With the Bruhat Bangalore Mahanagara Palike (BBMP) looking to selling some of its leased properties to service its numerous loans, the question on the tax payers’ mind is why the civic body is in such a poor financial condition.
The reasons for this appear to be many… right from financial indiscipline, lack of austerity, not enough attention being given to resource mobilisation to the numerous scams. This has resulted in the BBMP being deep in debt with outstanding loans amounting to more than Rs. 3,500 crore and pending bills of Rs. 1,600 crore. The civic body pays nearly Rs. 70 crore a month towards loan repayment, officials said.
That there is no financial discipline is known and has also been mentioned in the annual reports of the Comptroller and Auditor-General (CAG). “The bigger mistake is huge borrowing from commercial banks for development works. The BBMP could have instead borrowed from development banks such as HUDCO. However, the authorities concerned seem to have found it easier to borrow from commercial banks, as it only requires a letter from the government,” said the former Mayor M. Ramachandrappa, who said the civic body had borrowed heavily from 14 commercial banks.
To borrow from development banks, the BBMP would have had to prepare detailed project reports with proper financial planning. The loans would have been given at low interest rate and the funds would have been released in instalments following inspection of the projects, he said. However, the BBMP is now looking to closing some loans from commercial banks by borrowing from HUDCO at low interest rate.
The civic body’s main revenue source is property tax. There are over 16 lakh properties in the city. Though the tax collection target was over Rs. 2,000 crore, the BBMP was able to garner only Rs. 1,300 crore last fiscal. P.R. Ramesh, the former Mayor, lamented that the BBMP had lost its credibility as the financial institutions were now insisting on surety from the civic body. “With poor revenue inflow and inflated budget outlays, the BBMP seems to be borrowing to even carry out day-to-day administration. After the BBMP was formed in 2007, attention was not given to resource mobilisation. This has led to this financial state,” he averred.
Financial indiscipline during the Administrator’s period, taking up unnecessary works and borrowing at high interest rates from banks has only worsened the BBMP’s financial condition. “It is high time that corrective measures are taken immediately.”
Now that the BBMP is seeking government help to pull it out of the debt trap, Mr. Ramesh said that it should first conduct stringent audit of the works whose bills are still pending.
