Bhawani Mall: One of BMC’s reason for deficit. Telegraph picture

Bhubaneswar, Oct. 3: The municipal corporation is facing a serious financial crunch.

Between April and August 2013, the Bhubaneswar Municipal Corporation had a financial deficit of Rs 28 crore with expenses outstripping earnings. While the civic body spent Rs 86 crore on welfare projects during this period, its earning was only Rs 58 crore.

Consequently, the civic body is not only facing difficulty in executing new projects, but since July 1 this year, the increase in the labour and material costs has forced the corporation to pay more to contractors for constructing roads and drains.

“Because of rising costs, a civil construction project that earlier cost Rs 1 lakh now needs Rs 1.30 lakh. We are facing a lot of problems to pay the bills of contractors. We have to pay bills on a priority basis and manage the funds judiciously,” said municipal commissioner Sanjib Kumar Mishra.

A senior official said: “Such is the financial condition that the corporation may have to break its fixed deposits to arrange funds for urgent expenditure. However, we are trying hard not to use that last option.”

Explaining the reasons for the deficit, the municipal commissioner said: “We demand raising of the Octroi compensation from Rs 4.10 crore in a month to Rs 8 crore to meet our day-to-day expenses.”

Octroi compensation is given to urban local bodies by the state government after abolition of the entry tax in 1999. As the entry tax was converted to value added tax, the state government decides to provide Octroi compensation to various urban local bodies. Interestingly, the Octroi compensation for Bhubaneswar Municipal Corporation is still calculated according to 1999 rates.

Sources in corporation said the city has nearly two lakh dwelling units. Keeping the 30,000 slum units apart, there are 1.7 lakh houses that are eligible to pay holding tax. However, the annual holding tax collection is not exceeding Rs 22 crore.

“The proposal to revise holding tax, which is lying with the state government, can help the corporation get at least Rs 75 crore in a year. Similarly, tax collection from advertisement space, rent collection from corporation markets and licencing fee collection have to go up so that the corporation can have a healthy financial status,” said a senior civic official.

“This year, we expected around Rs 125 crore from selling corporation’s shares from different public-private-partnership projects such as the BMC-Bhawani Mall at Saheed Nagar, BMC-Keshari Mall at Unit-II and BMC-Panchdeep Mall at Unit-IV market. But selling deeds were not possible. As the receipt from the sale was mentioned as a source of income in this year’s budget of Rs 473.36 crore, failure to get the amount has also caused a deficit,” explained an accounts official.

What has surprised the corporation officials is that while the corporation will spend Rs 32 crore October, the state government is not providing any special grant.

However, sources confirmed that the government was extending Rs 12 crore to Berhampur Municipal Corporation to meet its festive season requirements.