RBI Report: Municipal Fees for Better Services: Rediff Moneynews

New Delhi, Nov 17 (PTI) Municipal corporations need to impose adequate user charges for basic services such as water supply and sanitation to increase non-tax revenues and provide quality public services, according to a Reserve Bank of India (RBI) report.

The ‘Municipal Finance Report’ takes an in-depth look at the financial position of 232 municipal corporations (MCs) from 2019-20 to 2023-24 (Budget Estimates), focusing on the theme ‘Own Sources of Revenue Generation in Municipal Corporations: Opportunities and Opportunities’. ‘Challenges’.

“MCs can significantly increase these (non-tax revenues) by imposing appropriate and adequate charges and user charges for essential services such as water supply, sanitation and waste management, as well as ensuring uninterrupted availability of high-quality public services,” he said.

These measures, combined with more transparent and accountable governance practices, can contribute to strengthening the financial health of MCs, creating a virtuous cycle of better services to the public, stronger revenues and continuous improvement of urban infrastructure.

Major non-tax revenue sources include user fees, commercial license fees, residential/building approval fees, development fees, goodwill fees, sales and rental fees, market fees, slaughterhouse fees, parking fees, birth and death registration fees.

Sources of tax revenue include property tax, vacant land tax, water aid tax, advertising tax, sewage aid tax, tax on animals and taxes on cars.

“Non-tax sources are particularly important in the context of constraints on tax revenues. MCs in India generate 66.5 percent of non-tax revenues from fees and user charges,” the report said.

Fees and user charges represent important sources of revenue for all civic bodies, especially in Maharashtra, Rajasthan, Gujarat and Tripura, where their share of equity revenues is higher than property taxes, he said.

The report said this could be attributed to several factors, including a high degree of urbanisation, tourist attractions and subsequent expansion in the supply of essential municipal services such as water supply, waste management and transport.

The report also noted that increased fiscal autonomy to municipalities from their own revenue sources (tax revenue, non-tax revenue and other revenues) provides stability and increased capacity to strategize and execute urban development initiatives more efficiently and effectively.

Municipal companies need to increase their own revenue sources for greater operational and financial flexibility. “By optimizing property and water taxes, increasing non-tax revenues, and adopting transparent governance practices, urban local institutions can improve their financial health,” he said.

It was stated that utilizing technologies such as Geographic Information System (GIS) mapping and digital payment systems can increase property tax collections.

Periodic revisions in water and drainage taxes and fees and user charges, coupled with the use of technology to fix leaks, can also help improve revenue collections, he added.