The Brihanmumbai Municipal Corporation (BMC) has initiated plans to appoint a merchant banker for issuing municipal bonds as it looks to raise funds for large-scale infrastructure projects valued at over Rs 2.13 lakh crore.
According to the civic body, the selected bank will be responsible for structuring the bonds, determining interest rates and preparing repayment schedules. The proposal comes weeks after the BMC floated a tender to appoint a Securities and Exchange Board of India (SEBI)-registered agency to evaluate its credit rating, a key requirement before accessing capital markets for borrowing.
Municipal bonds are financial instruments used by civic bodies to mobilise funds for infrastructure development. The BMC’s current infrastructure commitments have reached nearly twice the size of its reserve corpus, which stands at Rs 81,774 crore. Civic officials noted that a substantial portion of these reserves is already committed to internal liabilities, including gratuity payments, pension obligations, provident fund contributions and refundable contractor deposits.
“As we can see, out of the Rs 81,000 crore reserve that we have, only 49% or Rs 39,500 crore could be used for the infrastructure projects, while the overall size of these projects is nearly four times of this usable amount. This clearly indicates that in the next few years, we (BMC) will need additional cash flow to complete these projects,” said a civic official on condition of anonymity.
Opposition leaders criticised the move, arguing that municipal bonds would increase the corporation’s debt obligations. Samajwadi Party MLA Rais Shaikh questioned the need for external consultants and market borrowing.
“The state’s chief secretary recently issued directives discouraging wasteful expenditure through the appointment of consultants. Against this backdrop, the BMC issued an advertisement for appointing consultants for bond issuance. Instead of spending money on consultants, the BMC’s own officials could handle the process,” Shaikh said.
The BMC is also exploring green bonds to support climate-focused infrastructure, including wastewater treatment plants, desalination facilities, water tunnel projects and the proposed Gargai dam project.
Source: The Indian Express
