State minister for housing Suresh Jain who spoke to the urban development minister Ram Jethmalani on Tuesday told The Financial Express that there was a need for the removal of anomaly in the income tax Act to enable civic bodies, state and central government undertakings to issue tax free infrastructure bonds. "This will facilitate a speedy development of urban infrastructure," he added.

Jain said the definition of infrastructure facility broadly covers urban infrastructure such as road, bridge, airport, port, water supply, sanitation and sewerage system, generation and distribution of power, telecom and housing. However, the manner in which the section was worded results inexclusion of local authorities, municipal councils and corporations, state and central government undertakings from the necessary benefits.

he said that the word "wholly" before the words engaged in the business of developing should be deleted from the main para of section 10 (23G). Moreover, para 1 of section 80-1A (4A) which stipulates that the enterprise should be owned by a company registered in India or by a consortium of such companies should be amended by including local bodies, municipal councils and corporations, state and central government enterprises in the definition of enterprise.

Jain said that the Centre's decision on according tax free status for urban infrastructure will help the Jalagaon Municipal Council (JMC) which is floating a Rs 200 crore bond issue for carrying out various infrastructure projects. He informed that Icra and Care have been engaged in giving rating to the JMC whose turnover is Rs 70 crore. Incidentally, JMC has a revenue surplus of Rs 50 crore after incurringexpenses of Rs 20 crore.

Jain who is the former president of JMC said that Lazard Creditcapital is the lead manager for JMC's Rs 200 crore bond issue. He hoped that with the "sound" condition of the civic body, Icra and Care may give a AAA rating. The bond issue is likely to be floated by March depending upon Centre's nod.Moreover, Nashik Municipal Corporation, Solapur Municipal Corporation and Aurangabad Municipal Corporation have also planned to approach the market soon. These civic bodies have also appointed Lazard Creditcapital as their lead manager.

Lazard Creditcapital president (corporate finance group) Shreekant Javalgekar said that Nashik Municipal Corporation (NMC) has planned a bond issue of Rs 100 crore while Solapur Municipal Corporation (SMC) and Aurangabad Municipal Corporation (AMC) will approach market to raise Rs 50 crore each. These corporations expect rating from Icra and Care in the near future.

Javalgekar said that NMC will require funds for the implementation of first phase of Rs221 crore water supply and sewerage disposal project. NMC's revenue has increased to Rs 199 crore in 1998-99 from Rs 149 crore in 1997-98. It has a revenue surplus of Rs 80 crore.

Solapur Municipal Corporation will require funds for the implementation of first phase of Rs 125 crore water supply project. The corporation's revenue has rose to Rs 78 crore in 1998-99 from Rs 65 crore. Aurangabad Municipal Corporation will undertake Rs 50 crore water supply and sewarage disposal project. AMC's income has increased from Rs 63 crore in 1997-98 to Rs 80 crore and it has a surplus revenue of Rs 25 crore.