Currently, one after another, municipal budgets in Maharashtra are being presented. The Marathi word “Arthasankalp” is a beautiful equivalent of the English word “Budget.” Unfortunately, our municipalities merely present “Andajpatraks”—budget estimates that miss their mark every year! These budgets lack vision or any concrete resolutions. However, the blame does not lie solely with the municipalities. The real issue is the state leadership, which deliberately keeps cities financially crippled. The governance structure of cities has been made so weak that even if a city desires to take a different path, it cannot. That is why all our cities look the same—unplanned, deteriorating, and swollen beyond capacity. The problems they face are identical, and the solutions suggested for them are just as superficial and hollow. This becomes clear when one examines their budgets. 

The Subjugation of Cities

Cities can truly progress only when they have adequate financial resources, multiple avenues to generate revenue, and, in simple terms, when they become economically self-sufficient. Recently, Pune Municipal Corporation presented a budget of ₹12,618 crore. Out of this, a massive ₹6,252 crore (nearly 50% of the total budget) is expected from the state and central governments. This includes ₹2,700 crore as Pune’s share of the Goods and Services Tax (GST).

Earlier, municipalities had their own sources of revenue through octroi (jakat) and local body tax (LBT). However, after these were abolished in favor of GST, cities have become entirely dependent on the state government’s discretion for funds. Municipal corporations now have to beg the state government for their rightful share of tax revenue. These funds are given (or withheld) at the government’s convenience, depending on political calculations.

For instance, in October 2024, Pune’s pending GST dues from the Maharashtra government reached a staggering ₹1,400 crore! To put this into perspective, the entire annual budget of Kolhapur Municipal Corporation last year was ₹1,200 crore, while Pune’s GST arrears alone exceeded that amount!

This issue is not limited to Pune. Every municipal corporation in Maharashtra is forced to remain financially dependent on the state government. In Thane, out of a ₹5,500 crore budget, at least ₹2,000 crore is expected from the state. In Nashik, half of the ₹3,053 crore budget depends on state transfers. In Nagpur, a shocking 70% of the budget is reliant on central and state government aid. The situation of smaller cities is even worse!

With their financial lifelines controlled by the state, cities are reduced to mere beggars, and city-level political leaders are forced to remain subservient to state leaders. The state government and its politicians, in turn, act like feudal lords, distributing funds as if they are doing a favor.

The Endless Construction Cycle

Take a look at most city politicians today—they are directly involved in the real estate sector. The old notion that “politicians and builders have ties” is outdated; today, politicians are the builders.

This close link between municipal budgets and the construction industry is worth examining. The relentless construction of buildings and concrete towers is not just in the interest of builders but also a necessity for municipalities.

According to Pune’s latest budget, a massive 23% of the city’s revenue is expected from Building Development Fees, and another 23% from Property Tax. Essentially, 46% of Pune’s municipal revenue is tied to past, ongoing, and future construction. While the specific numbers may vary across cities, the core issue remains the same—municipalities have become heavily dependent on real estate-driven revenue, as they have no other major sources of income.

What is the Solution?

As a result of this flawed system, our cities do not grow in a planned manner; they simply swell uncontrollably, like an unhealthy body. Occasionally, a big infrastructure project is introduced with the blessing of a political leader, but these band-aid solutions do not cure the disease.

Some fundamental reforms are needed. 

Financial Independence for Cities: Just as the state gets a fixed share of GST, cities should also get a guaranteed share of tax revenue without having to depend on state governments. Cities should receive a direct portion of commercial taxes generated within them. In many countries, municipal governments receive a share of income tax, ensuring a steady revenue stream.

Municipal Governance Reform: The current Commissioner system should be replaced with a Mayor-Council system where the mayor holds executive authority. Just as India has a Prime Minister and states have Chief Ministers, cities should have Mayors with executive powers and a Council similar to a Cabinet. All major political parties have, at some point, acknowledged the need for this reform, but no state government wants to relinquish control over city administrations.

Accountability & Effective Revenue Collection: Municipalities need the power to make independent decisions on property tax reforms, efficient tax collection, and sustainable revenue models. Currently, municipal inefficiency is rampant. For example, in 2020-21, Pune waived penalties and interest on unpaid property tax through an amnesty scheme, resulting in a ₹210 crore loss. In 2021-22, another amnesty scheme cost Pune ₹64 crore. Shockingly, by the end of 2024, 67% of those who benefited from the last scheme had defaulted again! Similarly, last year, Pune had budgeted for ₹11,600 crore in revenue but managed to collect only ₹6,500 crore in 11 months.

Every year, municipal commissioners present ambitious budgets filled with grand figures. However, a budget without vision is just a numbers game. Unless municipal administrations have the intent and capability to execute these plans, our cities will never grow, instead, they will just swell unhealthily, much like a body suffering from an unchecked disease.