It is time BMC got a bit creative

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Published in Hindustan Times Mumbai on February 19 2008. Ahmedabad’s experience may hold lessons for Mumbai. But the political will is missing.  Sentences underlined below are not part of the published article. 

Repeal of the Urban Land Ceiling Act in Mumbai has led to optimism all around. It is just one of the sorely needed measures to solve Mumbai’s problems! Here are some out of the box ideas that might help Mumbai regain its lost glory.
 
Create Lakes. Thousands of acres of land are expected to be available now. Their redevelopment plan should include space for artificial lakes and gardens with walkways around them. They could be funded through public private partnerships.   
 
The Mumbai Heritage Conservation Committee found eleven water bodies in NTC owned cotton textile mills situated in the Parel/Lalbaug area. These water bodies need to be retained and beautified. Some of the mills are India United Mills Cadell road, Mumbai textile mills Lower Parel, Madhoosudan Mills Parel, and Gold Mohur mills Dadar etc.
 
The benefits are manifold. One, it would reduce temperatures and provide citizens with a place to unwind. Two, it would promote community living in an inclusive way, meaning open access to all sections of society. Multiple lakes and parks could transform the city in the same way as the proposed Sabarmati Riverfront Development Ahmadabad will. Closer home Thane’s lakes make it a much better place to live in.
 
For this dream to come true the State Government and Courts have to ensure that open spaces are retained. 
 
Ferry services. Visitors to Hongkong may have used the Star Ferry Service. With its fleet of sturdy ships it ferries people between islands virtually throughout the year. Amongst its fleet is the 750-seater ‘Golden Star’ that has an air-conditioned upper deck cabin. Ironically, the ferry service was originally founded by a prominent Parsee, Dorabjee Nowrojee, under the name of Kowloon Ferry Company. In 2002, Hong Kong had 55 million ferry passengers. Something like that in Mumbai would take some pressure off local transport-besides making for a pleasurable ride.
 
The idea is to introduce a ferry service comprising 1000 seater vessels on the western (Borivali to Nariman Point) and eastern flanks (Navi Mumbai to Gateway of India). This needs to be supported by strong lateral connections into entry/exit points. Hovercrafts were introduced earlier but failed because of their small size and the lack of supporting infrastructure.
 
The service would benefit the aam aadmi, provide car owners an alternative and possibly spur the Indian Railways to further improve the quality of their services.
 
Critics might argue: what happens during the rains when the sea is rough? A noted town planning expert opines that the service would be suspended for a maximum of 75 and 30 days on the western and eastern sides (protected by the harbor) respectively. Even if commuters have to travel by other transport for this short period, ferries still offer a comfortable commute for atleast 225 working days p.a. The service could earn additional revenue from tourism and parties.
 
Could one of India’s major industrial houses make a ‘Nano’ out of the Ferry project! 
 
Property Tax Reform: Mumbai must take a leaf out of Ahmedabad on property reforms. Property tax used to be determined on the basis of Annual Rateable Value. It was complicated and perceived to be irrational and unfair. The assessed values, based on the notional rental value of properties were very low. A large number of residential and commercial properties were exempt from paying tax. Moving to an area-based system increased revenues and made it more be equitable too.
 
In the first phase municipal records were updated, existing undervalued properties were reassessed and tough action taken against defaulters. In phase 2, the city moved to an area-based property tax system. It involved comprehensive survey of properties and computerization of data. Feedback from the public was invited.
 
The main features of the amended Ahmedabad system are: the standard factor is ‘1’ in all cases. The value of each factor is raised or lowered depending on the type of locality/building, age of building. The prevailing market value of the land determines the location factor of the area. Properties over 10 years of age get a discount of 15%, going up to 50% for properties more than 40 years old. Property occupied by owners are levied half the tax as compared to a tenanted property.
 
Property tax is no longer based on annual rental value and its assessment delinked from ‘standard rent’ concept of rent control acts. This linkage has in the past, undermined the revenue generating potential of the property tax.
 
Following the reforms revenues jumped from Rs 96 crore in 2001 to nearly Rs 175 crore in 2006. Reforms at AMC show that e governance along with a rational, equitable, transparent system of property valuation generates higher revenues.
 
In the recent past, Bihar, Andhra Pradesh, Delhi and Karnataka have introduced legal reforms in property tax assessment. Reform requires political will, something that is scarce in Maharashtra. And yes, Assembly Elections are due in 2009.
 
Double entry Accounting: Most municipal bodies function on the concept of single entry accounting where income and expenditure is accounted for on a cash basis. Under the accrual system, when a bill for property tax is raised the party's account is debited, amounts received credited and amount unpaid shown as outstanding. A party-wise outstanding list forms part of the general ledger. In the cash system, property tax is accounted as income when money is received from party. Party wise outstandings are maintained in subsidiary registers. Municipal Bodies do not prepare a Balance Sheet (statement of assets and liabilities).

In November 2005, Gujarat launched the historical Municipal Accounting Reform project for implementing the computerized accrual-based double entry accounting system in all municipalities. With help from the state government and two reputed local chartered accountants a simple tender was designed. Chartered Accountant firms from all over the state were assigned three to four municipalities each. A common vendor was selected for distributing the adapted and upgraded software with training inputs. A government recognized valuer was hired to begin valuation of fixed assets.

As on 1/1/2008 Tally accounting software is installed in 170 MB. Balance sheets as on 31.3.2007 are received from 85 MB and under review. By June 2008, 140 MB are expected to publish their Balance Sheets as on 31.3.2008. By 2009 accounts of all MB would be on the state intranet.
 
BMC introduced double entry accounting in 1980 for water supply and sewerage services; being a precondition for World Bank funding. A F Ferguson & Co was appointed in April 2006 to assist BMC extend double entry accounting across its operations. Accounts for the year ended 31.3.2008 are expected to be prepared on accrual basis. Meanwhile a number of municipal bodies like Thane, Pune, and Nasik have, on a stand alone basis started work on the double entry accounting system.

Unlike Gujarat, where the new system is driven by the state government and so consistent, in Maharashtra cities are doing their own thing. While the broad contours may be similar absence of a common code structure, does not, like Gujarat for consolidation at a State level.
 
If Mumbai fails to reform itself, there would be a flight of capital and talent to financial centers like Dubai. If that we were to happen India’s policies would once again contribute to Dubai’s growth just like restrictions on import of gold made Dubai a key transit point for smuggling of the yellow metal into India.