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Government waves green signal to municipal bonds

The government has allowed creation of municipal bonds market in the country.

To begin with, municipal corporations and municipalities will issue tax free bonds upto an amount of Rs 2 billion during 1998-99.

Pending the grant of such fiscal concessions, Ahmedabad Municipal Corporation and Bangalore Municipal Corporation have already issued municipal bonds and tapped more than Rs 1 billion each from the capital market in the current financial year. This is the first time that municipal corporations in the country have issued municipal bonds.

The decision of government follows the recommendations of the Rakesh Mohan Committe (India Infrastructure Report) projects that for certain types of urban infrastructure, requirements of funds would be of the order of Rs 2.5 trillion for the next ten years.

In this regard, new and innovative experiments are being attempted by municipal corporations, urban development authorities and other agencies in the country to mobilise resources from the capital market.

The ministry of urban affairs and employment took up the matter with the ministry of finance for provision of fiscal concessions for the creation of municipal bonds market in the country.

Necessary guidelines for facilitating issuance of municipal bonds are under way.

Following the recommendations of Tenth Finance Commission, Rs 10 billion were to be made available by the Centre for upgradation and augmentation of the urban infrastructure to the municipalities and municipal corporations through states governments, about Rs 4 billion have so far been released to the states to this effect.

UNI