This refers to “Munis: Smart bonds for smart cities” (December 5). Bonds issued by civic institutions carry the onus of public trust. In mid-2017, the Pune Municipal Corporation (PMC) raised Rs 2 billion via a bond issue. Many saw this as a test case for the revival of municipal bonds in India. In July 2018, Indore followed suit. Bonds are subject to investment ratings by independent agencies; the coupon rates go up as ratings dip to raise the debt burden that makes its servicing tough. Most cities consume more than half of the revenue in salaries. With a pension scheme, the liabilities are open ended.
With smart cities in the offing, a bulk of their financing could well be through municipal bonds. To be fruitful and viable, administrative mechanisms need to be in place that transcend political interests to be able to raise large finances, and also deliver and sustain results. Bonds do bring in a civic accountability and professionalism that budget support are hardly equipped with.
R Narayanan Navi Mumbai
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