The Bruhat Bengaluru Mahanagara Palike (BBMP) is in a veritable financial mess, and few have a clue about bow to extricate the Palike from it. In spite of available data on municipal finances, little analysis has been done on them, and accountants (even though there is a shortage of them) are the only ones who understand the data.
These observations come from a well-known economist who has studied the BBMP’s budgets, and has a number of recommendations to make. Mukul Asher, who specialises in public sector economics and social security issues in Asia, made these observations recently when he was in the city for lectures to course participants of the B.PAC Civic Leadership Incubator Program (B.CLIP) being conducted by the Bangalore Political Action Committee (BPAC) with Takshashila Institution as the knowledge partner.

One reason why the BBMP is under the public glare is that the Palike is sinking under the huge debt that piled up arguably because of its faulty way of accounting. According to the budget estimates of 2012-13, the BBMP was under a debt burden of Rs 5,325 crore.
To understand the BBMP’s financial scenario, one can simply look at the palike’s budget overview for 2012-13. An analysis of the overview done by Janaagraha had shown that most of the BBMP’s receipts for the year came from loans — an amount of Rs 2,500 crore. The next biggest head, in fact the biggest revenue earner, was property tax with Rs 2,000 crore. Non-tax receipts accounted for Rs 1,965 crore and grants Rs 1,887 crore.
While the BBMP has been heavily dependent on loans and grants, it has been considerably opaque as far as expenditure is concerned. A substantial portion of its expenses for 2012-13, for instance, had to be clubbed by the Janaagraha analysts under “category unknown” with Rs 2,940 crore. The other major monetary drains went under the heads of mobility with Rs 1,923 crore and overheads with Rs 1,666 crore.
According to Asher, though the BBMP budgets are classified by departments, line items aggregating to thousands of crores simply state “development works” or “Assembly constituency works” without mentioning the precise objective or category of work. This probably where the problem lies. On one hand the BBMP is biting more than what it can chew, and on the other the Palike is opaque about its own expenditure. The way out, Asher asserts, is for individual budgetary allocations aggregating to at least 90 per cent of total expenditure (excluding loan-related payments and overheads such as salaries, etc.), to clearly mention the purpose of the works in terms of either a category or one of the functions of the BBMP (such as solid waste management, storm water drainage, etc).
As of now, the left hand doesn’t know what the right one is doing. There are ways of fixing this. Asher suggests that individual budgetary allocations aggregating to at least 70 per cent of the total expenditure (excluding loan-related payments and overheads such as salaries, etc) should carry a precise address and landmarks which facilitates physical inspection of the work spot. And, based on these, such work spots should be depicted on a ward map that is publicly displayed at respective ward offices. It’s a different thing that democracy in the BBMP has still not adequately trickled down to the ward level.
One of the other means of sorting out the gross financial mismanagement could be for a specified percentage of BBMP’s budget, not less than 40 per cent of total expenditure, to be set aside as ward budgets. These would need to comprise individual budgetary allocations that are sourced directly from citizens by councillors and administrators through a participatory budgeting process.
And the city does not have to live beyond its means. Asher had earlier summed up his views with this correspondent, “If the city understands what its assets are, what its air space rights are, what space rights it has below the ground, then they can put together revenue-generating capacities and initiatives that will help them undertake some of the infrastructural work that they need to do.
You don’t have to move completely to the accrual system of accounting, but at least you should have asset registry to understand what our accrued liabilities are going to be. All those sound financial management practices and budgeting practices have to be followed.”
A budget fix

According to Mukul Asher, budget documents should carry summary schedules of the following:

1. Ward-wise budgetary allocations.
2. Category or function-wise budgetary allocations
3. Property tax collections and outstanding dues by ward (this was done by the BBMP earlier, but has been subsequently discontinued)
4. List of defaulting individuals/organisations for outstanding dues, excluding property tax
5. Number of employees by department and total employee cost, number of contract employees by department and total cost this too was done by the BBMP earlier, but has been subsequently discontinued)
6. Operational classification of total budgeted expenditure i.e. by salaries, contractor payments, other administrative expenses, establishment expenses, operations and maintenance expenditure, etc. (as against the current department level classification which renders it difficult to ascertain total salary cost of BBMP).

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