Down the drain: A near-bankrupt East corporation has no money to pay salaries

Down the drain: A near-bankrupt East corporation has no money to pay salaries

A near-bankrupt East corporation has no money to pay salaries or fund development. Naveed Iqbal finds out what went wrong.

Eastern Corporation
With the East corporation hit by shortage of funds, development work in East Delhi has been at a standstill for over a year. (Source: Express photo)

For the first time since the trifurcation of the Municipal Corporation of Delhi (MCD), the North corporation has failed to provide salaries to at least 45 per cent of its employees. Officials at the North civic body are working hard to avoid the kind of financial crisis that the East civic body is currently faced with.

East Delhi mayor Meenakshi told Newsline that development work in East Delhi “has been at a standstill for over a year”. Desperate for funds, the mayor has been running from pillar to post to help pull the East corporation out of its current state of near-bankruptcy.


The East corporation has an annual budget of over Rs 3,000 crore while its revenue amounts to approximately Rs 900 crore. Property tax, toll tax, advertisement costs, parking spaces, conversion charges and licensing are some of the main contributors to the coffers of a municipal body. Stripped by the previous Congress government of roads (over 60 feet), slum department, rural development, development of unauthorised colonies, the Delhi Jal Board and fire department, the corporations are left with limited sources of income.

Senior officials at the East corporation said the corporation will need at least Rs 150 crore in grant from the Delhi government to pay salaries for the next two months. The East corporation has approximately 32,000 employees on its rolls and the agency is struggling to pay their dues. “The corporation has not been able to pay old-age pension in over two years. This is a nominal amount of Rs 1,200 and we have not been able to find funds for this,” Meenakshi said.


Govt response


In January, the mayor met Union Home Minister Rajnath Singh and appraised him of the situation the East corporation was in and sought the Centre’s assistance in helping it tide over the crisis. “The home minister said the Centre cannot intervene and help a municipal body directly and that we should wait for a government to take over in Delhi,” the mayor said.

She said as soon as the AAP government came to power in the capital, she sought time from Chief Minister Arvind Kejriwal. However, her all requests to meet the CM have been turned down by his office, she said. “We were told by his office that we should try meeting the CM in his Janata Darbar,” Meenakshi said.

Hospitals, schools

The so-called philanthropic functions of the corporation such as running low-cost hospitals and free primary education do not bring in revenue for the corporation and demand heavy cash flow toward providing these services. According to East corporation officials, the running cost of the Swami Dayanand Hospital alone is Rs 200 crore per year. The corporation runs two hospitals and 390 schools in the East Delhi area without earning any revenue from these.

Populist measures such as exempting black-and-yellow taxis from paying toll tax have not helped matters. In contrast, the South corporation, which is said to have a fixed deposit of Rs 600 crore and a fund surplus, does not run a single hospital.

The East corporation requires at least Rs 1,200 crore annually for paying salaries and disbursing old-age pension. The mayor said she informed the home minister that the East corporation had run into losses amounting to Rs 500 crore and would need financial help of at least Rs 900 crore.

Loan burden

Besides, there are technicalities as to why the East corporation is the poorest among the three corporations. During the trifurcation, the East corporation received the maximum share of loans that the unified MCD was to pay off. The mayor said most grants from the government got reduced to bare minimum amounts as the interest payable for these loans was skimmed from these grants.

The mayor said at the time of trifurcation, the Delhi government had promised financial aid to compensate the financial losses, but only released Rs 335 crore as loan. “Since then, the East corporation has not received any financial help from the Delhi government,” she said.

Property tax

Property tax is the principal source of income and biggest contributor to the revenue pie of the three municipal bodies. Parameters for this, officials pointed out, are unfairly biased in the East. Properties in Delhi are divided into eight categories — A to H. While the South corporation, which collects over Rs 600 crore from property tax alone, has properties in the A to D category (having higher tax rates), the East corporation mostly has properties in the H category with taxes as low as Rs 100 per square metre. With rebates to senior citizens and specially-abled, the amount falls even lower. At present, the East corporation collects Rs 120 crore annually from property tax – only 20 per cent of what the South civic body collects in a year and about 60 per cent of the North corporation’s earnings.

For developmental works done in the past, payments worth Rs 200 crore are still due to contractors and no new works have been taken up.
The “global share” of municipal bodies from taxes collected by the Delhi government is 5.5 per cent. During the Congress government, 1.5 per cent of this was made subject to administrative reforms such as e-governance and bringing in more transparency.

East corporation officials said although the outgoing government had agreed to release this, it has not been released. Post that, the lack of an elected government in Delhi led to a further decline in the financial condition of the East corporation. The remaining 4 per cent has been stuck in the payment of pending loans and other costs.


Grappling with bills, the corporation also had to direct its resources and manpower for the Swachh Bharat Abhiyan announced by the Central government. The East corporation consolidated its resources and contributed its bit to the massive sanitation campaign. “Although the Centre had promised financial aid of Rs 500 crore for the massive sanitation campaign to the three corporations, no funds have been released till now,” an official said.