Introduction
Municipalities are local government bodies responsible for providing basic services such as water supply, sanitation, waste management, roads, and street lighting in urban areas. To perform these functions efficiently, they require funds. Understanding the sources of revenue and the areas of expenditure for municipal bodies is essential for effective urban planning and governance.
Sources of Municipal Revenue
Municipal revenue is broadly classified into two categories: tax revenue and non-tax revenue.
1. Tax Revenue
This is the main source of income for municipal bodies. It includes:
- Property Tax: A major source of income, collected based on the value of land and buildings. It is levied on residential, commercial, and industrial properties.
- Profession Tax: Collected from individuals engaged in professions, trades, or employment within the municipality.
- Entertainment Tax: Charged on movie tickets, events, and other entertainment-related activities.
- Advertisement Tax: Levied on hoardings, billboards, banners, and other advertising displays in public areas.
- Vehicle Tax: Sometimes collected for vehicles registered within municipal limits.
2. Non-Tax Revenue
This includes income earned by providing various services or through commercial activities.
- User Charges: Fees collected for services such as water supply, sewage, garbage collection, and parking.
- License Fees: Charged for granting licenses to shops, businesses, restaurants, and hawkers.
- Rent from Municipal Properties: Income from leasing out markets, shops, community halls, or other assets owned by the municipality.
- Fines and Penalties: Collected from individuals or organizations for violations of municipal rules and regulations.
- Donations and Grants: Contributions received from individuals, organizations, or international agencies for specific purposes.
3. Grants from State and Central Governments
Municipalities often receive financial support from higher levels of government through schemes such as:
- Smart Cities Mission
- Atal Mission for Rejuvenation and Urban Transformation (AMRUT)
- Swachh Bharat Abhiyan
- Finance Commission grants
These funds are provided for infrastructure development, urban renewal, and service improvement projects.
4. Loans and Bonds
To finance major infrastructure projects, municipalities may also raise funds through:
- Municipal Bonds: Issued to the public or institutions for financing large-scale projects such as metro rail or water treatment plants.
- Loans from Banks or Financial Institutions: Borrowed with or without government guarantees to fund capital-intensive projects.
Municipal Expenditure
Just as they earn, municipalities also spend money to maintain and improve urban living conditions. Their expenditure is categorized as revenue expenditure and capital expenditure.
1. Revenue Expenditure
This includes daily operational costs like:
- Salaries of municipal staff
- Electricity bills for streetlights and offices
- Repair and maintenance of infrastructure
- Water and sanitation service operations
- Garbage collection and disposal
2. Capital Expenditure
This refers to investment in long-term infrastructure and development projects such as:
- Construction of roads, bridges, and flyovers
- Building schools, hospitals, and public parks
- Drainage and sewage systems
- New housing projects and slum rehabilitation
- Urban transportation systems
3. Emergency and Contingency Expenditure
Funds are also kept aside for dealing with emergencies such as floods, fires, or pandemics. These expenses are not regular but are critical when disasters strike.
Issues in Municipal Finance
- Low collection efficiency of property tax and other dues
- Heavy dependence on grants from state and central governments
- Lack of transparency and accountability
- Shortage of skilled financial staff
Reforms Needed
To make municipal finance more sustainable, the following steps are recommended:
- Digitization of tax and fee collection
- Capacity building for staff in financial planning
- Regular audits and transparent reporting
- Public-private partnerships for revenue generation
Conclusion
Municipal revenue and expenditure play a key role in shaping the quality of urban life. Efficient financial management ensures that cities can grow sustainably and provide necessary services to their residents. By strengthening both the income sources and spending practices, municipalities can become more self-reliant and responsive to citizens’ needs.