Are User Charges Underutilsed in Indian Cities? An Analysis for Delhi

The Commissioner of Municipal Corporation of Delhi (MCD) had recommended certain measures in December 2011 to improve the revenues of the corporation and thereby narrow the existing budget gap. These included introduction of congestion and conservancy charges and revision of rates for parking fees, one time parking charges, fees from mobile towers and property taxes, thus mainly focusing on the augmentation of the non-tax revenues. However, due to social resistance and lack of political will, none of these recommendations were implemented. In this paper we have attempted to quantify the potential revenue gains that may have resulted had the recommendations been accepted. Through a simple simulation based analysis, we find that with the implementation of the recommendations, increases in the own revenues could be between 10 per cent to 21 per cent while that in total revenue could be between 7 per cent to 15 per cent. We also find that with the reccommendations being implemented, own revenues would be able to cover about 77 per cent to 85 per cent of the revenue expenditure and total revenues would be able to account for about 74 per cent to 80 per cent of the total expenditure. Further, the share of non tax revenues in the total revenues would also rise which suggests that the corporation would be in a better position to exploit its potential for non tax revenues and move towards greater self reliance with lesser dependence on tax revenues. Finally, we find that the major share of gains would come from ‘one time parking charges’ followed by property taxes and other components.