The 5th State Finance Commission (SFC) has recommended to the State government on equal distribution of funds ward-wise in the Bruhat Bengaluru Mahanagara Palike (BBMP) and city corporations for equal development of all wards.
The 5th SFC headed by former MP C. Narayanaswamy, who prepared the report for 2024-25 and submitted it to Governor Tawarchaand Gehlot, said that “Many of the Urban Local Bodies (ULBs) do not allocate funds equitably among their municipal wards, which results in uneven development across ULBs,”
The report, which was tabled in the Legislative Assembly on Friday, suggested that devolution of funds to bigger ULBs such as BBMP and city municipal corporations should be “ward-wise” to ensure equitable distribution of funds.
Prepare MTFP
It said that BBMP (Fiscal Responsibility and Budget Management Rules, 2021) came into effect on March 10, 2022. The rules provide for preparation of the Medium-Term Fiscal Plan along with the annual budget. The commission recommended that BBMP should prepare MTFP every year along with the budget.
The 5th SFC report noted that the own source revenue of BBMP in respect of property tax has increased marginally in the last six years. The property tax in the BBMP area was yet to be assessed based on the latest guidance value principle which might fetch a substantial increase in the property tax revenue. It is reported that the process of survey of properties is underway which is expected to give a tax jump of about 30%.
Non-tax revenues
The non-tax revenue of the BBMP has declined from ₹1306 crore in 2016-17 to ₹1161 crore in 2021-22 reflecting inadequate efforts by the BBMP authorities.
The commission suggested that the BBMP should adopt latest guidance value-based assessment of property tax at the earliest and enhance efforts of the agencies for collection of intended non-tax revenue and in cases, it needed updating of existing laws, necessary action should be taken by the government.
It suggested that all the ULBs should levy, revise and collect the property tax based on the guidance value revised periodically, to improve own source of revenue.
The SFC’s role is to examine the financial situation of the PRIs and framing a formula for division of tax revenues such as taxes, duties, fines and toll fees between a state and its PRIs and ULBs.
