There’s no doubt that the COVID-19 pandemic has wreaked havoc on the global economy. However, the Brihanmumbai Municipal Corporation (BMC) has been struggling with its finances even before the pandemic began.
A new report now says that the civic body is currently thinking about issuing Municipal Bonds so as to raise money via the open market. This comes as the BMC faces a deficit in the next budget.
With elections in the offing, the BMC is clearly looking to make efforts to sort out its financial woes. Currently, the civic body is looking to cut a gap of ₹6,500 crores between revenue and spending with the help of municipal bonds. Officials said that this is the only remedy that would prevent the BMC from spending its fixed deposits currently valued at ₹80,000 crores.
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The bonds will be issued with a guarantee on the interest and repayment of the principal. In ordinary circumstances, such bonds are issued to provide funding for day-to-day projects or raise funds for infrastructure.
As mid-day points out, it’s somewhat odd that the BMC has currently managed to fund the massive Coastal Road Project, but it cannot find the necessary funds to maintain its day-to-day functioning.
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It is said that the 50% concession given to the developers on premiums that are supposed to be paid to the BMC coupled with the low rate of interest on fixed deposits along with a relatively low collection of property taxes may have all been contributors to the BMC’s financial shortfall.
P Velrasu is the Additional Municipal Commissioner of the BMC and is also the head of the Finance Department.
“We are facing trouble with regards to the collection of income as there are concessions on development charges. This slashed our income. In addition, property tax bills are yet to be recovered and the interest on FDs has gone down,” Velrasu said.
“We managed the COVID expenditure by using our contingency funds and deferred some projects. Yet, the gap is huge and if this situation continues for another year, by the end of Financial Year 2021-2022, we may have to consider issuing Municipal Bonds,” he added.
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