BENGALURU: After Union Finance Minister Nirmala Sitharaman stated that municipal bodies will be allowed to issue bonds for improving their infrastructure, and cities will be incentivised to improve their creditworthiness over the bonds, BBMP Special Commissioner for Finance, Jayaram Raipura, welcomed the move.
Reading out the Budget speech in the Lok Sabha, Nirmala said, “Through property tax governance reforms and ring-fencing user charges on urban infrastructure, cities will be incentivised to improve their creditworthiness for municipal bonds.”
Raipura said that in order to overcome financial crises and strengthen financial discipline in municipal bodies, the Centre has allowed municipal bodies to issue ‘Municipal Bonds’ through which the development of infrastructure projects can also be taken up. The escrow mechanism will have to be set up for that purpose and the borrowings have to be settled through property taxes and other revenue by municipalities. He further added that, however, it depends on the state government as it has to check the pros and cons of a municipal body and its fitness for issuing bonds.
Agreeing with Raipura, former Standing Committee chairman of BBMP Finance Department, MK Gunashekar, said, “This is a good move as it will make urban local bodies financially disciplined. If the credit rate is good and the local body shows its capacity in repaying the loan, the bonds issued by the municipality will have value.”
Experts opined that since the municipal bodies have their assets, they can pledge and issue bonds, and charge interest. The funds raised are used for projects and for showing success.
While officials welcomed the move, urban expert Ashwin Mahesh expressed doubt over its working.
“Strengthening municipal finances is a good idea, and bonds that can finance new initiatives are potentially good too. But there is a contradiction in the way the Centre and states think about this. The BBMP, for example, is financially in a mess. But more importantly, it is in a governance mess. The two have to be fixed together. But what is happening now is that the poor administration is ignored, while we conjure up schemes for many other things. It’s unrealistic to think that will work,” he said.