BMC leaves no stone unturned to increase India's ranking in Ease of Doing Business
The Brihanmumbai Municipal Corporation (BMC) has been leaving no stone unturned to improve the Ease of Doing Business (EoDB) rankings of India in World Bank's Doing Business index. The civic body has brought down the charged for constructing a warehouse in the city by a whopping 90 per cent.
The BMC has taken this step at a time when a team of central government is in the city for a three-day visit. Reportedly, the team will check an initiative taken by the BMC to minimise the construction cost, and lessen the number of various permissions required by the builders in order to construct a building or a warehouse in the city.
A senior official from the Building Proposal Department of the BMC said that a circular with a provision to relax the premium that the builders pay to construct a warehouse in the city was released in 2015. Since the land price is very high in the city, the premium on construction is also high. However, civic administration's move will bring down the overall cost of permissions and the cost of construction as well.
Earlier, the cost of getting all permissions and premiums was around Rs 11 lakh for constructing a warehouse on an area of 1,300 square metre. Now, the civic body's decision will bring down the cost to just Rs 1.1 lakh.
"The move will help India improve its ranking in the World Bank's Ease of Doing Business Index," said the senior official from BMC's Building Proposal Department. He added that the civic body has already received four proposals for constructing warehouses in Mumbai. "These proposals are for three warehouses in the suburbs and one in the city," the official added.
In 'World Bank's Doing Business 2018: Reforming to Create Jobs' report, India's EoDB rankings could have been much better — if only the cost of getting various permissions to construct a building in India wasn't so high. India rose up 30 ranks from last year to bag the 100th spot. However, the report indicated that India lagged behind in areas such as dealing with construction permits, starting a business and enforcing contracts. It ranked at 181 in dealing with construction permits, a little better than last year's 185.
Here's how it works:
Say a 1,300 sqmt warehouse has to be constructed with no trees or natural resources. As per World Bank's methodology, the warehouse is valued at 50 times of Gross National Income (GNI) per capita of the country. The GNI per capita of India is $1680 (around Rs 1,08,601), so the construction cost of the warehouse should be around Rs 50 lakh at current value.
However, the construction cost of such warehouses in Mumbai stands at around Rs 2 crore and the different permission charges stand at around Rs 11 lakh. However, the WB does not look at actual costs.
It takes Rs 50 lakh as base price and then looks at Rs 11 lakh towards permission charges, which is roughly 20 per cent.
Now, the BMC has brought down the all permission charges, including premium by 90 per cent. It means that now, 10 per cent of Rs 11 lakh will have to be paid, which will be around Rs 1.10 lakh.
"As per the WB assumption, this is then considered a difficulty for the business, while in reality, permission charges are just about 5 per cent, which is decent," said a BMC official.
The civic body says it is trying to bring down various charges as well as cut down the number of processes to further improve the rankings.
EODB RANKINGS
- India rose up 30 ranks from last year to bag the 100th spot this year
- India lagged behind in dealing with construction permits and starting a business
- It ranked at 181 in dealing with construction permits, a little better than last year’s 185
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