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The municipal administrator of Brihanmumbai Municipal Corporation (BMC) revealed the annual civic budget for 2025-26 on 03 February 2025. Pegged at ₹ 744.27 billion, it marked a jump of almost 20 percent over 2024-25. The budget did not introduce any fresh and major infrastructure works. However, huge projects that were earlier sanctioned and are ongoing, require to be serviced with substantially large sums of money. It was wise of the local administration, therefore, to ensure that resources are not spread thin and works that have already been undertaken are fully funded and completed.
No new taxes were announced in the budget. This was expected, as the BMC may go into elections in the course of this year and traditionally, governments do not like to fight elections in the background of raised taxes.
BMC has for long had a bloated revenue budget and it is good to see that an attempt is being made to rein it in.
The municipal budget provides an amount of ₹ 431.62 billion for capital expenditure or 58 percent of the total budget. This essentially goes for building new assets in the city. On the other hand, revenue expenditure comprises salaries, pensions and other institutional costs. This amount stands at ₹ 312.04 billion or 41.92 percent of the total budget. BMC has for long had a bloated revenue budget and it is good to see that an attempt is being made to rein it in.
However, one would have to watch how revenue expenditure behaves as the year goes on. A word here about infrastructure maintenance is necessary. Traditionally, municipal infrastructure manuals prescribe maintenance schedules that ought to be followed as per the recommended time periods. However, omissions on the part of municipal staff led to several infrastructure failures in the past that cost human lives. It is hoped that revenue budgets have taken care to adequately provide for maintenance of infrastructure, which need periodical maintenance, and with age, major maintenance. Therefore, an annual inspection of all infrastructure and provision of money for their upkeep is as vital as building new assets.
Unfortunately, urban local bodies (ULB) in the country have been struggling for resources, post the GST onslaught that subsumed many of the municipal revenue handles. To make matters more difficult, BMC has been saddled with huge projects that are over-stretching its hitherto financial robustness. The total bill for the projects already undertaken, shown in the budget as committed liabilities, is a whopping ₹2.32 trillion. Of this amount, ₹882.51 billion are for roads and bridges alone. Since the annual budgetary provisions cannot sustain this load, BMC has had to dig into its hefty reserves. A large part of these reserves amounting to ₹817.74 billion are now tied up to service the committed liabilities and on-going works. It is obvious that these treasured reserve funds are fast depleting and may not provide any elbow room in the future. Since we are living in uncertain times, with sudden disasters disrupting the city, reserves provide an excellent bulwark for tiding over such crises. That comfort may not be available in their absence.
A large part of these reserves amounting to ₹817.74 billion are now tied up to service the committed liabilities and on-going works.
The concern on account of this overstuffed burden is reflected in the municipal budget. The very first of the stated objectives is fiscal discipline and sustainability with a dual target of revenue augmentation and expenditure rationalisation. Decidedly, the municipal administration is worried and wants the civic machinery to tighten its belt. In the area of revenue augmentation, the city government searches for new avenues for raising resources. To begin with, BMC has requested the state government to increase the percentage share on premium collected by the local body by reducing state government’s share. If conceded, this is expected to yield ₹ 3 billion during 2025-26. It has also rolled out a Vacant Land Tenancy (VLT) policy by which available lands could be converted into long lease. This could give BMC about ₹ 20 billion. BMC is examining whether it could levy a solid waste management (SWM) user charge by amending the existing solid waste management sanitation byelaws of 2006. This is with a view to make waste management independently sustainable.
BMC has stated that it would levy property tax on commercial units, numbering about 50,000, in slums. This is a bold innovation and should give the ULB ₹3.5 billion. Additional revenue will come from the proposed transportation and commercial hub at the Dahisar ‘check naka’ along the Western Express Highway. BMC intends to auction underutilised plots in areas such as Worli and Crawford Market. BMC also plans to actively pursue the collection of entertainment tax, the finalisation of its advertisement policy and a hike in trade licence fees. Raising resources is one way of getting more money. An equally effective way is to eschew parts of unessential expenditure that were allowed during years of greater fiscal comfort. BMC now wants to exert in this area through a policy of rationalisation of expenditure—minimise establishment cost, optimise workforce utilisation, undertake energy conservation of around 10 percent and screen works from the point of utility.
BMC also plans to actively pursue the collection of entertainment tax, the finalisation of its advertisement policy and a hike in trade licence fees.
The BMC provides the largest number of services in the country. These comprise important social infrastructures of health and education. These have been areas of BMC’s strength and their requirements have been catered for. Some other critical areas that the BMC needs to manage effectively are the city’s air, management of solid waste and sanitation, open spaces and gardens, flood mitigation and disaster preparedness, especially managing floods. All these have been provided resources. This is especially so in regard to augmentation of storm water drains under the revised BRIMSTOWAD (Brihanmumbai Stormwater Disposal System) master plan, comprising new drain construction, extension of the old ones, construction of holding ponds, augmentation of nullahs and the Mithi river.
BMC also runs the oldest bus service known as BEST. The undertaking has been provided ₹ 10 billion for adding to its depleted bus fleet and for deploying 2,000 electric buses. Mumbai, since decades, had had a robust water supply system and it intends to maintain it that way. Hence substantial amounts (₹ 134.23 billion) have been provided for the upgradation of the city’s water supply and sewerage department.
Surprisingly, no separate provision has been made for the implementation of the city’s Development Plan (DP 2034). The quality of life of the city is largely dependent on the implementation of the development plan. It may be possible that these have been catered for in the provisions of the individual departments. However, the budget has ignored the DP recommendation for the creation of a separate DP head to specifically show the moneys provided for DP.
The budget has ignored the DP recommendation for the creation of a separate DP head to specifically show the moneys provided for DP.
While overall, the budget has made an honest attempt to do the best in the given circumstances, it is quite clear that the ULB, widely regarded as the richest municipal body in the country, now finds itself in a tight spot for taking on more than it can chew. It is, after a long time, looking at ways to raise more resources and asking the state to share additional money and clear its pending dues. This has happened when the local elected body is not in existence and the municipal corporation is currently under the direct watch of the state government. The present situation calls for care, not profligacy.
Decidedly, the shadow of national elections in 2024, subsequent state elections in November during the same year and the now impending municipal elections has fallen on the premier ULB of the country. Despite such pressures, it is incumbent on the local administration to see that the city’s financial health is not frittered away in the race for declaring huge eye-catching infrastructure works and stretching BMC’s finances to the point of a breakdown. That would be a terrible tragedy.
Ramanath Jha is a Distinguished Fellow at the Observer Research Foundation.
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Dr. Ramanath Jha is Distinguished Fellow at Observer Research Foundation, Mumbai. He works on urbanisation — urban sustainability, urban governance and urban planning. Dr. Jha belongs ...
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