KOCHI: Three prominent banks have expressed their interest in extending a loan of Rs 40 crore to Kochi Municipal Corporation for completing the construction of its head office in Marine Drive.
Federal Bank, HDFC Bank, and IDBI banks submitted their bids with 8.50 to 8.90, 8.50, and 8.50 to 9.25 per cent interest rates, respectively.
The corporation is in talks with the banks about negotiating the interest rate, and a final decision will be taken by the first week of September. “The council meeting held last week has decided to borrow `40 crore from banks to complete the construction of the office complex and pay off the debt of contractors,” said Kochi Mayor M Anilkumar.
“We will have to pay Rs 40 lakh as repayment every month for ten years. For Kochi Corporation, Rs 40 lakh is not a huge amount,” the mayor said. For the past several years, the council has been taking an overdraft to repay the pending bills of the contractors of Rs 10 crore. “The biggest flaw of the overdraft is that for each overdraft of Rs 10 crore, we have to pay Rs 1 crore a month, and we have to pay around Rs 1.5 crore as interest. This has been the practice for the past two decades,” said the mayor.
The mayor also stressed that there has been an overall increase of 25% in the income of Kochi Corporation. “The effective measures taken in cost reduction by savings on water and electricity bills and a 10 per cent increase in property tax have resulted in a 25% increase in overall income; therefore, repayment of Rs 40 lakhs each month for ten years will not be an issue,” he stressed.
Meanwhile, the opposition councillor, M G Aristotle, said that there is no clarity on how the corporation is going to repay the debts. “As per the budget, in the financial year 2022–23, we had expected an income of Rs 229 crore and received Rs 168 crore, a Rs 61 crore deficit from the property tax. For the present year, we are expecting Rs 268 crore from the property tax.
If we move ahead with the loan, the corporation will be in more trouble, and the administration to come in next year will have the burden of repayment. Moreover, the corporation has debts to contractors, maintenance at the Brahmapuram Waste Treatment Plant, and other developmental projects in the pipeline. This loan will affect the rest of the projects,” Aristotle said.