Civic bodies tapping municipal bonds
Pimpri Chinchwad Municipal Corporation (PCMC) in Pune has decided to raise Rs 400 crore in the current fiscal, the provision for which had already been made in the corporation’s annual budget sometime back
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Different municipal corporations in UP gearing up to issue munibonds for infra
Mumbai: Local bodies across the country are currently busy fighting against the second wave of the pandemic Covid-19. But it has not deterred them from tapping municipal bonds as they seek to raise funds for developing infrastructure.
They are dividing time between ongoing pandemic relief work and meeting merchant bankers and the officials of Union Ministry of Urban Development so as to raise the required amount in this way. For instance, Pimpri Chinchwad Municipal Corporation (PCMC) in Pune has decided to raise Rs 400 crore in the current fiscal, the provision for which had already been made in the corporation's annual budget sometime back.
Talking to Bizz Buzz, the commissioner of PCMC, Rajesh Patil confirmed about the development. Later, the chief finance officer of the corporation, Jitendra Kamble said that the spadework has already begun for the raising of the amount through municipal bond. However, as the things were still in preliminary stage, it is not possible to divulge any further details about finalization of merchant bankers and other info, he added.
He said that the amount will be used for undertaking various developmental projects. In fact, Pune Municipal Corporation (PMC) has already raised Rs 200 crore in the first tranche during last fiscal through municipal bonds, also known as munibonds. It was way back in June 2017, when PMC had raised Rs 200 crore through municipal bonds at an interest of 7.59 per cent to finance its 24x7 water supply project.
In fact, the Pune Municipal Corporation (PMC) water department has requested the accounts department to generate another Rs 200 crore through municipal bonds for the project. PMC commissioner Vikram Kumar has instructed the officials concerned to work hard so as to complete the project within the deadline of 2023. Maharashtra is not alone which has gone for such type of fund raising as it is happening across the country.
Different municipal corporations in Uttar Pradesh are also gearing up to tap this window. They include Varanasi, Prayagraj, Agra and Kanpur. If sources are to be believed, municipal corporations of these UP towns are likely to raise more than Rs 1,000 crore between them by the end of the current fiscal. The commissioner of Indore Municipal Corporation, Pratibha Pal said that the corporation has already raised money by way of munibonds in the recent past.
Indore municipal Corporation was among the first Indian cities to list municipal bonds on the National Stock Exchange (NSE) in 2018, marking a new chapter in new-gen urban clusters. Indore had gone for sale of municipal debt papers. rated as AA (SO), or two notches lower than the top grade, to raise Rs 140 crore by selling bonds, which offered 9.25 per cent with 10-year maturity. SO or Structured Obligation is a guarantee of sorts for investors.
Now, the moot question arises what has prompted the civic authorities to suddenly join the bandwagon of raising money through munibonds. Well, they want to take the advantage of falling interest rates. Not to mention that UP cities like Lucknow and Ghaziabad have already raised funds through this route. Each civic body in the State is planning to sell papers in the range of Rs 150-250 core. The story of munibonds in India dates back to late 2019 when SEBI relaxed norms for the sale of such bonds.
