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Budget Analysis of the Imphal Municipal Corporation

Sonam Dorji
PRN: 1606024055, SEM III
MSc Economics (Urban Development)
Symbiosis School of Economics
Overview of Imphal City
As per Census 2011, the total population of Manipur is 2,570,390 .Of this, the rural population is
1,736,236 and the urban population is 834,154. There are 28 Urban Local Bodies (ULBs) in
Manipur. Of these ULBs, Imphal Municipal Corporation with an urban population of 2.68 lakh
as per 2011 census, is the largest ULB covering almost one third of the total urban population
(6.3 lakh) of Manipur. It is projected that the current population of Imphal city is about five
lakhs. The city was identified for implementation of the smart city mission for the government of
India

Methodology for Analysis


In this assignment, technique of horizontal analysis, vertical analysis and trend analysis of the
budget for Imphal Municipal Corporation is used for structural understanding of the budget.
While going through the website, the city does not have information like other city, but it does
have information of its budget from 2011 to 2014. This data on the budgets are organized and
analyzed using techniques mention above.

Organization of Data
The raw data from the budget is organized and put into following format for better understanding
of the budget.
Receipts 2011-2012 2012-2013 2013-2014 2014-2015
Revenue 43,644,599.00 46,061,417.00 63,240,337.00 63,144,675.50
Capital 163,982,201.00 204,752,448.00 204,752,448.00 135,161,039.00
Total Receipts 207,626,800.00 250,813,865.00 267,897,123.50 198,305,714.50
Expenditure
Revenue 60,555,457.00 48,736,187.00 55,208,373.00 55,208,373.00
Capital 177,416,699.00 72,662,481.00 174,334,237.00 174334237
Total Expenditure 237,972,156.00 121,398,668.00 229,542,610.00 229,542,610.00
Table 1 Budget Summary of Imphal Municipal Corporation

The table 1 shows the different type of receipts of the Imphal Municipal Corporation and its
expenditure. It also show the deficit of the budget, which will indicate the financial health of the
corporation.
2011-2012 2012-2013 2013-2014 2014-2015

Total Receipts 207626800 250813865 267992785 198305714.5

Total Expenditure 237972156 121398668 229542610 229542610

Deficit -30345356 129415197 38450175 -31236895.5


Table 2 Budget Deficit

Table 2 shows the details of the budget deficit of the corporation. Imphal had deficit only in year
2011-1-2012 and 2014-2015. It had budget surplus in 2012-2013 and 2013-2014. It shows the
uncertainty of the expenditure, as during the surplus year, most of the capital budget was not
spend. It would also indicate the inefficiency of the human resource available.

Horizontal Analysis
This analysis focuses on changes from one year to the next of different components of the budget
of Imphal Municipal Corporation. From 2011to 2015, revenue receipt increased from 43.67
million to 63.14 million. There was fluctuation of capital receipt, along with the capital
expenditure in these four years.

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0
2011-2012 2012-2013 2013-2014 2014-2015

Revenue receipts Revenue expenditure

Figure 1 Revenue Receipts Vs Revenue Expenditure

Figure-1 shows the increasing trend of revenue receipt and decline in the corresponding revenue
expenditure. It illustrates the ability of the municipality to fund its revenue expenditure
irrespective of the capital receipts and expenditure.
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2011-2012 2012-2013 2013-2014 2014-2015

Capital Receipt Capital Expenditure

Figure 2 Capital receipts vs Capital Expenditure

Figure 2 shows the decline of capital expenditure in 2012-2013, owing to the political instability
of the state or may be because of the inefficient human resource or poor governance. Whereas in
2014-2015, the capital expenditure was more than the receipt which was the main cause of the
budget deficit of the municipality.
Vertical Analysis
This analysis focuses on the various items listed up and down the page of a financial statement
for a given year. In this assignment, the constituents of each of the receipts and the expenditure is
analysed to understand how the revenue is earned and spent.

2%
property tax
2% 0%
1% 11% 0%
2% Land Hoarding
2%
4% Toll Tax

7%
Compensation in lieu of
octroi
69%
Market fees

Building Plan Approval


fees

Figure 3 Breakdown of Revenue Receipts (2014-2015)

Figure 3 shows the sources of the revenue for the municipal corporation, where the major source
of revenue is the octroi (69%) , followed by the septic tank clearance (11%) and market
fees(7%).
The contribution from the property tax is very less in this municipality, due to the lack of proper
property rights, as the community owns most of the land. The contribution from the property tax
to the revenue was insignificant and was only 30,429 rupees.

2% 1% 5%
UCDN (Under SJSRY) for
Urban Poor

UWEP (Under SJSRY) for


urban poor

BSUP

92%
13th finance
commission(performan
ce grant)

Figure 4 Breakdown of Capital Receipts (2014-2015)

From figure-4, we can say that 92 percent of the capital receipts is from the central government
for the implementation of BSUP of the JNNURM.
From the receipt side, we have identified the source of income for the municipal corporation. To
understand how the corporation uses it, we can break down the revenue and capital expenditure.

4%
7% Salaries, Wages and
3% Bonus
Benefits and allowances
6%
other terminal and
retirement
operation and
80% maintenance
Revenue Grants and
Subsidies

Figure 5 Breakdown of Revenue Expenditure (2014-2015)

Figure-5 shows that 80 percent of the revenue expenditure is spend on payment of salaries,
wages and bonus of the employee. It should actually lead to capacity of the corporation to
implement the plans and other development activities. Unless we visit the city and experience the
built environment in Imphal, we would not be able to say whether the employee in the
corporation is efficient or not.
This excessive expenditure of revenue on the pay and allowances of the employee is unhealthy
and unsustainable for the city, unless it justify itself with the quality services and infrastructure.

0%
4% UCDN (Under SJSRY) for
3% urban poor
UWEP (Under SJSRY) for
1%
14% urban poor
1% BSUP

Solid Waste Management

13th finance commission


77%
(general grant)
13th finance commission
(performance grant)

Figure 6 Breakdown of Capital Expenditure (2014-2015)

Fugure-6 indicates the dependency of the urban local body on the central and state finance
commission for the grants for capital expenditure. For a urban local body, it is very difficult to
raise its revenue for capital expenditure. Therefore, it should depend on the state and central
government for the grants.

Trend Analysis
This analysis looks at the change of the finances over the years. For this assignment, the trend of
receipts and the expenditure is illustrated with the graph for the analysis as shown in figure-7.

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2011-2012 2012-2013 2013-2014 2014-2015
Total Receipts Total Expenditure

Figure 7 Trends of Receipt and Expenditure


Figure-7 shows the trends of the finances of the Imphal Municipal Corporation. The expenditure
was less than receipts in 2012 to 2014, whereas it was higher than receipt in 2011 and 2015. This
shows the uncertainty of the financial situation and utilization of the budget appropriated to
them, especially capital budget.

Observations
In summary, following were the observations from the budget analysis of the Imphal Municipal
Corporation:-
 About 69 percent of its revenue comes from the Octroi. With GST in implementation, the
sustainability of its finances is questionable.
 Capital Receipts are underutilized or misappropriated for different budget heads.
 About 80 percent of the Revenue expenditure is for the salaries and allowances for the
employee and ward committee member. While it is important to pay them well, the
efficiency and quality of municipal service is also important.
 General grants and government specific program grants forms large part of capital
receipts, which are critical for the finances of urban bodies in delivering municipal
services.
 Compare to the property tax collection in other states of India, it is very minimum in
Imphal City. This requires designating specific property right or reforms, or may be
community based property tax would be efficient as in other countries, where tribal
culture dominates the right to property.

Thank You