Delhi’s MCDs to raise money through municipal bonds to fund projects
The corporations have started the process of obtaining credit ratings from independent rating agencies such as ICRA, CARE and FITCH to assess their credit worthiness and financial health.delhi Updated: Aug 11, 2017 21:52 IST
Delhi’s three municipal bodies are gearing up to tap the municipal bond market, a move aimed at mobilising resources to fund infrastructure projects.
The corporations have started the process of obtaining credit ratings from independent rating agencies such as ICRA, CARE and FITCH to assess their credit worthiness and financial health.
Based on the ratings, they will be eligible to raise money from the market to fund major projects.
The initiative has been taken on the Union urban development (UD) ministry’s directions.
Credit ratings are assigned based on assets and liabilities of urban local bodies, revenue streams, resources available for capital investments and other governance practices in the last 2-3 years.
“In addition, the future perspective of the project for which the bond needs to be issued would be evaluated too,” said Puneet Goel, commissioner, South DMC.
The agency has already issued the work order for engaging a consultant (ICRA) and process will be completed by October 31. The South DMC has also plans to complete the process by August 31.
“Based on the credit ratings, we will issue bonds and raise money from the market. The amount raised will help to fund infrastructure projects such as redevelopment of municipal properties for commercial use and construction of waste-energy plants,” said Praveen Gupta, North DMC.
The grading category starts with AAA (which indicates highest degree of credit worthiness) and goes on till D (lowest degree of credit worthiness).
Cities rated below BBB need to undertake necessary interventions to improve their ratings and obtain positive response for the municipal bonds to be issued.
The New Delhi Municipal Corporation was last year graded A- (upper medium grade).
The Ahmedabad Municipal Corporation has got A- while Pune Municipal Corporation has been graded as A+ (upper medium grade). Both are in advanced stages of going for municipal bonds.
In 2012, the MCD had got its credit rating done but soon after that, it was trifurcated and no decision could be taken on issuing a municipal bond.
Under the credit rating initiative of urban local bodies, 85 cities have launched the process and it has been completed in 16 municipalities.
“Though municipal bonds have huge potential, its market has not been tapped fully in India,” said a senior official of North MCD.