US treasury department to handhold six cities on municipal bonds

NEW DELHI: President Donald Trump’s visit would see India and US forging a technical cooperation for relatively green market of municipal bonds for urban projects. The US treasury department would provide technical know-how to six cities, including five smart cities, to float municipal bonds for water supply and sewer projects.

The US treasury department would sign memorandums of understanding with six cities with high credit ratings and have done the necessary groundwork for floating municipal bonds to raise money for big ticket urban renewal projects.

These include Mysuru and five smart cities of Rajkot, Vadodara, Lucknow, Pimpri Chinchwad, Mangaluru. This would be the first time these cities would raise money from the open market through municipal bonds. The bond market is relatively new for cities in India. Pune was the first city to use this method to raise money for a water supply project in 2017. It has raised Rs 200 crore.


US treasury department had helped Pune to begin this process on a pilot project basis. Seven other cities have also raised funds worth Rs 3,200 crore for municipal projects. These include Hyderabad, Indore, Amravati, Bhopal and Visakhapatnam. The spadework for this cooperation started in November 2019 when there were indications that US Economic and Financial Partnership programme could extend this technical assistance to more cities. The ministry of housing and urban affairs gauged credit ratings of all cities and asked cities to give a proposal.

The project was then put before Niti Aayog and department of economic affairs for their approval. After necessary go-ahead, 13 cities were shortlisted and eight cities were found better prepared to float bonds than others. A final list was drawn up with six cities. The increase in the number of cities prepared to float municipal bonds reflects well on financial health. A senior official told ET, “Most cities are undertaking government grant-based projects. The cities need to become financially selfsufficient. Municipal bonds provide that option.”