Taking a cue from local bodies in Hyderabad, Pune and Indore, the Surat Municipal Corporation is all set to raise money through bonds. The civic body commissioner, M Thennarasan, said it aims to raise Rs 200 crore from bond sales. This sum will be spent in providing 24X7 water supply. “SMC will start issuing bonds within 5-6 months,” Thennarasan said. He said total cost of the project would be around Rs 500 crore. “We will raise `200 crore through bonds, while the rest will come from the state government.”
Thennarasan also said all these projects require significant capital owing to which it has to be funded by borrowing from banks or the market. “Releasing bonds was the most convenient and easy option to arrange for funds.” These bonds will be released under the municipal bond scheme in which the Centre also provides 13% interest subsidy and the civic body will have to bear just 2% interest rate.
The municipal corporation has appointed SBI Capital Markets (SBI Caps) as a consultant, which will help the municipality raise money through bonds. The Surat Municipal Corporation has got ‘AAA-‘ credit rating. “We are also working to improve our ratings and hopefully soon it will be done,” Thennarasan said.
Rating agency Crisil said in a report that urban local bodies are estimated to raise about Rs 15,000 crore by 2023 with 92 cities already getting rated. The government’s move to develop civic infrastructure across the country through the AMRUT and Smart City missions requires significant capital spending by urban local bodies. These will have to be funded by market borrowings in addition to government grants.
Given the large requirement, the government and the Securities and Exchange Board of India in June 2017 notified guidelines on disclosure of financial information by urban local bodies at regular intervals, and audit of accounts to increase transparency and to improve prospects for issuances of municipal bonds. On its part, the government has also announced an interest subsidy scheme to make issuances competitive.