How city authorities can augment revenues through advertisements
Financial year 2015-16 has ushered in new era of fiscal consolidation. Myriad Government organizations such as Urban Local Bodies (ULBs) comprising of municipal corporations, municipalities and Nagar Panchayats are looking at ways to rationalize expenditures and strengthen revenue augmentation, especially by focusing on untapped internal resources.
There are about 3,636 ULBs in the India; unfortunately, most of them became weak and inefficient since the Indian Constitution did not make local self-government in urban areas a clear-cut constitutional obligation, even after the 74th Constitution Amendment Act (CAA) was introduced to strengthen decentralization at grass-root levels.
Though the Amendment explicitly stated that the responsibility for urban planning, water supply, social and economic planning, slum up gradation, public health, etc. lay in hands of ULBs, it did not lay down the revenue base for cities to accomplish these functions effectively. The power to determine the revenue base continues to remain with State Governments and their overarching policies.
The financing requirements for real-time functioning and improvement of existing cities as well as providing for orderly urban growth are enormous. There is an express need for an environment which encourages cities to plan for improving their revenue flows from their own resources. A number of revenue streams are available for this purpose. These include property tax, building license fees, other land-based levies such as betterment levy / valorization / impact fees / exaction, stamp duty, octroi, hawker / vendor fees, Public Private Partnership, use charges and advertisement fees.
Out of these, advertisement fees are a key instrument for revenue augmentation. In fact, advertisement fees – or revenue collected through leasing of advertisement rights on assets owned by various Government agencies – could turn out to be a game changer.
Presently, JLL’s Strategic Consulting team is advising urban local bodies on augmenting their revenue sources through advertisements on public buildings, bus shelters, street lamp posts etc. In fact, many Indian cities are now focusing on developing, planning and expanding this opportunity beyond just these established media to other assets which present an advertisement fee opportunity – these include public convenience facilities such as restrooms and water fountains, lamp posts, public parks and open spaces, and Government buildings.
The Strategic Plan (2011-16) released by Ministry of Urban Development, GOI acknowledged the immense potential for out of home (OOH) advertisement fee to add substantially to the funds available with ULBs. It also made it a point to highlight that poor application, overall lack of innovation and weak enforcement are currently the key hindrances to implementing an efficient advertisement revenue strategy.
Outdoor advertising has evolved to the extent that it can be almost as useful as traditional advertising media like newspaper, radio and TV. This presents a good marketing option as the media audience becomes more fractured and more adept at avoiding ads. The outdoor advertising market is set to cross Rs 3,000 crore at a growth rate of 13 per cent in 2016 against the projected 7 per cent – only marginally lower than then the overall advertisement industry growth of 16.8 per cent. In 2014, the total spends on outdoor advertising grew by 12.9 per cent. Transit media too grew by 12 per cent as against its projected growth of 10 per cent.
Today, the out of home advertising medium has taken marketing to an entirely new level – it offers new digital technologies, new lighting and materials, new formats, and the involvement of more creative thinking to make messages reach a larger number of people than ever before.
Revenue Augmentation: The additional revenue can significantly contribute towards greater self-reliance, efficiency and reducing fund deficit – and greatly reduce a city’s dependence on tax accruals
No additional cost: Other than on procedural requirements, cities do not have to make any capital intensive investments.
High demand: A city’s assets include public places largely situated in prime locations with high vehicular and pedestrian traffic, both of which are essential factors in impactful advertising
Reduced operation & maintenance costs: Many Indian cities are challenged in terms of the effective upkeep of public convenience facilities, bus stops, parks, etc.. The rights to advertisement on these assets can be coupled with responsibility for their operation and maintenance, as well.
Enhanced city aesthetics: A single body regulating outdoor advertisements brings uniformity, reduces clutter and makes the city look vibrant and unique.
Ideal means to improve social awareness: A portion of the available advertising space can be reserved for promoting social messages and other important information regarding the city, government and its initiatives.
Most importantly, by giving licensing rights to OOH agencies to display advertisements provides the city authorities with a highly reliable revenue stream to help manage the city more efficiently.