1                  financial profile

 

1.1                                    Introduction

Shimla Municipal Corporation uses cash-based, single entry accounting system where income and expenditure heads are maintained on daily basis. The financial status of the Municipal Corporation has been reviewed for past five years. This section contains a description of the corporation finances, the sources and uses of funds, assessment of Corporation Finances based on important financial indicators.  All the expenses towards regular maintenance are treated as revenue expenses, while expenses on new projects are treated as capital expenses.

SMC proposes to implement an accrual based double entry accounting system and generate the balance sheet by March 31, 2007.

Broadly, municipal finances can be classified into Revenue Account and Capital Account. All the day to day income and expenditure are under the Revenue Account and similarly one time expenditure and expenditure on infrastructure development are considered under the Capital Account.

 

1.2                                    Revenue Sources

The income of SMC is derived from

(a)                Revenue Receipts like Tax Revenue, Non- Tax Revenue and Octroi Grant

      Tax revenues are receipts from the operations of the Corporation in the form of property taxes, sewerage taxes, water taxes, Show Tax, Animal Tax, Stamp duty and other misc. taxes levied by SMC.

      Non-Tax revenue comes in the form of various license fees, tehbazari fees and various unclassified sources

      Octroi Grant is the grant given by HP State Government in lieu of octroi since the abolition of octroi in the city

(b)               Capital Receipts includes sale of municipal properties, other grants from the State and Central Governments, loans taken for the projects

 

1.3                                    Expenditure Treatment

Expenses incurred towards establishment cost, operation and maintenance expenditure for provision of services and repayment of loans are treated as revenue expenditure and expenditure on asset creation, purchase of equipment and investments in new projects etc. are treated as capital expenditure.

Advances and deposits and any items of income or expenditure of temporary nature are treated and accounted for under suspense account. These heads of this suspense account are not analyzed as they are transitory in nature and have no impact on the overall financial position of SMC.

 

1.4                                    Financial Status at a Glance

The income and expenditure pattern of SMC for last five years as presented in Figure 19.2 shows deficits in almost all the years analyzed. Total expenditure is always higher than the total income in all the years analyzed except 2001-01. Since the Municipal Accounting System is cash based, it does not reflect the arrears /liabilities, but we have considered these major expenses while analyzing the financials. Table 19.1 shows summary of municipal finances over five years. The revenue account and capital account are in deficit for all the years analyzed except 2002-03 where capital account doesnt show deficit.

Table  STYLEREF 1 \s 1. SEQ Table \* ARABIC \s 1 1  Summaries of Municipal Finances

Items

2001-02

2002-03

2003-04

2004-05

2005-06

CAGR (%)

Actuals in Lakhs Rs.

Opening Balance

194.04

257.88

173.89

204.32

256.95

Revenue Account

Revenue Income

1274.76

1037.45

1288.58

1938.61

1973.97

11.55%

Revenue Expenditure

1706.97

1816.03

1829.2

2027.98

2355.26

8.38%

Surplus/Deficit

-432.21

-778.58

-540.62

-89.37

-381.29

 

Capital Account

Capital Income

21.08

46.99

59.07

151.63

204.7

76.53%

Capital Expenditure

60.74

41.2

184.72

234.77

226.2

38.92%

Surplus/Deficit

-39.66

5.79

-125.65

-83.14

-21.5

 

Source: SMC Accounts Department

The Revenue Income increases at Compounded Annual Growth Rate (CAGR) of 11.55 % while the Revenue Expenditure is increasing at CAGR of around 8.38 % which shows that the Corporation has not been able to manage its revenue accounts well over the years. Even Capital Account has deficit almost all the years. The deficit in one or the other account for all the years shows that SMC needs to improve the efficiency, enhance revenue sources and reduce expenditure.

Next few sections provide an in-depth review of the revenue account, in order to assess the municipal fiscal status and to provide a base for determining the potential of each of the sources and the ability of SMC to sustain the extent of planned investments identified under the City Development Plan.

 

1.5                                    Revenue Account

1.5.1          Revenue Income

The source-wise income generated during the review period is presented in Table 19.2 and the detailed income and expenditure statement, the sectoral contribution and growth rates of each of the items are presented in Annexure 23.8. From the above chart it quiet apparent that the share of Non-Tax revenues is increasing over the years and dependency on the Octroi Grant has been reducing over the five year period analyzed. From Table 19.2, we can figure it out that the No-Tax Revenues are increasing at a CAGR of 22% while the Octroi Grant is decreasing at a CAGR of 4.27 %.

 

 Table  STYLEREF 1 \s 1. SEQ Table \* ARABIC \s 1 2  Source-wise Revenue Account Income

Items

2001-02

2002-03

2003-04

2004-05

2005-06

CAGR (%)

Actuals in Lakhs Rs.

Tax Revenue

375.25

393.58

409.43

644.13

593.22

12.13%

Non Tax Revenue

440.5

402.47

605.48

875.94

995.23

22.60%

Octroi Grant

459.01

241.4

273.67

418.54

385.52

-4.27%

Total Revenue Income

1274.76

1037.45

1288.58

1938.61

1973.97

11.55%

Source: SMC Accounts Department

 

1.                         Tax Revenue:

Tax revenues are receipts from the operations of the Corporation in the form of property taxes, water tax, sewerage taxes, Show Tax, Animal Tax, Stamp duty and other misc. taxes levied by SMC.  On an average 30% of the total revenue income comes from Tax revenue as shown in the graph above. General tax (tax levied on the commercial and residential properties) is the major tax revenue of the Corporation. In addition to the General Property Tax, Municipal Corporation Levies additional taxes listed in Table 19.3.

Table  STYLEREF 1 \s 1. SEQ Table \* ARABIC \s 1 3  Various Taxes Levied by SMC and its rates

S N

Type of Tax

Rate

1

General/ Property Tax on lands and Buildings

15% of the Annual Rateable Value

2

Water Tax

2.5%of the annual readable value

3

Sewerage Tax

15% on the amount of General Tax

4

Show Tax

Rs. 50 per Show

 

Property Tax: The property related taxes are commonly referred as house tax and include a tax on building or lands situated within municipal limits. SMC levies property tax on residential, commercial and industrial buildings and lands that lie within its jurisdiction. The rules and procedures related to levy of property tax is governed by SMC HP Municipal Corporation Act 1994.

The property tax is based on the annual rateable value of the property. The tax slab rates are shown in Table 19.4.

Table  STYLEREF 1 \s 1. SEQ Table \* ARABIC \s 1 4  Tax Slab Details

S. N

Area

(in Sq.m.)

Tariff  (%of Annual Rateable Value)

Type

Discount

1

< 100

Exempt

Residential

0.00

2

> 100

15.0%

Residential

50 % on net tax Amount

3

>0

15.0%

Commercial

0.00

The details of the number of commercial and residential properties, tax assessed, arrears and collection efficiency are show in Table 17.5.

The collection efficiency of the SMC is very low; almost 60 to 72 % of the billed amount is collected during that year. The highest collection efficiency was in 2004-05 where 72 % of the current demand and 33 % of the arrears were collected.

Sewerage tax is levied on the general tax amount. It is around 15 % of the general tax amount. The amount collected through sewerage tax is low compared to general property tax.

Table  STYLEREF 1 \s 1. SEQ Table \* ARABIC \s 1 5  Property and Sewerage Tax data

Type of Tax

Year

2001-02

2002-03

2003-04

2004-05

2005-06

Actuals in Lakhs Rs.

No. of residential buildings

NA

NA

NA

NA

9762

No. of commercial buildings

NA

NA

NA

NA

700

Property Tax

Current Demand( Tax assessed)

406.8

430.48

454.04

487.89

514.9

Previous Demand

392.43

456.62

518.21

604.36

559.98

Total Demand

799.23

887.1

972.25

1092.25

1074.88

Collection Total

294.8

322.57

331.19

486.4

466.32

Collection Efficiency (Total)

36.9%

36.4%

34.1%

44.5%

43.4%

Sewerage

Tax

Current Demand( Tax assessed)

33.2

35.25

38.45

41.93

45.48

Previous Demand

9.07

17.42

24.57

33.37

33.08

Total Demand

42.27

52.67

63.02

75.3

78.56

Collection Total

20.83

23.69

26.61

36.28

35.47

Collection Efficiency (Total)

49.3%

45.0%

42.2%

48.2%

45.2%

 

 

2.                        Non-Tax Income:

Non-Tax Income is around 45 % of the total Income of SMC for last year and on a five year average it is around 41 % of the total Income. These revenue sources include fees and charges levied as per the legislation. Accordingly the income sources have been classified under the broad categories like water charges, rent of buildings, various license fees, forest income, tehbazari fee, other fees and various unclassified receipts.

Major heads of non-tax income are shown in Table 19.6 along with CAGR details.

 Table  STYLEREF 1 \s 1. SEQ Table \* ARABIC \s 1 6  Non-tax Income details

Items

2001-02

2002-03

2003-04

2004-05

2005-06

CAGR (%)

Actuals in Lakhs Rs.

Rent of Buildings

91.37

101.84

112.45

145.64

193.74

20.67%

Sale of water

159.52

171.95

337.82

467.12

565.93

37.24%

Other Fees and Revenues

189.61

128.68

155.21

263.18

235.56

5.57%

Total Non-Tax Income

440.5

402.47

605.48

875.94

995.23

22.60%

 

We have considered water charges as non-tax revenue. Water charges are biggest contributor in non-tax revenue and second largest income source for SMC after general tax. Water income is around 20% of the total income while general tax income is around 24% of total income. Water charges are levied where the properties are metered. The details of the water slabs are shown in Table 19.7.

Table  STYLEREF 1 \s 1. SEQ Table \* ARABIC \s 1 7  Water Charges

Type of User

Usage Kilo Liter per month

2003-04

2004-05

2005-06

Charges(Rs. per Kilo litre)

upto 06.10.03

After 06.10.03

upto 06.10.04

After 06.10.04

Till date

Residential

0-30

2.5

3.5

3.5

3.85

3.85

30-75

2.5

5

5

5.5

5.5

>75

2.5

7.5

7.5

8.25

8.25

Commercial

0-30

10.5

15

15

16.5

16.5

30-75

10.5

20

20

22

22

>75

10.5

27.5

27.5

30.25

30.25

Construction

>0

NA

NA

NA

30.25

30.25

 

3.                        Octroi Grant:

The Octroi Grant is given by the state government in lieu of the octroi. It has been came in to existence since 1984 when the State Government decided to discontinue the octroi levied in the Shimla City and for compensation of the same the State Government will give a fixed amount to SMC . Even after various amendments and continuous request from SMC, the state Government increased this grant time to time, still the state Government is not paying it in full to SMC the total outstanding has reached to a very high level. Table 19.8 shows the grant received from State Government, apparently shows the irregularity of the payment from State Government.

Table  STYLEREF 1 \s 1. SEQ Table \* ARABIC \s 1 8  Octroi Grant

Items

2001-02

2002-03

2003-04

2004-05

2005-06

CAGR (%)

Actuals in Lakhs Rs.

Octroi Grant

459.01

241.4

273.67

418.54

385.52

-4.27%

 

 

1.5.2         Revenue Expenditure

Revenue expenditure has been analyzed based on the expenditure heads, which are broadly classified into establishment expenses, contingencies and maintenance expenditure. Apparently major expenses are Establishment and Other Expenses. Over the period share of Establishment expenses in total expenditure has decreased and share of other expenses has been increased sharply. Summary of revenue expenditure account is shown in Table 19.9.

Table  STYLEREF 1 \s 1. SEQ Table \* ARABIC \s 1 9  Summary of the revenue Expenditure

Items

2001-02

2002-03

2003-04

2004-05

2005-06

CAGR (%)

Actuals in Lakhs Rs.

Establishment

956.59

1053.58

1098.56

1132.76

1272.95

7.40%

Contingencies

114.17

122.3

103.75

140.5

143.67

5.91%

Maintenance

109.16

125.43

39.53

297.33

123.83

3.20%

Other Expenses

527.05

514.72

587.36

457.39

814.81

16.55%

Total Revenue Expenditure

1706.97

1816.03

1829.2

2027.98

2355.26

18.9%

As we can see from Table 19.9, the highest amount was spent on establishment expenses. More than 50 % of the total expenses are on establishment and in particular on salaries of various departments. And almost 33 % of the expenditure is on other expenses.

4.                        Establishment Expenditure:

The establishment expenditure has increased from 959 lakhs in 2001 to 1272 lakhs in 2006 with a CAGR of around 7 %. Department wise details of the Establishment expenses are shown in Table 19.10.

Table  STYLEREF 1 \s 1. SEQ Table \* ARABIC \s 1 10  Department wise Establishment Expenses

Items

2001-02

2002-03

2003-04

2004-05

2005-06

CAGR (%)

Actuals in Lakhs Rs.

Salary

General Dept

98.62

111.7

112.05

123.43

142.63

9.66%

Tax Dept

31.53

31.19

34.73

35.55

43.41

8.32%

Estate Branch

21.86

26.77

26.42

22.46

29.57

7.85%

Forest Dept

40.2

43.73

51.35

55.54

62.27

11.56%

Library

0.2

0.22

0.12

0.12

0.12

-11.99%

Public Health

422.02

454.48

463.18

514.51

574.17

8.00%

Water Supply

150.53

175.48

183.11

189.36

209.38

8.60%

Roads and buildings

157.27

173.02

187.37

191.79

211.4

7.67%

9-c Grant

34.36

36.99

40.23

0

0

 

Total Establishment Expenses

956.59

1053.58

1098.56

1132.76

1272.95

7.40%

 

It is quiet apparent from Table 19.9 that the highest salary expenses are from the Public Health department, followed by Roads and Buildings and Water Supply departments.

 

5.                        Contingencies Expenditure

The Contingencies expenditure has increased from 114 lakhs in 2001 to 143 lakhs in 2006 with a CAGR of around 6 %. Department wise details of the contingencies expenses are shown in Table 19.11.


 

Table  STYLEREF 1 \s 1. SEQ Table \* ARABIC \s 1 11  Department wise Contingencies Expenses

Items

2001-02

2002-03

2003-04

2004-05

2005-06

CAGR (%)

Actuals in Lakhs Rs.

General Dept

36.3

42.54

28.49

41.35

51.48

9.13%

Tax Dept

0.38

9.99

5.76

1.99

1.47

40.24%

Estate

2.7

1.75

1.76

1.06

0.87

-24.66%

Forest Dept

4.2

2.24

3.16

2.87

1.88

-18.20%

Library

0.23

0.29

0.28

0.16

0.07

-25.73%

Public Health

39.47

27.39

32.58

49.73

41.31

1.15%

Water Supply

27.87

35.65

29.13

39.48

43.41

11.72%

Roads and buildings

2.38

2.45

2.59

3.86

3.18

7.51%

Reserve

0.64

0

0

0

0

 

Total Contingencies Expenses

114.17

122.3

103.75

140.5

143.67

5.91%

 

The highest expenses are incurred in Public Health department followed by General Department.

 

6.                        Maintenance Expenses:

The Maintenance expenditure has increased from 109 lakhs in 2001 to 124 lakhs in 2006 with a CAGR of around 3 %. Department wise details of the contingencies expenses are shown in Table 19.12.

Table  STYLEREF 1 \s 1. SEQ Table \* ARABIC \s 1 12  Details of the Maintenance Expenses

Items

2001-02

2002-03

2003-04

2004-05

2005-06

CAGR (%)

Actuals in Lakhs Rs.

Roads & Buildings

90.98

97.08

6.96

259.56

89.86

-0.31%

Water Supply

17.35

26.07

30.98

36.23

32.8

17.26%

Forest Dept

0.83

2.28

1.59

1.54

1.17

8.96%

Total Maintenance Expenses

109.16

125.43

39.53

297.33

123.83

3.20%

 

The highest amount was spent on maintenance of roads and buildings.

 


 

7.                        Other Expenses:

Other Expenses are expenses that are incurred but not paid and therefore not reflected in the cash based system. In order to include these expenses in financial analysis of the Municipal Corporation, we have considered only two major heads or major liabilities, which have not been paid i.e. expenses towards the purchase of bulk water from I&PH department and expenses towards consumption of electricity for street lights and other purposes due to HPSEB. Bulk water is a huge expenses and increasing at a CAGR of 30 %, which is fairly high. On the other hand the electricity dues are going down that is a positive sign.

Table  STYLEREF 1 \s 1. SEQ Table \* ARABIC \s 1 13  Details of the Other Expenses

Items

2001-02

2002-03

2003-04

2004-05

2005-06

CAGR (%)

Actuals in Lakhs Rs.

Amount due to IP&H for water

399.86

340.21

473.24

407.25

752.4

23.46%

Amount due to HPSEB for power

127.19

174.51

114.12

50.14

62.41

-21.13%

Total Other Expenses

527.05

514.72

587.36

457.39

814.81

11.51%

 

 

1.6                                    Capital Account

 

1.6.1          Capital Income

Capital Account Income is income generated from the sale of municipal assets, loans from various institutions and grants given by state and central government for particular purpose. SMC doesnt have the capacity to repay the loan; it has not taken any kind of loan from any of the institutions. Moreover there is no grant for any purpose from state or central governments. Therefore the sole constituent of the Capital Account is sale of municipal assets and it has increased from 21.08 lakhs to 204.7 lakhs with a massive CAGR of 76.53%. It shows that SMC has been heavily dependent on the disposing of its own properties for capital expansion, which is not sustainable for a long term. Table19.14 shows year-wise details of capital income along with the CAGR.

 


 

Table  STYLEREF 1 \s 1. SEQ Table \* ARABIC \s 1 14  Details of the Capital Income

Items

2001-02

2002-03

2003-04

2004-05

2005-06

CAGR (%)

Actuals in Lakhs Rs.

Sale of Municipal Assets

21.08

46.99

59.07

151.63

204.7

76.53%

Loans

0

0

0

0

0

 

Grants

0

0

0

0

0

 

Total Capital Income

21.08

46.99

59.07

151.63

204.7

76.53%

 

1.6.2         Capital Expenditure

Capital expenditure are normally contingent upon receipt of associated revenue. The capital expenditure of SMC includes all expenditure incurred on creation/ acquisition of capital including construction of building, roads, nallahs, toilets, street lights and other related activities. The details of capital expenditure are shown in Table 19.15.

Table  STYLEREF 1 \s 1. SEQ Table \* ARABIC \s 1 15  Details of the Capital Expenses

Items

2001-02

2002-03

2003-04

2004-05

2005-06

%of Total Expenses

Actuals in Lakhs Rs.

Buildings

45.45

24.08

40.88

33.59

3.94

2.1%

Roads

0

0

120.3

155.82

193.18

5.6%

Forest Works

1.98

1.71

2.37

2.38

1.09

0.1%

Nallahs

0.03

0.54

1.97

5.5

2.3

0.1%

Toilets

10.09

4.2

8.87

8.02

11.12

0.6%

Street Lights

0

3.98

3.47

9.22

9.77

0.3%

Water Works

3.19

6.69

6.86

20.24

4.8

0.5%

Total Capital Expenditure

60.74

41.2

184.72

234.77

226.2

9.3%

 

It is observed that the maximum expenditure incurred on construction of the roads. Total capital expenditure is around 9 % of the total expenditure. On an average, over the years, majority of the capital expenditure has been directed towards Buildings and Roads.

 


 

1.7                                    Outstanding Liabilities and Assets

Outstanding assets and liabilities are shown in Table 19.16. Here we can see that total outstanding liabilities are Rs.2352 lakhs out of which SMC has to pay around 1874 lakhs to IP&H.

Table  STYLEREF 1 \s 1. SEQ Table \* ARABIC \s 1 16  Major outstanding

Liabilities

S N.

Agency

Major Outstanding as on March 31, 2006 ( in Lakhs Rs.)

1

IP&H

1874.09

2

HPSEB

404.10

3

Pension & Gratuity Fund

67.61

4

Language and Culture Department

6.29

Total

2352.09

Assets

S N.

Agency

Major Outstanding as on March 31, 2006 ( in Lakhs Rs.)

1

State Government

1325.62

2

Various Taxes (To be collected)

608.56

Total

1934.18

 

The reason behind this mammoth outstanding is the difference between the charges levied to the citizens by SMC and charges levied by IP&H to SMC. Year on year details of the outstanding are given in Table 19.17.

Table  STYLEREF 1 \s 1. SEQ Table \* ARABIC \s 1 17 Year wise major outstanding

Item

2001-02

2002-03

2003-04

2004-05

2005-06

Total

Outstanding Amount Payable to SMC by State Government

53.85

287.76

346.89

264.01

365.38

1317.89

Outstanding Amount Payable by SMC to IP&H

1547.55

1887.76

714.44

1121.69

1874.09

1874.09

Outstanding Amount Payable by SMC to HPSEB

632.27

806.78

291.55

341.69

404.1

404.1

 

The outstanding payable by SMC to IP&H and HPSEB has been increasing due to inability of SMC to pay the amount. In 2003 State Government paid 1646.56 lakhs to IP&H and 623.35 to HPSEB on behalf of SMC in 2003.


 

 

1.8                                    Key financial Indicators

Table  STYLEREF 1 \s 1. SEQ Table \* ARABIC \s 1 18  Key financial Indicators

S N

Indicator

Unit

Value

Min

Max

Average or as on 31st March, 2006

A

Resource Mobilization

1

Per Capita Income

Rupees

 

 

1134.5

2

Share of Taxes

 

27.2%

36.3%

30.7%

3

Share of Non-Taxes

 

34.0%

45.8%

40.9%

4

Share of Octroi Grant

 

17.7%

35.4%

23.1%

5

Share of Capital Income

 

1.6%

9.4%

5.4%

B

Expenditure Management

1

Per Capita Expenses

Rupees

 

 

1353.6

2

Share of Establishment

 

49.3%

56.7%

53.0%

3

Share of contingencies

 

5.2%

6.6%

6.0%

4

Share of Maintenance

 

2.0%

13.1%

6.6%

5

Share of Other Expenses

 

20.2%

31.6%

27.7%

5

Share of Capital Expenditure

 

2.2%

10.4%

6.8%

C

Performance

 

Operation Ratio

 

 

 

1.2

 

Capital Utilization Ratio

 

 

 

1.1

D

Efficiency

1

Property Tax

 

 

 

 

 

Collection Performance

 

34.1%

44.5%

39.0%

 

PT Arrears as % of Total Demand

 

49.1%

55.3%

52.3%

2

Sewerage Tax

 

 

 

 

 

Collection Performance

 

42.2%

48.2%

46.0%

 

PT Arrears as % of Total Demand

 

21.5%

44.3%

36.0%

3

Water Supply

 

 

 

 

 

Collection Performance

 

67.7%

72.9%

69.6%

 

Water Charges Arrears as % of Total Demand

 

22.8%

25.1%

23.8%

 

 


 

1.9                                    Key Issues

                 The current cash based accounting system and its financial reporting by the SMC is unable to show their true financial performance and position. The double entry based accounting system to be implemented as a part of reform process under JNNURM will overcome this issue

                 High subsidy on water: The Corporation is supplying the water at Rs.3.85 per Kilo litre for domestic and Rs. 30.25 per Kilo litre for commercial while procuring the treated water from IP&H at Rs. 8 per Kilo litre. With heavy subsidy on water supply SMC is not able to recover its procurement and O&M costs

                 The Energy bills towards HPSEB is increasing due to the interest levied by HPSEB to MC on the previous due amount. SMC has been paying the electricity charges regularly without any interest payments

                 The collection efficiency is low in case of the property tax. SMC has been able to collect maximum 70 % of the billed amount for the current years and 45 % of the total amount if total arrears are considered.

                 Due to recent merger or SADA area into Shimla Municipal Corporation, SMC shall be providing all the basic services to the residents of these areas without having income from property tax from these areas, which will increase the burden on municipal finances

                 No diligence on the project viability, user-charge recovery for capital expenditure

 

1.10                                Vision and Strategy

 The strategy for improving the financial positions of the Shimla Municipal Corporation is based on reduction in the cost and revenue enhancement

Reduction in cost

o             Improvement in Efficiency

Improvement in efficiency in service deliveries will lead to the reduction of costs. Computerization, e-governance, redeployment of staff redundant staff and implementation of other reform agenda is expected to improve the efficiency

o             Outsourcing

Outsourcing and involvement of private sector, which can bring not only efficiency in service delivery but also professional management practices should be encouraged

Revenue enhancement

o             Implementation of unit area assessment for property tax

The implementation of unit area method for property tax assessment reform is expected to widen the base and eventually increase the revenue in long run

 

o             Revision in water charges in order to recover at least O&M cost

Proposed last two revisions in water charges are pending. It is recommended that the two pending revision be carried out. It is recommended that the water charges be revised to recover 50% of the O&M charges as prescribed in the JNNURM guidelines

 

o             Improvement in collection efficiency

Collection efficiency of SMC is almost 65% of the billed amount of property tax for current year and around 45 % if arrears are considered. It is recommended that automation in billing and collection should be implemented. Also, involvement of private sector in collection system be encouraged

 

o             Enforcement of sewerage charges

SMC has notified sewerage charges, which is 50% of the water charges. However it are not being charged and collected. It is recommended that the notification be enforced in true spirit

 

o             Enforcement of other taxes

SMC should increase revenues by enforcement of various other taxes like professional tax; moreover increase in various other tax rates wherever possible will improve the revenues of Municipal Corporation

 

o             Collection of taxes in SADA areas after two years

Currently, property tax in not levied to SADA areas. It is recommended that these areas should also brought under the property tax in order to enhance the revenues

 


 

o             Conservancy fee on all hotels

Shimla being a tourist center and more of weekend tourism, the sector is putting more stress on the infrastructure without significantly contributing to economy. Conservancy tax may be levied on tourists collected through hotels

 

o             Levy of Green fees and its sharing

 

It is recommended that green fee on line with Manali may be levied on vehicles entering Shimla with appropriate sharing between SMC and GoHP

 

o             Leverage the SMC owned properties to enhance the revenues

 

SMC owns large number properties in Shimla Planning Area. It is recommended that SMC should leverage these properties in order to enhance the revenue

 

Mobilization of resources

The major source of funding for mobilization of resources by SMC may include:

      Internal resources of SMC raised through leveraging of SMC property

       State grant

      Loan from Banks and Financial Institutions

 

The raising resources from financial institutions and capital market would require implementation of reform agenda on fast track and implementation of following facilitating actions

      Credit rating of the SMC

      Setting up Urban Development Fund for leveraging grants received from GoI and GoHP under JNNURM