Exploring various ways of funding urban infrastructure for building cities of tomorrow, the Union government has identified 35 municipal bodies in the country that can raise funds from the market by floating their bonds for infrastructure development.
“The Department of Economic Affairs of Union finance ministry had conducted a workshop four months ago on credit enhancement.
From the workshop, we identified 35 municipal bodies across the country which have good credit rating and can go to the market. So our next action plan is to enable them to go to market,” said Solomon Arokiaraj, Joint Secretary, Department of Economic Affairs on the conclusion of the two-day G-20 meet of IWG in the city on Tuesday.
He said that currently those municipal bodies with ‘A’ credit rating are able to access bonds which is based on the overall financial performance and there are many municipal bodies in the country which need to improve it.
Incidentally, the Pune Municipal Corporation (PMC) has already been able to raise funds through municipal bonds for its water supply project.
The case of success of Mexico in raising funds through floating municipal bonds by municipal bodies was discussed, Arokiaraj said, “Mexico introduced a Municipal Financial Trust model for raising funds through municipal bonds. Instead of the Mexican government, the trust gives guarantee for municipal bonds and it has increased fiscal discipline among municipal bodies. It was good to learn about the model.”
The Trust, municipal body and banker are tripartite that work as a successful model. “It is very impressive. India is just getting started with municipal bond, so it was helpful to learn about the Mexican model,” he said.
The joint secretary informed that Asian Development Bank (ADB) is coming out with a report on the process to be adopted by municipal bodies on raising funds through bonds.