BMC Issues Rs 350 Crore Credit Notes to Builders, Despite No Work Done

The Brihanmumbai Municipal Corporation (BMC) has issued credit notes worth around Rs 350 crore to contractors for building houses for project-affected people (PAP) in Mulund, Bhandup, and Prabhadevi. The contracts have been awarded to Swaas Construction Co, New World Landmark LL, and Classic Promoters & Builders, respectively.

Under this system, instead of paying money, the BMC issues credit notes to the contractors who can then use them to pay municipal taxes or premium charges to the BMC in the future. They can also sell these credit notes to other contractors for money.

According to civic sources, most credit notes were issued to a contractor executing the Mulund project, along with the transfer of development rights (TDR), to construct over 7,439 PAP houses. However, the construction work has not yet started.

While there is no provision for paying credit notes under the MRTP Act, the erstwhile MVA government permitted the BMC to do so. Two decades ago, the state agency MMRDA had done something similar while paying builders to construct PAP houses for them.

Initially, some politicians in the BMC raised concerns about irregularities in the construction of PAPs, but they later went silent, sparking whispers that some senior state politicians may have had personal interests in the matter.

BMC aims to construct 40,000 PAP houses, each measuring 300 sq ft, under the credit notes scheme. To achieve this, it has provided two options to contractors. Under the first option, contractors should have their private land parcel to construct the PAP houses for BMC, and BMC pays them in TDR and credit notes which they can sell in the market to recover their expenses and profit. Under the second option, BMC provides its own land parcel to contractors to construct houses and pays them in the form of TDR and credit notes.

While civic officials have admitted that the biggest legal hurdle in credit notes plan implementation is that there is no provision for them in the MRTP Act, the state urban development department permitted the BMC to implement the credit notes policy citing an earlier MMRDA precedent. However, former Congress group leader in BMC, Ravi Raja, has raised concerns about the legality and transferability of these credit notes.

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