200 crore raised through through municipal bonds stuck in Pune civic body’s to-do list

Hindustan Times, Pune | ByParth Welankar
Jul 10, 2018 07:48 PM IST

The civic body has to give Rs15 crore annually as interest for the Rs 200 crore raised through municipal bonds.

The Pune municipal corporation had raised Rs 200 Crore through municipal bonds in June 2017 for the ambitious project of 24 hours water supply, which was part of the Smart City initiative, last year. The total amount of Rs 200 Crore continues to remain unutilised till date.

The Pune municipal corporation raised ₹200 crore in June 2017 through municipal bonds.(RAHUL RAUT/HT PHOTO)
The Pune municipal corporation raised ₹200 crore in June 2017 through municipal bonds.(RAHUL RAUT/HT PHOTO)

The civic body put the collected amount into fixed deposits schemes as the project is getting delayed.

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The tenders were cancelled when the opposition leaders along with the faction of the ruling Bharatiya Janata Party (BJP) alleged that the top civic officials had fixed the terms and conditions to favour selected bidders. Opposition corporators too raised objection for the project saying PMC would suffer a huge loss. Sanjay Kakade,BJP’s Rajya Sabha MP had earlier said, “CM Devendra Fadnavis cancelled the tenders as the bidders had quoted a very high price, which was 26 per cent above the estimated rate to execute the project.”

The standing committee of PMC then allotted the work to L&T and Jain Irrigation Company. Almost 90 per cent of the work has gone to L&T. Jain Irrigation was given the responsibility to implement the remaining part of the project.

The lack of planning by the Pune Municipal Corporation has led to a deficit of Rs 2.41 crore to the exchequer. The civic body has to give Rs15 crore annually as interest for the Rs 200 crore raised.


Uma Kalaskar, chief accountant officer of PMC said, “We have raised 200 Crore amount at the interest rate of 7.59 per cent. Owing to the cancellation of tenders, the funds could not be used and we had to put the amount as fixed deposits at an interest of rate of 6.85 per cent. Now because the rate of interest we get from the fixed deposits is less than the rate at which we had raised funds, it leads us to a fiscal deficit of Rs 2.41 crore.”

PMC had raised Rs 200 crore as the first tranche of a Rs 2,300 crore fund raising programme to fund the water supply project for Pune city.

The project involves modernising the aging water supply system in the city through improving distribution, replacing old pipelines, introducing smart metering and improving networks. The civic body is now trying its level best to reduce the fiscal deficit by taking assistance from the central government, in the form of subsidy.

Kalaskar said, “The Government of India has issued a government resolution (GR) saying that the corporations who have raised the amount through municipal bonds will be given subsidy. The Pune municipal corporation will receive a total of Rs 26 crore as subsidy from the central government. So, the loss that PMC ex chequer has to incur now, will be a temporary loss which after receiving the subsidy will be indemnified.”

“All the proposals for this have been sent to the government of India and the papers have been submitted. While we have received a verbal confirmation from the union government, we will get an official confirmation by the end of July.” added Kalaskar.

PMC, breaking tradition, will keep fixed deposits in private banks

The Pune municipal corporation has now decided to keep all the fixed deposit amount in private banks, instead of keeping them in nationalised banks, as has been the practice.

The standing committee of the Pune municipal corporation (PMC) in the last week of June had taken a decision to keep all the fixed deposits in the private sector banks.

Yogesh Mulik, standing committee chairman, PMC said, “We followed the government resolution (GR) issued by the state government. The government had issued a GR saying that all the corporations should keep their fixed deposits in the private sector banks.”

He added, “By keeping the fixed deposits in the private banks, it is estimated that the rate of interest is higher by one per cent than that of the nationalised banks. We welcome the government resolution as it will only add to the money which we get from fixed deposits.”

Currently PMC has fixed deposits of Rs1600 crore. Every year Pune municipal corporation invites quotations from various banks in respective sectors to ensure that the corporation keeps its money in the bank which gives the highest rate of interest on the fixed deposits.

Another official from PMC, requesting anonymity, said, “As the standing committee has passed the decision to keep the funds in the private banks, PMC will soon invite quotations from all the private banks. Whichever bank is offering the highest rate of interest on fixed deposits, PMC will keep the funds in the respective bank. All the fixed deposits won’t necessarily be kept in one particular bank. The PMC might keep it in different banks as well.”

Saurabh Rao, PMC commissioner is keen on keeping the fixed deposits in the private sector bank, added the official.

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