Urban civic bodies in the State are heading for a financial crisis. The financial health of Thiruvananthapuram, Kochi and Kozhikode Corporations as well as 55 out of the 65 municipalities is said to be precarious. They are finding it hard to meet the routine expenses, including salary and pension bills.
Salary payment has already become erratic in many municipalities, including all the five in Alappuzha district, official sources say.
Corporations are now apportioning their Plan funds to disburse salary and pensions. Complacency of the civic bodies in tapping their own income avenues to match the soaring cost overheads is being cited as a main reason for the crisis.
Devolution of powers has increased the responsibilities of civic bodies, but their financial base has not been strengthened proportionally. While the State and Central governments are evolving new revenue options, the LSGIs are not making any initiative to tap even the available sources.
From the power bills of streetlights and the five-fold rise in drinking water cess of public taps, to the salary of employees, there is a manifold increase in the expenses of services managed by the civic bodies. Still, their own revenue sources remain virtually stagnant.
Building tax is their prime revenue source, and it is mandatory to revise it once in five years. But the tax structure has remained unaltered for the past 18 years.
Rent-based tax system
The previous government had proposed to substitute rent-based tax system with plinth-area-based assessment, but the proposal has not yet been implemented. Under-assessment and non-assessment of taxable properties are prime culprits.
A ceiling of Rs.2,500 fixed as per the Constitution for levying professional tax has prevented the civic bodies from the enhancing the limit. Most municipalities and panchayats have been developed as IT hubs where professionals draw exorbitant salaries. But the cap has restricted the scope of enhancing the revenue collection from this source. The cut in entertainment tax from 48 to 20 per cent for addressing the film industry's crisis was yet another major blow.
Rules mandate a five per cent share of the duty on property transfer in the cities and a vehicle-tax compensation to the LSGIs. Since 2005-06, these heads were unified, but the allocation in this score is much lower than what is due to them, sources say.
The Fourth State Finance Commission headed by M.A. Oommen had recommended that financial management of civic bodies be streamlined and tax collection, optimised. Such reforms have not yet been implemented in its true spirit, sources say.
