Orissa To Float Rs 350 Crore Civic Bonds

The government of Orissa will float tax free municipal bonds to the tune of Rs 350 crore at a coupon rate of 10.5 per cent for development works at the seven municipalities of Cuttack, Puri, Bhubaneswar, Rourkela, Sambalpur, Berhampur and Angul.

The bonds will have maturities ranging from seven to ten years and the amount will be paid back through new taxes and shadow tolling. Kolkata based infrastructure finance company Srei International Finance Ltd (SIFL) is in the race for bagging the mandate for the bond that will primarily be placed with banks, financial institutions, insurance companies, provident funds as well as general public.

The fund, as part of urban reforms programme of the government, will be used to revamp the sewerage system at a total project cost of Rs 420 crore in these towns. While the Orissa state government will provide part of the project cost at Rs 70 crore, rest of the funding will come from the bonds. Around Rs 5 crore will be provided by the Netherlands Development Finance Company.

The ministry of urban development authority and poverty alleviation will act as the nodal agency for processing the proposal for tax free municipal bonds, internal monitoring of the project account and escrow account. The state government will raise the money for paying back the bonds through taxes and tolls. Taxes will involve new water taxes, sewerage tax at 50 per cent of the water tax and development tax in these seven cities of Orissa.

Shadow tolling will be levied on railway passengers travelling through or to these cities. Tourists putting themselves up in hotels will also be paying for the development programme