Bangalore is a fine city –the conclusive proof

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Posted on:06-12-13

In last week’s blog I had written of how Bangalore is now ringed by new, congested and sprawling middle class slums. These have been built on land irregularly converted from agricultural to non-agricultural use, with scant regard for any canons of urban planning. It is estimates that there would be more than 3,50,000 of these structures in the city. That’s a large number of law breakers.

Many will protest at my harsh indictment. After all, many flat owners would not have known of these intricacies of the law when they purchased their flats. Sale deeds should mention the order reference regarding the conversion of the land concerned, for non-agriculture purposes. The builder must also give a copy of this order to each property purchaser. However, many sale deeds, especially in the case of apartment complexes, do not contain these details.

An immediate problem to be tackled by the BBMP was whether the owners of these irregular structures were liable to pay property taxes. The BBMP decided that they would list these properties in their taxable property registers and issue a ‘khata’, which is a document that signifies that one’s property is liable to be assessed for property tax.

To make it clear that the issuing of a khata does not condone the irregularity of constructing a building in violation of the law, the BBMP refers to the Khatas issued to such properties as B Khatas. In a far reaching move of administrative reform, B Khata certificates are pink coloured, in contrast to the lily white of A Khatas, which are issued to properties that are in compliance with the law.

That solved one problem; law breaking property owners now pay property taxes. However, they continue to be law breakers and at least on paper are liable for harsh punishments, which may extend to forfeiture of the property, or demolition of law-offending constructions.

In response, the government announced ‘Akrama-Sakrama’

You might be forgiven for guessing that ‘Akrama-Sakrama’ might be a pair of Pakistani fast bowlers. No, it is a zingy name for a solution to the problem of irregularly constructed buildings on agricultural land. It means, literally, ‘irregularity, regularised’.

What the government intends to do through Akrama-Sakrama is to levy a one-time fine on each irregularly constructed property. In return for the payment of these fines, the irregularities are condoned; or ‘regularised’, to use the proper government term.

It’s a nice solution. You pay, I look the other way. In other words, it is ‘kiss-and-make-up’ governance.

Akrama-Sakrama has been in the air for several years now, but has still not been implemented. Three elected governments representing the three mainstream political parties in Karnataka, have pushed for the scheme, so there is a large political buy in for this approach. In all fairness, the approach of politicians is pragmatic. Any other approach, which means demolition of properties or forfeiture of land, is obviously impractical and politically disastrous. One can imagine the mayhem that would explode if the government were to actually drive in bulldozers to demolish staid middle class localities. This is not as easy as razing a few hundred huts of poor people. So, imposing a fine and walking away is probably the best way out.

You might well ask why there has been a delay. The governor of the State did not accept the proposal submitted by the previous government, but has accepted it now, when sent by the current government.

It’s the money, honey!

Not less than 30 billion rupees – three thousand crores – is expected to be raised through the fines levied for regularization. That’s a lot of money; as much as the entire annual budget of the BBMP, all raised through fines.

The Chief Minister has already announced that this money will be used to fix Bangalore’s roads and make them world class. Many might think that this is a happy ending. Citizens walk away with their properties regularized, the government gets its money and we get better public services.

However, let me burst that bubble. While the colour of the money is indistinguishable, there is a world of difference between the money collected through fines and that through taxes.

Fines are deterrents. They are meant to punish the offender and sound a warning to deter potential offenders. The money collected through fines is an incidental gain for the government. It is the public order that punishments of law breakers ensures, which is of greater value than the money itself.

Some people will even go as far as to say that money collected through fines should be re-invested in better regulation and enforcement to see that offences are reduced even further. Thus, money collected through fines on jumping traffic lights, would best serve the public if they are used for driver education programmes, advertisements, or closed circuit cameras to monitor traffic. This makes a lot of common sense, though from a public-finance perspective, it is not mandatory that fines should flow back to improve regulatory systems specifically related to the transaction fined.

Taxes, on the other hand, go into a common pool from where public expenditure can be made for any public purpose.

From the perspective of accountability too, there is a world of difference between fines and taxes. Imagine that one pays a fine for jumping a traffic light. What is the first emotion that one experiences? Is it not one of relief; that one has got away with a mistake? Perhaps one might also remind oneself not to repeat the mistake again. But, does one really ponder the question as to what the government may use the money for?

Contrast this with one’s emotions when one pays a tax. The tendency to ask questions as to where one’s money is going to be used is much greater if you pay taxes, than if you pay fines. This is not conjecture, but is an observable and researched fact.

The governance game changes when a government begins to lick its lips with anticipation at the pecuniary gains from imposing fines. The government begins to lose interest in ensuring compliance with the law. On the other hand, it actually develops a perverse interest in people breaking the law – the more the law is broken, the more fines can be collected.

From the perspective of holding the government accountable for its expenditure plans, raising money through fines is a lousy way of moving ahead. People who pay fines will revel in the relief of getting away with law breaking; they are not going to ask questions on how that money is being spent. The same cannot be said of people who pay taxes.

If Akrama-Sakrama is implemented it will look momentarily as if we have solved Bangalore’s city’s bankruptcy. We might invest these fines on building better roads, but not many are going to ask questions of the money spent. Moreover, what happens when the fine money runs out? Do the planning authorities in Bangalore continue to look away from the possibility of more irregular structures coming up, like rings of Saturn, around the city’s periphery? Do they quietly encourage another round of irregular constructions, which can be milked through fines, five years from now?

Bangalore will be built on fines, but in the long run, it is not going to be a fine city.

Exploring the difference between taxation and fining is a place to introduce my next series of blogs. They will focus on a simple introduction to public finance; what every citizen needs to know about where government’s money comes from and where it goes.

So till then, have a fine week!

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