Now, cities to raise municipal bonds to fund Smart City projects

Mon, 2017-03-06 11:21 -- SCC India Staff

 Municipal bonds

It's a well-known fact that most of the municipal corporations in India have a limited source of income or fund generation. But considering the growing need for better infrastructure, water and sewage management, waste management, smart transportation, etc., funds accumulated from one source tightens municipal corporations intention.

However, things are changing! Moving away from archaic ways of urban governance, cities are now vying for credit ratings for mobilisation of resources through municipal bonds, reflecting on their keenness to think and act differently. Eight cities—Ahmedabad, Bhopal, Indore, Jaipur, Kakinada, Pune, Rajkot and Visakhapatnam—have already appointed transaction advisors for issuing municipal bonds.

To begin with, in the current financial year, municipal corporations of Pune, Vishakhapatnam and Ahmedabad will raise around Rs 3,000 crore to fund its smart city projects. Speaking to the Council, all three corporations have confirmed the development.

Kunal Kumar, Commissioner of Pune Municipal Corporation (PMC), said that the Corporation will raise Rs 2,200 crore worth of municipal bonds, which will hit the market anytime in March. For this, PMC has received a long-term credit rating of AA+ and plans to utilise the funds for 24 x 7 clean potable water supply project. Once done, it will be the country’s largest municipal bond issued till date. It will be issued in four tranches depending on the municipal corporation’s requirement. For this, PMC has appointed SBI Capital as a merchant banker.

As far as the Ahmedabad Municipal Corporation (AMC) is concerned, the Corporation will raise Rs 200 crore municipal bonds. Ramy Bhatt, Assistant Municipal Commissioner of AMC, told that the funds will be utilised for water supply, sewage treatment, wastewater and city upgradation projects that falls under smart city plans submitted to the Government. AMC has received a long-term credit rating of AA-.

Similarly, Visakhapatnam will raise Rs 200 crore, and according to M Hari Narayanan, Commissioner, the Greater Visakhapatnam Municipal Corporation is yet to identify the projects.

Meanwhile, our of 97 smart cities, 89 have initiated the process of credit rating process of which 70 have completed it and 26 of them have already been given credit rating. Total of 44 cities including 25 AMRUT cities have so far got credit ratings.