THIRUVANANTHAPURAM: Municipal corporations in Kerala budgeted the highest aggregate revenue deficit for 2023-24, according to the Reserve Bank of India’s ‘Report on Municipal Finances’ released on Wednesday.
Civic bodies in Maharashtra budgeted the highest revenue surplus of Rs 11,104 crore in the same fiscal year. Other states with combined surplus of above Rs 1,000 crore were Gujarat, Karnataka, Madhya Pradesh, Haryana, and Telangana.
Besides Kerala, only seven other states posted a revenue deficit: Uttar Pradesh, Jammu and Kashmir, Chhattisgarh, Bihar, Himachal Pradesh, Jharkhand and Tripura.
At Rs 789 crore, Kerala had the highest total revenue deficit while Tripura posted the lowest deficit of Rs 2 crore. Except Kerala, all other southern states had budgeted revenue surpluses -- Karnataka (Rs 1,942 crore), Telangana (Rs 1,494 crore), Andhra Pradesh (Rs 603 crore), and Tamil Nadu (Rs 100 crore).
In the previous years, Kerala had reported a revenue surplus. The revised estimates of 2022-23 budgeted a surplus of Rs 486 crore. The actual surplus in 2021-22 was Rs 156 crore. For these years, the state was ranked sixth and eighth, respectively, in the country for revenue surplus.
The report said municipal corporations (MCs) need to augment their own revenue sources for greater operational and financial flexibility. The primary tax revenue source for MCs is property tax, constituting an average of 59.1% of revenue.
“Leveraging technologies such as Geographic Information System (GIS) mapping and digital payment systems can enhance property tax collection. Periodic revisions in water and drainage taxes, and fees and user charges, coupled with use of technology for plugging leakages, can also help improve their revenue collections,” the report said.
Municipal bonds
The report made a recommendation to allow municipalities to explore innovative financing instruments. “While the larger MCs are already using municipal bonds for financing some of their infrastructure projects, other MCs can also explore municipal bonds and innovative financing instruments for capital investment for diversification of their funding sources. Creating mechanisms that allow MCs to pool resources for large-scale infrastructure projects will help overcome the fiscal constraints of individual corporations,” it said.
“The idea of municipal bonds is worth exploring. It is among the terms of references of the State Finance Commission as well. Besides a policy decision by the state government, several factors like the financial health of municipal corporations are to be studied before allowing them to explore the bond market,” opined K N Harilal, chairman of the Seventh State Finance Commission.
Drop in capital outlay
The report also threw light on the widening revenue gap of Kerala’s MCs. The increase in revenue receipts between 2019-20 and 2023-24 was 103.82%. The revenue expenditure rose by 174.29% over the same period.
The budgeted expenses under ‘salary, wages and bonus’ for 2023-24 were Rs 4,034.1 crore, an increase of 44.51% from 2019-20. The increase in pension expense was 57.41%. The sharp increase in committed expenses (salary and pension) has taken a grave toll on the capital outlay of MCs. It declined from Rs 12,133.3 crore in 2019-20 to Rs 8,883.8 crore in 2023-24. Kerala was positioned 15th in the country in capital outlay by MCs in 2023-24, the report said.