Mumbai: BEST wants 8% cess on property tax to pay for losses

Updated: Feb 04, 2015, 11:26 IST | Chetna Sadadekar |

In a proposal that will be tabled before BEST committee today, the undertaking has suggested that cess up to 8 per cent be levied on property tax collected from citizens in the entire BMC jurisdiction

The broke transport undertaking Brihanmumbai Electric Supply and Transport (BEST) are mulling over reducing losses by asking the BMC to levy an additional cess on property tax of up to 8 per cent. A proposal in this regard will be discussed in the BEST committee meeting today.

mid-day had reported last year that the BEST had made a similar suggestion to BMC officials, but the suggested cess on property tax then had been kept at 1-2 per cent. Officials had then calculated that a cess of 2 per cent would bring in Rs 90 crore in additional revenue.

BMC’s then Standing Committee chairman had even discussed it in a meeting, and the idea seemed to elicit a positive response, though it wasn’t tabled since there was no formal proposal.

According to the revised proposal, the loss-making transport body wants this to be hiked possibly as much as 8 per cent, the maximum allowable amount as per the Mumbai Municipal Corporation Act, 1888.

Going for broke
BEST has been in the red for several years; it incurred a loss of Rs 590 crore in the financial year 2013-14. The undertaking cross-subsidises the transport business by collecting a transport division loss recovery from their profit-making electricity business.

But, the paltry 1.54 paise/unit paid by its consumers in island city (Colaba to Mahim/Sion) is insufficient to recover the entire loss. In any case, BEST’s consumers had raised their voice against this, stating they had to pay up despite not using buses much.

The new proposal seeks to levy this cess upon everybody in city limits, irrespective of whether they use BEST’s services or not. An official from the body, who refused to be identified, said, “The losses need to be recovered, and since the citizens use the transport system they should also pay taxes for the same.

The maximum cess we would charge will be 8 per cent, and not more than that.” BEST committee chairman Arvind Dudhwadkar confirmed, saying, “The proposal will be discussed on Tuesday and we will take a final call on the same.” If the proposal is ratified, it will then be sent to the BMC standing committee.

Transport experts, however, were not too keen on the idea. Milind Mhaske, project director of the NGO Praja Foundation, said, “This is a clear case of financial mismanagement and a way of burdening taxpaying citizens.

If the BEST could plan a holistic approach for attracting more commuters, it could serve the purpose. But asking citizens to pay more, irrespective of whether or not they travel in BEST buses, is wrong. About 45 lakh people travel by BEST. If managed properly, more will use the services.”

BMC speak
R B Arote, assessor and collector, BMC, said, “We are yet to get a written proposal. Only after it reaches us will we be in a position to check the feasibility of levying such a cess.”

How property tax is levied
The BMC shifted to a capital value-based system in 2012. According to this system, property tax is calculated taking five factors into consideration ready reckoner price of the property, its area, age of the building, its nature (commercial or residential), and the type of construction (number of floors). Property tax is the BMC’s second largest source of income after octroi collection.

Another cess for builders
BEST also hopes to collect an additional cess from builders, justifying it with the reasoning that if a particular residential project is connected well by BEST’s bus network, the property rates go north. “We also plan to charge builders, as property prices only increase if projects are connected by road transport (BEST). We extend services for development, so they need to pay us,” said a BEST official.

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