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UP allows Lucknow and Ghaziabad civic bodies to raise funds through municipal bonds

[ecis2016.org] The UP government has given its nod to the Lucknow and Ghaziabad civic bodies, to raise Rs 200 crores and Rs 150 crores, respectively, through municipal bonds

In a bid to make funds available to the Lucknow and Ghaziabad civic bodies, the Uttar Pradesh government, on July 15, 2019, gave its nod to float municipal bonds. The decision was taken at a meeting of the state cabinet, chaired by chief minister Yogi Adityanath. The UP government will try to raise Rs 200 crores for the Lucknow Municipal Corporation and Rs 150 crores for the Ghaziabad Municipal Corporation, through the move from the market.

You are reading: UP allows Lucknow and Ghaziabad civic bodies to raise funds through municipal bonds

The money raised through the bonds by the Lucknow civic body, will be used for improving the drinking water supply and the sewage system. Principal secretary (Urban Development) Manoj Kumar Singh said that this was for the first time that municipal bonds were being floated in the state. The money raised by the Ghaziabad Municipal Corporation, will be used for the tertiary treatment of water for industrial usage. Singh said this was a market-oriented experiment and an attempt to make the working of the municipal corporations more professional. The bonds will be for a duration of 10 years and the rate of interest on these will be from 8.5% to 9%.

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A team would be constituted to monitor the implementation of projects launched with the money raised through the municipal bonds, he said, adding that the permission from the Securities and Exchange Board of India (SEBI) had been obtained in this regard. A presentation was also given to the Bombay Stock Exchange in this regard. The principal secretary said there would be no government guarantee for the bonds and the probability of institutional investors turning up for it was more. “The aim behind it is to make the municipal corporations economically self-reliant,” UP cabinet minister Shrikant Sharma said.

The state cabinet also approved an amendment to the municipal corporation property tax rule, to remove anomalies in the classification of properties. “Today’s amendment puts a mall and a small shop in different categories for the purpose of property tax evaluation,” Singh said. “If a shop measuring 120 sq ft is operational in a residential area, it would have to pay 1.5 times the property tax,” he said, adding that earlier, the shopkeeper had to shell five times the property tax prevailing in that area.


Housing minister recommends municipal bonds, to improve financial condition of municipalities

Expressing concern over the financial condition of municipalities in the country, urban affairs minister Hardeep Singh Puri, has called for tapping into private funds and raising money through municipal bonds

January 12, 2018: The financial condition of municipalities is a ’cause for concern’, union minister Hardeep Singh Puri said, on January 11, 2018 and pitched for ‘robust financial management’, to enhance their revenues and raise funds by tapping the capital market through bonds. He said the combined receipts of all municipalities in India was estimated to be lower than Rs 1.5 lakh crores, with less than a third of the amount coming from their resources, making them dependent on the central and state governments.

It is also estimated that nearly Rs 65 lakh crores would be required as capital investment and for services in Indian cities over a 20-year period, the minister said, adding that therefore, the space to raise private funds was ‘enormous’. “Compared to certain other areas of reform, we have been relatively slower in municipal finance reforms and the financial position of our municipalities is a cause of concern,” Puri, the Housing and Urban Affairs Minister said.

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He said the municipal finance market faced a range of challenges, including weak administration and political interference, by way of waivers. “Municipalities need to lay a foundation of robust financial management for both, enhancing own revenues, as well as tapping the capital market through municipal bonds,” he said.

Speaking about administrative reforms, he said the time has come to adopt the recommendations of the Second Administrative Reforms Commission and merge the functions of the person chairing the municipal council and the individual exercising executive authority. “The position of chairperson/mayor duly created, must be filled via a direct electoral process and should have a fixed five-year tenure. The mayor should also be given the power to appoint his/her cabinet consisting of councillors selected from the elected members,” he said. Currently, in many cities, the head of a municipal corporation, the mayor, is merely a ceremonial authority and executive decisions are carried out by the municipal commissioner, appointed by the state government.

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The minister said the kind of urbanisation that India will witness in the 21st century, with technology and innovation at its core, required skills and expertise that would not always be available within the government fold. “I urge all state governments and municipal governments, to look beyond the Indian Administrative Service and leverage the enormous talent available in Indian society, particularly in the field of finance. Lateral entrants, particularly at the municipal level, should become the norm and not exception,” he said.

Source: https://ecis2016.org/.
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Source: https://ecis2016.org
Category: Lifestyle

Debora Berti

Università degli Studi di Firenze, IT

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