A dozen civic bodies to raise Rs 6k cr through bonds in 2017

NEW DELHI: About a dozen municipalities would raise nearly Rs 6,000 crore through bonds during 2017 for infrastructure projects, according to an estimate by the government. This will be over four times the total municipal bonds raised in the past 20 years across the country .

Pune is taking the lead among the 17 smart cities that have completed their credit rating.

This being seen as a major change in the municipal governance in India where the local civic bodies have been traditionally dependent on funding from state or Central government for major projects.

Municipal bonds were first issued by Bangalore Municipal Corporation in 1997 and till 2013 a total of 25 municipal bonds worth Rs 1,485 crore were raised by different municipalities.

“We will hit the market with our bonds by this month end or maximum by mid of February to raise Rs 2,200 crore. We are raising this for our water supply project, which is being revamped with smart features and services. Our credit rating has improved this year (2016) than that of last year. We have finalised the roadmap for increasing water tax till 2047,“ Pune municipal commissioner Kunal Kumar told TOI.

Pune is one of the smart cities. Kumar said their overall income has also increased almost two-fold from Rs 2,800 crore in 2014 to Rs 5,700 in 2016. Sources said Ahmedabad will be the next municipal body to raise funds through bonds.

Sources in urban development ministry said 88 municipal bodies have started the credit rating exercise and 66 of them have already hired the agencies for this task. “Once municipal bodies start the credit rating exercise that marks the beginning of big change in the way they function. Their working, accounting system and focus to collect revenue or service charges change as they have to ultimately pay it back with interest,“ said a ministry official.

In fact, the Centre is keenly pushing this initiative under the Smart City project where the municipalities will have to raise fund on their own for major bankable projects as the Central government provides partial funding.