around 5lakh vending

spaces and licenses. We can also create special zones for Night markets/ food parks or

entertainment zones and creating revenues through same.

But all the ULBs in Delhi have issued only 14,534 vending licenses. It has resulted in an

inspector raj where-in each of these 5 lakh vendors end up paying Rs150 to Rs1000 per day

to municipal and police authorities. If Street Vendors Act is implemented and Rs1000/month

is charged from each of the vendor, MCDs can collect Rs600 crores per year. Using this

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money, we can pay the arears of sanitation workers (Rs1559.19 crores) in two and a half

years! A win-win for everyone.

5. Transparent Toll Tax Collections

Toll Tax collections also have been fraught with

corruption and opacity. The South MCD had asked

in 2014, Sriram Institute for Industrial Research

(SIIR) to conduct a survey of number of vehicles

entering Delhi and the amount of Toll Tax which

can be collected. SIIR suggested that the yearly

estimated revenue collection should be Rs1922 crores. The table of Toll Tax collection

depicts only 42% of the potential with a shortfall of 1135.12 crores last FY alone. Even if we

set aside 3% collection charges and 15% contractor’s profit, the annual collection should be

Rs1574 crores. This is a shortfall of 50%!

6. Outdoor Advertisements

The current status is pathetic and the corporations have let the outdoor advertising

opportunity pass on either to Outdoor mafia or Cartels or have distributed it like sweets to

their near and dear ones. They have tied the opportunity down with heavy chains of legal

entanglement through various litigations and court stays. The spirit with which they should

have nurtured this opportunity is missing.

The biggest example of mishandling and mis-governance can’t be more evident than

the way the Municipal Corporations have handled the Outdoor Policy of Delhi, which

was approved by the Hon’ble Supreme Court of India and Bhure Lal Committee after

extensive efforts been put into it, to ensure planned, monitored and controlled

growth of Outdoor advertisement in manner that its sole purpose was to make Delhi

more habitable, more beautiful and well landscaped, safe, illuminated and as means

to provide public facilities to Delizens without any burden on corporations, state’s or

centre’s coffers. This becomes even more critical in view of the fact that full bench of

the Hon’ble Supreme Court in 2007 overturned its own full bench of judgement of

1997 in which it had banned Outdoor Advertisement in Delhi & permitted it as the

new one was Policy based & amenity oriented. But after getting Hon’ble Supreme

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Court’s nod for the new Outdoor Advertisement Policy, the Corporation never made

any attempt to take advantage of it and earn more revenue or to beautify Delhi.

Crores and Crores of revenue is being lost month on month, due to failure of the

corporations to get their act together, to the benefit of corrupt officials, outdoor

advertisers and corporation governing bodies.

The sole purpose of the Outdoor policy not getting ratified is that the existing

corporations want to benefit unduly in illegal manner to fill in their personal pockets,

through corruption and nepotism. They award the outdoor advertising projects

without legal and commercial scrutiny and then let corporations entangled in

litigations filed by the outdoor advertisers. They are hand in gloves in this with

outdoor mafia.

There is no mechanism set by the existing corporations to Audit, Monitor and

Check the extent of Outdoor revenue being created by other private or public

bodies, who are supposed to pay or share the outdoor revenue generated by them.

For example auditing of the T3 International Airport, Delhi Metro Rail Corporation,

Indian Railway, DND Expressway etc. had never been done in terms of their total

revenue earned & the revenue entitlement of the MCD & also the area of actual

display Vs the area awarded by the Municipal bodies.

There were additional means of revenue generations through new innovative

mediums (LED screens in pedestrian areas or in markets, Outdoor Digital screens

providing live information, Distress Women Booths, Night Shelters etc.) and the way

to apply the fee, which was explained within the Outdoor Policy, has been

completely ignored, to ensure that the existing system does not get reformed.

The firmness that is required to collect outstanding dues is missing, except for hiding

behind the legal framework. No punitive action is taken on time and same outdoor

advertisers who have been bleeding corporations are awarded media in same

company name or a new name with same ownership, without checking the

credentials.

o The glaring examples of same can be witnessed on BRT Corridor, where illegal

media has been created on cycle shelters, on so-called Info-panels, Toilet

blocks etc.

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o There has been no tender on DND flyover for last 1.5 years and yet the

display of illegal outdoor media can be witnessed over it.

o On Nizamuddin Bridge the Unipoles have been awarded by UP Irrigation at

the rate of Rs5000/ Unipole without calling any tender, which has led to

mushrooming of media on it, making it dangerous for commuters, at the

same time MCD had been losing in terms of revenue sharing.

o MCD decided to abolish a major revenue earning source (Wall Wraps) already

identified in the Outdoor Advertising Policy because it failed to control and

monitor their implementation.

7. Parking Charges

Cartelization and political influence of the existing governing bodies of the corporations

have encouraged these operators to flout every norm, be it of providing safe parking space

or charge authorised parking charges or overcrowd parking by exceeding the number of

vehicles permitted to be parked in allotted parking space.

The parking charges and other mandatory information that should be displayed in allotted

parking space is seldom done. The parking coupons are fraudulently printed without any

numbers, no revenues are shared with corporation and no taxes paid on this excessive

illegal parking charges collected. This is being done in complete knowledge and with

blessings of existing corporation governing bodies.

The proper demarcation is never undertaken and parking operator encroach on public space

much beyond the allotted space, sometime to the extent of 3 to 4 times of the allotted

space. Thus, robbing the corporations at one hand of the revenue as well as causing

inconvenience to the public.

Many of the parking spaces are further sublet or sub-contracted to people who hire petty

criminals, untrained attendants etc. who run their tyranny in the neighbourhood. They

engage in overcharging, harassing women, sheltering illegal occupants carrying unlawful

activities and creating nuisance. Any resistance by parking users and general public to their

harassment by this parking mafia results in physical fights and verbal abuses.

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Even some of the basic rules and equipment’s operational in New Delhi Municipal Council

(NDMC) area as well as in Private parking spaces in Malls are completely missing. For

example the practise of issuance of parking coupons through hand held parking devices

which record the time and duration of the parking and collect the correct parking fee and

systems like automatic parking coupons issued by self-operated, non-manned coupon

dispensing machines used in malls. If such initiatives and operations can be successful in

one part of Delhi, there is no excuse for not allowing it in other parts and are ignored

through lame excuses.

“from deficit to surplus: a realistic and achievable roadmap to make mcds financially...

Government & Nonprofit