People's Democracy

(Weekly Organ of the Communist Party of India (Marxist)


No. 29

July 17, 2011


The Burden of User Charges

P Madhu


THE Administrative Reforms Commission, formed by the union government, has stated that the non tax revenue constitute an important part of the financial resources of municipalities. It detailed the importance of collecting user charges from the people for the various services rendered by the municipalities. Water cess, sanitation tax, sewerage charges, garbage collection charges, street lighting charges, parking fee etc constitute the non tax revenue. Recently, the Administrative Reforms Commission has brought out a report titled 'Democratic Governance' in which it expresses concern that the income from various services offered is much lower than the expenses incurred in rendering those services. It recommended recovery of full amount from the users for these services.


The union government's Economic Survey of 2006-07 has also recommended the same. It asserted that income from user charges must be the foundation for the provision of basic services in cities. It also advised that money can be raised from capital markets and the repayment should be done through levying of user charges. Expressing dissatisfaction at the low usage of raising money through issue of municipal bonds, the Survey advised to improve this and pay back by levying user charges for the services rendered by municipalities. The Andhra Pradesh state government is taking steps to raise the water charges in 68 municipalities of the state as part of this overall policy direction.


The central government has stated three reasons for lack of funds for urban local bodies in municipalities:

1.     The elected representatives are afraid to increase user charges for services rendered by local bodies fearing people’s resentment. This is creating problem in delivering quality services from within the available funds.

2.     Without the availability of necessary funds, expertise, there is failure in estimating expenditure requirements.

3.     Citing lack of paying capacity of some as an excuse, there is a failure in collecting user charges from those who have the capacity to pay.


It is because of these reasons that most of the urban local bodies are facing dire financial situation, felt the central government. Citing this situation, the central government has imposed a condition for releasing funds of all its schemes to states and local bodies – compulsorily impose and collect user charges for the services. It ordered that all expenditure for operation and maintenance of services for the coming five years must be collected from user charges. It linked the release of grants of the central government to collection of user charges. All this was formalised through the Administrative Reforms Commission.


There are some services that are collective in nature and cannot be reduced to individual level. For such services, it is being collected under the guise of ‘betterment levy’. This is being implemented in many parts of the country already. There is another category from which money is sought to be collected under the principle, ‘polluter pays’, although this is in initial stages. For example, in the name of curbing peak traffic, there could be levy of charges. Another example is the levying of Rs 25 per square feet fine for storing the construction material in a manner that obstructs traffic in Hyderabad corporation limits.


There are many options for municipal bodies to levy fines for violation of civic rules by citizens. The income from such fines is very marginal but the central government has suggested that this avenue can be an important one in implementing municipal legislations. The levying of fines is not being done mainly because as per existing law, these fines can be collected by municipal authorities by sticking to criminal proceedings. The centre expressed concern that this is preventing implementation of various rules. It therefore underlined the need for thorough changes in municipal Act. It also recommended institution of ‘municipal police services’! It also felt that one of the reasons these rules are not being implemented is the small amount of fines presently and therefore recommends a review of punishment and fine amount in such violations. It proposed amending the law to empower municipal bodies to raise the fine amount.


In the name of garnering resources for urban local bodies, the central government is trying to shift the entire expenditure of providing basic services on to the people in the form of user charges. The people, burdened as they are already with galloping prices of essential commodities, will surely resist this move through struggles.