In Delhi, the fight over civic body funds

Finance panel has recommended a larger share for the corporations, but the wrangling continues.

Written by Naveed Iqbal | New Delhi | Published: December 11, 2015 12:08 am
delhi finance commission, finance commission, delhi finance, delhi municipal corporation, ndmc, sdmc, delhi news The Third Finance Commission had recommended a 5.5% share of the tax; the Fourth Commission has recommended that civic bodies’ share be increased to 12.5%.

What is the Fourth Delhi Finance Commission? What does its report say?

The Fourth Delhi Finance Commission was set up in 2009 to review the financial position of the civic bodies and make recommendations on sharing the net proceeds of taxes, duties, tolls and fees levied by the Delhi government. Following the trifurcation of the Municipal Corporation of Delhi, the North and East civic bodies have slipped into an acute financial crisis, while the South has remained steady. Government funding to the corporations comes largely in the form of a “global share” of taxes collected by the Delhi government. The Third Finance Commission had recommended a 5.5% share of the tax; the Fourth Commission has recommended that civic bodies’ share be increased to 12.5%.

Why has the implementation of the report been delayed?

The report was submitted to the government in 2013, but the Sheila Dikshit government did not act on it. The first Kejriwal government did not take it up, and the following year, Delhi was under central rule. The report was ultimately tabled in the Assembly on December 2, and accepted by the government.

Why are the civic bodies unhappy, then?

The report has recommendations for the central and Delhi governments, and the three corporations. While accepting the report, the government has said that it will implement it when the Centre does. On December 7, the South Delhi Municipal Corporation met to discuss the report. The SDMC has complained that it has been treated “unfairly”. While the Commission recommends that the global share of taxes for the MCDs be increased from 5.5% to 12.5%, it has also said that while a half of the global share will be distributed among the civic bodies, the rest would be distributed “keeping in view the comparative financial health” of each.

What is the formula for sharing funds?

The commission report states that the “existing formula of sharing of funds… is population and area (in the ratio of 70%:30%) had adversely affected financial health of at least two of the four municipalities for a long time.” (The report includes the New Delhi Municipal Council in its ambit.)

It has recommended that 50% of funds in the divisible pool (6.25% of the 12.5% share of funds from the state government) “shall be divided amongst all municipalities” as per population and area. However, the rest of the amount in the divisible pool “is to be distributed keeping in view the comparative financial health of each municipality”. This leaves the SDMC out, and provides additional funds (in a 34:66 ratio) to the North and East bodies starting 2012-13, owing to the acute financial crunch there. NDMC is cash surplus, and is also likely to be kept out of the pool.

What is likely to happen now?

The report states: “Until such time as the Government of the NCT of Delhi is able to convince the Central government to disburse the amounts… the government should compensate the municipalities to the extent of 50 per cent of the loss suffered by them due to lack of action on the part of the government.”

SDMC estimates that its share, as per the new share of taxes, is close to Rs 4,000 crore. The East corporation is currently losing Rs 600 crore annually. The total projected losses of the North corporation are over Rs 2,700 crore. South has projected losses of Rs 200 crore, but has said it will work to raise resources on its own.

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