Exploring various ways of funding urban infrastructure to build cities of tomorrow, the Union Government has identified 35 municipal bodies in the country that can raise funds from the market by issuing their bonds for infrastructure development.
“The Department of Economic Affairs, Union Finance Ministry, had organized 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 plan of action is to enable them to go to the market,” said Solomon Arokiyaraj, Joint Secretary, Department of Economic Affairs, at the conclusion of the two-day G-20 meeting of the IWG in the city on Tuesday.
He said that currently municipal bodies with ‘A’ credit rating are able to access bonds which is based on overall financial performance and there are many municipal bodies in the country which need to improve.
by coincidence, Pune Municipal Corporation (PMC) has already been able to raise funds through municipal bonds for its water supply project.
Discussing the case of Mexico’s success in raising funds through floating municipal bonds by municipal bodies, Arociaraj said, “Mexico introduced a municipal financial trust model to raise funds through municipal bonds. Instead of the Mexican government, the trust guarantees municipal bonds and has increased financial discipline among municipalities. Nice to know about the model.”
The trust, the municipal body and the banker is a tripartite which works as a successful model. “It is very impressive. India is just getting started with municipal bonds, so learning about the Mexican model was helpful,” he said.
The Joint Secretary informed that the Asian Development Bank (ADB) is coming out with a report on the process to be followed by the municipal bodies on raising funds through bonds.