Octroi abolished in 15 smaller cities

MUMBAI: After dragging its feet over abolition of octroi in major cities governed by municipal corporations, the state government on Wednesday decided to get rid of the duty in 15 smaller cities. However, the catch in the decision is that all these 15 municipal corporations belong to the D category, which means the decision may not have a substantial impact on trade in the state. Maharashtra, the most urbanised state in India, has 22 municipal corporations.

Top and middle-rung municipal corporations for cities of Mumbai, Navi Mumbai, Thane, Pune, Nagpur, Nashik, and Pimpri Chinchwad, would continue to collect octroi. Finance minister Jayant Patil said the cities where octroi is being abolished would revert to collection of an account-based cess in the 2008-09 fiscal.

The decision could have a positive impact on trade in D class municipal corporations which fall in the Mumbai metropolitan region and also help the state achieve its objective of a dispersed economic growth beyond Mumbai, sources said.

���Trade in cities like Bhiwandi, Ulhasnagar, and Kalyan-Dombivli which are in the metropolitan region and get the spill-over benefits of being close to Mumbai would benefit from abolition of octroi,��� said an urban development official.

Sources said the reason why the finance minister abolished octroi in smaller cities could be that the state had yet to identify a feasible replacement for octroi. ���In Mumbai alone, the BMC collects more than 60% of its revenue through octroi.

For the next fiscal, the BMC has set a target of Rs 4,525 crore from octroi collection. Corporations like Pune and Pimpri Chinchwad also make handsome gains from octroi. As of now, octroi has no alternative for these corporations,��� said an official.