It analyzes budgetary data for Municipal Corporations (MCs), identifying opportunities, challenges and suggests measures to improve their financial health.
Key Findings
- Low revenue collection: MCs generate only 0.6% of GDP in revenue (2023-24), much lower than central government (9.2%) and State Governments(14.6%).
- Heavy reliance on transfers:MCs rely heavily on government transfers.Grants from Central and State governments have increased by 24.9% and 20.4%, respectively (2022-23)
- Increased municipal borrowings:It has risen from ₹2,886 crore (2019-20) to ₹13,364 crore(2023-24)
- Bonds:It totals ₹4,204 crore (0.09% of corporate bonds), with most bonds privately placed
Challenges in Municipal Finances: lower revenue compared to advanced economies, underdeveloped municipal bond market, low operational flexibility
Recommendations
- Enhancing Revenue Sources: Reform property tax (with use of GIS mapping), rationalize user charges
- Transfers from State governments: SFCS should recommend timely and predictable state transfers
- Improvement in Cost Efficiency: by digitalization, use of Public Private Partnerships in urban transport, waste management, and renewable energy
- Innovative Financing: Smaller MCs should explore options of Municipal Bonds, Green Bonds
- Financial Transparency: Adopt of practices such as National Municipal Accounting Manual
Revenue Sources of Urban Local Bodies
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