Kolhapur: The state has cut down on the monthly compensation amount given to the civic body by Rs 1 crore.After the Local Body Tax (LBT) was abolished in August 2015, the state decided to release the compensation amount each month. Since then, the government released Rs 7.22 crore. It has now released a notification that the compensation will be reduced.The state released Rs 6.23 crore last month. The civic body claimed that it has been facing losses of around Rs 12 crore each month since LBT was abolished and compensation should be paid accordingly. The government, however, didn't buy the civic body's claims and took the decision to offer compensation lower than the claim made.Ram Katkar, KMC's LBT officer said that the cut in the compensation amount will further hamper the plan for infrastructure work. "Earlier, the claim of Rs 12 crore was made as per LBT generated for two years prior to the decision of abolition. If the compensation as per the claimed amount was provided, the KMC would have carried out with their routine work smoothly."The LBT was abolished because of traders' demand. The traders had claimed that the system which came in to replace Octroi, required heavy documentation. They said that they had to face harassment by civic officials.The state had devised the formula to compensate the civic body facing revenue losses after the LBT abolition. The compensation amount is the monthly average of the highest recorded LBT collection and the current rate of revenue growth of the state. For instance, the KMC recorded the highest amount of Rs 110 crore collected a few years ago, the monthly average of which is around Rs 9.16 crore. The compensation amount was to increase at the same rate at which the state government's revenue increases."The state has stressed on tapping those traders with a turnover of over Rs 50 crore for generating the revenue. There are very few traders, however, with a turnover more than Rs 50 crore and the KMC hardly gets significant revenue from them," Katkar said.The current fiscal year has only ten days left. LBT generated from traders with an annual turnover of more than Rs 50 crore is not more than Rs 8 crore and cumulatively, the KMC is facing losses if the compensation figures and the generated LBT are compared with the amount generated when the LBT was in force.

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