BMC’s real test begins: Can the Mahayuti fund its subsidy promises as civic reserves shrink?

The reserve corpus is largely parked in fixed deposits across multiple banks, with the interest earned contributing to the civic body’s revenue.

Over the past few years, the BMC has taken up higly capital intensive infrastructure projects such as the coastal road, the Goregaon-Mulund Link Road (GMLR), the waste water treatment facility (WWTF) project involving the construction of seven sewage treatment plants (STPs), and the mega road concretisation project.

Civic officials said the total expenditure on all major infrastructure projects now exceeds Rs 1.5 lakh crore — nearly double the size of the BMC’s current reserve corpus.

Apart from this Rs 51 of the total reserves, held as fixed deposits, are earmarked for internal commitments. These include funds set aside for employee gratuity, pensions, Provident Fund contributions, and refundable bank guarantees taken from contractors as security deposits, which must be returned upon completion of projects.

“As we can see, out of the Rs 81,000 crore reserve that we have, only 49 per cent or Rs 39,500 crore could be used for the infrastructure projects, while the overall size of these projects is nearly four times to this usable amount. This clearly indicates that in the next few years, there is going to be a liquidity crisis in the BMC,” said a civic official on condition of anonymity.

The BMC commissioner presents the civic budget in February. Last year’s budget stood at Rs 74,527 crore, of which 58 per cent or Rs 43,000 crore was earmarked for capital expenditure, largely for infrastructure works.

“Last year, the budget didn’t show any signs of financial crunch, this year we were also able to manage the dip since our property tax generation has increased and the premium earned through building proposal department has also seen a rise. However, if attention is not paid in full towards controlling expenditure and fixing liabilities, things will go gradually out of control,” the official added.

Return of corporators, subsidies

The return of corporators and subsidy promises in the Mahayuti manifesto are expected to further increase the BMC’s expenditure. Among the most criticised proposals is the plan to subsidise bus fares for women by 50 per cent.

At present, the Brihanmumbai Electric Supply and Transport (BEST) undertaking is heavily dependent on BMC grants. Last year, the civic body allocated Rs 1,000 crore to BEST, compared with Rs 850 crore the year before.

BEST records show that in the ongoing financial year, its total financial liabilities stand at Rs 9,286 crore, while the annual deficit is Rs 2,200 crore.

In May 2024, the minimum fare for non-AC buses was increased from Rs 5 to Rs 10, while the minimum fare for AC buses was hiked from Rs 6 to Rs 12. This led to an increase in BEST’s daily revenue margin from Rs 2.5 crore to Rs 3.5 crore.

“If the subsidies are pushed, then the daily revenue would see a dip by 40 per cent of Rs 1.4 crore daily, which means an annual loss of Rs 511 crore to the undertaking,” a BEST official told The Indian Express.

The Mahayuti manifesto has also promised to halt the annual 8 per cent water tax hike for the next five years.

At present, the BMC charges Rs 6 per 1,000 litres for residential water supply and Rs 50 per 1,000 litres for commercial and industrial use. In 2013, the standing committee approved a policy allowing annual tariff hikes of up to 8 per cent. However, since 2023, no hike was implemented, even as the cost of supplying water increased by 20 per cent. The last increase in 2022 was 7.12 per cent.

“The BMC supplies water of 3,870 million litres daily (MLD) at a very nominal rate and the supply cost is nearly two times the tax. Therefore, if the rates are not increased further, then it will lead to a loss of at least Rs 200 crore annually,” an official said.

In addition, the return of corporators will result in an increase in fixed expenditure of Rs 1,931.6 crore annually over the next five years, in the form of salaries and development funds.

The civic administration pays a monthly salary of Rs 25,000 to each of the 237 elected and nominated corporators. Each corporator also receives an annual development fund of Rs 1.6 crore for works in their respective constituencies. These funds had remained unutilised over the past four years due to the absence of an elected body.

“The Mumbai Municipal Corporation (MMC) Act states that the salaries and development funds will have to be given to the corporators on a mandatory basis. So this is a fixed expenditure that the BMC is going to incur during the next five years. Till 2022, BMC didn’t have the pressure of taking so many big ticket infrastructure projects at one time. However, the situation is different now and the BMC will have to tighten its expenditure,” the official added.

Shoring up funds

To regulate expenditure while executing the big-ticket infrastructure projects, the BMC has increasingly turned to the Public Private Partnership (PPP) model. Under this approach, private companies are being roped in not only to invest in projects but also to maintain them for a fixed period after completion.

One example is the development of a 70-hectare open space along the coastal road. Of this, the BMC has developed an 11-hectare Marine Drive-like promenade, while the remaining area is being developed by private agencies. Reliance Industries Limited (RIL) is developing nearly 53 hectares, while Tata Sons Limited is beautifying five hectares, including the road median.

Over the past few months, the civic body has also floated Expressions of Interest for PPP tie-ups for projects such as the Rs 1,250-crore overhaul of the Deonar abattoir, Asia’s largest slaughterhouse, and a textile museum at Kalachowki in Byculla, estimated to cost between Rs 80 crore and Rs 100 crore. Earlier in 2025, the BMC also proposed privatising services such as cardiology, dialysis and blood banks in at least six peripheral civic hospitals under the PPP model, drawing criticism from several organisations.

Officials said the intent behind PPP projects is not only to reduce the strain on civic finances but also to generate additional revenue, as in the case of parking projects where private operators share a portion of their earnings with the BMC.