Corporation banks on overdrafts to stay afloat

When a public sector enterprise struggles to pay wages, repay loans and attract funds for its business, chances are the government bails it out or proposes privatisation. But what happens if a civic body like

Greater Chennai Corporation

faces a similar fate? With

funding

from the state and Centre drying up, and no means of increasing revenue, the civic body has to firefight to ensure its employees are not penniless at the end of every month.
According to the corporation council documents, the civic body has a hefty bank overdraft of `275 crore. According to officials, this ceiling will be increased further as the local body continues to be hampered by lack of state funding.

“We are still in talks (with banks) to raise the overdraft and are firefighting to solve day-to-day issues,“ a senior corporation official told TOI. “It doesn't bode well for the city's future that the corporation is borrowing heavily and frequently . Debt servicing will increase and keep us in a state of crisis for years to come,“ another official said.

What this means for Chennaiites is that they can never be sure if the civic body will have the finances to ensure basic amenities -proper roads and drains, healthcare and disease prevention programmes and affordable education -because of the question over funding.

The logical move, in such a situation, would be to cut expenditure wherever possible. But the corporation doesn't seem to be interested in frugality.

Establish ment expendi ture, which in cludes salaries paid to employees, has seen a marked rise over the past three years. The special officer council's 2017-18 budget shows the corporation will spend `200 crore more on salaries this year than it did in 2014-15, without taking into account allowances and other perks.

But a comparison of the revenue earned through property tax, the major source of income for the civic body, shows a wide gap. In 2016-17, the corporation earned `695.45 crore, only `113.6 crore more than it did in 2014-15.

And the deficit is only going to grow bigger, say sources. “Senior officials want to create three more chief engineer posts at the regional level though there is no necessity whatsoever. This will add to the financial strain,“ a source said, adding that the lack of an elected council has led to “poor decision making“ in Ripon Buildings.

The crisis is not entirely selfengineered. In July , the CAG 2016 report for urban local bodies pointed out that the state did not deliver the funds promised. Under the Chennai Mega City Development Mission, TN promised `9,228.51 crore between 2011 and 2016 to the corporation and

Metrowater

for infrastructure projects. But only `2,500 crore was disbursed, which in the CAG's words “limited the scope of activities“.

Saidapet legislator M Subramanian of the DMK, the mayor till 2011, said the corporation is prone to wasteful expenditure. But former AIADMK mayor Saidai S Duraisamy believes excess spending is at times unavoidable. “ After the city expanded, it was the corporation's responsibility to provide infrastructure to the extended areas,“ said Duraisamy , who was responsible for sanctioning projects worth `16,541.60 crore.

“Unfortunately, the spending could not be offset by increasing revenue, especially property tax, due to political reasons,“ he added.