Annual loss of MVR 3.9 million to Kulhudhuffushi if amendments are followed: Mayor

Upon ratification of the amendments to the Decentralization Act, Kulhudhuffushi Mayor Mohamed Athif has said that their City Council will see annual losses of MVR 3.9 million.

The bill passed in Parliament on Wednesday, with just the ratification process being left. Mayor Athif has expressed concern regarding the amendments, particularly the acquisition of rent from any plot or building that was given by the government to the public for basic services having been prohibited, and the result of that being a loss of MVR 3.9 million to the city council.

Consequences of the provision being ratified:

- If the government declares communication services as basic services, the service providers will lose MVR 1.26 million annually from the land allocated to them by the Kulhuduffushi City Council.

- Annual loss of MVR 183,927 from land allocated for banking services.

- Annual loss of MVR 2.12 million from land allocated for water and sewerage services.

- Annual loss of MVR 425,278 from various buildings from Kulhudhuffushi allocated to the state.

The Mayor said that discussions are already underway to lease various place for varying state purposes.

"We will see major losses in yearly revenue and losses in the aforementioned areas," Athif said in a Kulhudhuffushi City media briefing.

The mayor also said it is a risk that the bill states that certain conditions have to be met even though the local authority company would be granted the power to carry out economic activities within council areas, particularly the bill stipulating that the investment or capital of the project should not exceed MVR 10 million.

Athif said imposing conditions on the work that local authority companies do is to prevent councils from earning revenue.

"I am saying this because you know very well that these councils in the islands are not really financially capable of making an investment of more than MVR 10 million. We are a city council. It will be a burden for us to put in an investment of MVR 10 million," said the mayor.

He said the reason for the amendment was to bring a stop the work being done by the local authority company.

"The bill even states that no work can be done unless it pertains to structural development. I would like to make it clear that the option for local authorities to conduct business ventures outside of structural development is crucial, as structural development works are huge projects with huge payments involved," said Athif.

He said the local authority company is already working to provide play school services in Kulhudhuffushi. If the bill is passed, that project will also be stopped.

Business that see conflict with the amendment (of the conditions that have to be met, etc) will have 90 days to cease all operations in order to abide by the changes, and that this will also be quite a loss, said that mayor.

Due to the provision, the mayor went on to say that if the local authority company has already started the play school service in Kulhudhuffushi, it will have to stop within 90 days.

"There are many works and projects that are underway in many islands via local authority companies. This amendment will see all that investment go to waste. This amendment will cause irreparable damage to councils," Athif said.

He stated that if the bill is passed, the state will deduct the amount of money that councils have not paid for public services for more than six months, including the payment of block grant funds currently issued by the state.

Athif said the electricity bills of the stadium in Kulhudhuffushi have been transferred to the name of the city council without their consent, even though the island football stadiums are assets of the Sports Ministry. He went on to say that as the stadium is not owned by the Kulhudhuffushi City Council, they have experienced legal obstacles in paying the bills.

"Regardless of this, if this amendment is brought to fruition, they should subtract the amount they have to pay concerning the assets of the ministry when we are given block grant payment," said the mayor with concern.

"This is deeply saddening."

As per the bill, council bank accounts would be run under the purview of the Finance Ministry as well, with all bank account statement requests being granted.

Athif said while he was expressing his concern, that the councils are already operating in accordance with the Public Finance Act and circulars issued by the Ministry of Finance. He went on to say that the inclusion of bank account statements being granted upon request being in the bill was to financially tie up councils.

More than 50 councils have said in statements that the current proposed amendments to the Decentralization Act would stop councils from reaping financial costs and financial benefits, but the government has said the amendments are meant to ensure councils exercise their financial powers responsibly.

Minister of Cities, Local Government and Public Works Adam Shareef has said that President Dr. Mohamed Muizzu is working hard to strengthen the decentralization system and financially empower councils and that these include giving uninhabited islands to councils, visiting islands, meeting with councils, making decisions on the proposals of the councils and making changes to projects proposed by the councils.

"[These are] The President's efforts to strengthen the decentralization system, empower councils in the truest sense of the word and win the trust of the people for councils," said Adam Shareef.

He said the rebuilding of 105 dilapidated council offices is being done under the direct initiative of President Muizzu.

One of the amendments states that if the period between the expiry of the term of the councils as stipulated in the Constitution is one year or less, the council shall not perform certain functions except in accordance with the rules prescribed by the Ministry of Finance and the LGA.

These functions are:

- The recruitment of permanent or contract employees to the council administration or the council office.

- The lease and grant of land, harbors and reef areas within the jurisdiction of the council.

The bill also states that certain conditions have to be met even though the local authority company would be granted the power to carry out economic activities within council areas, with them being the following:

- Not be an economic activity or business carried on by a private entity in the island or islands that belong to local authority company.

- The work being done is necessity for the structural development of the island or islands.

- The investment or capital of the project or works should not exceed MVR 10 million.

As per the bill, the acquisition of rent from any plot or building that was given by the government to the public for basic services will also be prohibited. Among them, the bill describes the rent of leased land, harbors, reef areas and the rent of council buildings and property.

Council bank accounts must now be run under the purview of the Finance Ministry, with all bank account statement requests being granted.

Parliament passes bill to amend Decentralization Act