The Brihanmumbai Municipal Corporation (BMC) is laying the groundwork to tap the capital markets as it explores issuing municipal bonds to finance large-scale water and coastal infrastructure projects. The move has gained momentum following Union Finance Minister Nirmala Sitharaman’s recent announcement of a Rs 100-crore incentive for municipal bond issuances exceeding Rs 1,000 crore, which officials believe could serve as a trigger for Mumbai’s civic body to enter the bond market.
Senior officials said the BMC is currently undergoing the mandatory accreditation and credit rating process required before any bond issuance. This exercise is expected to take between one and two months. Once completed, the civic body could proceed towards listing bonds with fixed interest rates, marking a shift in how it mobilises funds for infrastructure creation.
Among the financing options under consideration are “blue bonds”, a form of municipal bond dedicated to water and wastewater-related projects. According to officials, the BMC is evaluating the possibility of raising as much as Rs 10,000 crore through blue bonds. The funds would be directed towards sewage treatment plants, water supply augmentation works, wastewater conveyance tunnels, and related treatment facilities—areas that are seeing rising investment needs as the city’s population and environmental pressures grow.
In parallel, the civic body is also examining toll-backed bonds to support transport infrastructure, particularly the proposed northern extension of the Mumbai Coastal Road. These bonds would be repaid using future toll revenues generated by the project, providing a dedicated repayment mechanism. Officials indicated that details of these bond proposals could be announced in the BMC’s budget for 2026–27.
If implemented, the bond issuance would represent a notable departure from the BMC’s long-standing practice of financing projects almost entirely through internal resources. Traditionally, the corporation has relied on robust revenue streams such as property tax, water charges, development fees, and premiums, along with sizable bank deposits, to fund its capital expenditure. This approach has kept borrowing off the table for decades.
An official said, “Discussions on it were on for the past 6 months, considering the many big-ticket projects that are in the pipeline.” Despite being India’s richest civic body, with an annual budget of around Rs 75,000 crore last year, the BMC has never raised funds through municipal bonds. Major infrastructure works, including the Mumbai Coastal Road built at a cost of Rs 1,40,000 crore, the Goregaon–Mulund Link Road estimated at Rs 15,942 crore, and sewage treatment plants costing about Rs 30,000 crore, were all financed through internal surpluses and fixed deposits.
At any given time, the BMC holds fixed deposits running into tens of thousands of crores, which historically made market borrowing appear unnecessary. However, officials said that mounting liabilities and an expanding pipeline of capital-intensive projects have prompted a reassessment of this strategy.
Past attempts to raise funds through bonds did not materialise. “Back in January 2021, there were discussions to float ‘Municipal Infrastructure Bonds’ to raise money from the market and pay for big-ticket infrastructure projects. The BMC back then expected to raise around Rs 3,000 to Rs 4,000 crore from these bonds to meet spending requirements for big-ticket projects from 2023 onwards. However, this never took off,” said an official.
This time, with policy incentives in place and financing needs rising, the civic body appears more determined to test the bond route.
Source: The Times of India
