Outsourcing Takes a Toll on Civic Bodies

Delhi’s three municipal corporations outsource their toll tax collection to private companies, who pay the corporations Rs 551 crore per year.

Published: 12th July 2015 03:25 AM  |   Last Updated: 12th July 2015 09:52 AM   |  A+A-

Civic Bodies

NEW DELHI:A report has revealed that the three municipal corporations of Delhi are losing Rs 1,100 crore revenue by not being able to collect toll tax effectively from commercial vehicles entering the city. The North Delhi Municipal Corporation, South Delhi Municipal Corporation and East Delhi Municipal Corporation—which are low on manpower and resources—outsource their toll tax collection to private companies, who pay the corporations Rs 551 crore per year. If they collect toll tax on their own, they will earn Rs 1,600 crore every year. Outsourcing the collection sets the them back by Rs 1,100 crore annually.

Every year 11 crore commercial vehicles enter Delhi. There are 124 entry points to Delhi out of which DND Noida and NH-8 at Rajokri border were integrated with build-operate-transfer (BOT) operator on the condition that in addition to collecting their own toll, they will collect tax for the three civic bodies.

The report was prepared by the Shriram Institute for Industrial Research hired by the municipal agencies. It carried out the survey in March this year at all the 124 entry points. It stated, “The municipal corporations can generate revenue of Rs 1,611 crore per year.” The survey was carried out after calculating the volume of commercial vehicles entering the city per day and the toll rates.

The agencies are helpless as private companies do not offer higher rates. Though the agencies know that they can earn Rs 1,600 crore from toll tax each year, they were forced to give out the contract at Rs 551 crore annually. Had they collected toll taxes effectively, the corporations would have been able to pay salaries to their sanitation workers and teachers in time.

The corporations’ chartered accountant-cum-financial adviser Rajesh Pathak told The Sunday Standard that the contract amount was based on market rates while the toll tax amount—as the survey report indicated—was practically impossible to achieve. “The market did not support the survey done by the institute,” Pathak said.

Earlier, the corporation—then called the Municipal Corporation of Delhi—used to collect toll taxes on its own but for last 12 years it has outsourced it. Pathak said that the corporation levied toll tax from commercial vehicles under section 113(2)(g) of the Delhi Municipal Corporation Act from January 2000 and continued to collect the same through its own employees up to May 1, 2003. “The revenue generated from toll tax collection strengthens the agency financially and allows to take development works for the welfare of public,” the agencies spokesperson Yogendra Singh Mann said. Thereafter, the civic body decided to outsource toll collection. The first contract was awarded to a private firm Banas Sands TTC JV for one year at Rs 70.20 crore. The corporation again gave the contract to the same company for three years from May 1, 2004 to May 1, 2007 at Rs 243.57 crore, which amounts Rs 81.19 crore per annum.

The contract was extended to Banas Sands TTC JV till May 16, 2008, at the same rate. It was then awarded to P K Hospitality Services Pvt Ltd (now PKSS Infrastructure Pvt Ltd), from May 16, 2008 to May 16, 2011 at Rs 563.49 crore for three years. In 2011, the contract was awarded to SMS-AAMW Tollways Pvt Ltd for Rs 932 crore for three years. This contract provided the MCD with 62.5 per cent more revenue than what it was getting from the previous firms. The contract was extended to the same company after increasing the collection rate at Rs 425 crore for one year. On May 16 this year, the new contract was awarded to SMYR Consortium at Rs 551 crore per year.

“This year, the agency floated a tender keeping a reserve price of Rs 875 crore and shocking, not a single company made a bid. Perplexed with the response, the agency floated another tender without quoting the reserve price. Again, not a single company applied for it. The corporations then floated a third tender and lowered the reserve price of Rs 511 crore,” Mann told The Sunday Standard.

Last month, Delhi’s Deputy Chief Minister Manish Sisodia had said, “I propose to levy a fee on entry of commercial vehicles in Delhi” in an attempt to reduce air pollution. He wanted to appoint municipal corporations as the nodal agencies to collect the traffic congestion fees. The cash-strapped corporations, however, are clueless how to implement it. Sisodia blamed commercial vehicles entering Delhi as the main contributors to air pollution.

The moot question is that when the municipal corporations  is not able to collect toll tax on its own, how will it collect the proposed “pollution tax” from goods vehicles entering the national capital?


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