LMC proposes to issue municipal bonds this year

LUCKNOW: Central credit rating agency CRISIL found Lucknow Municipal Corporation unfit to issue municipal bonds for development works in the city in April 2017.

But this month, a proposal for issuing municipal bonds of ₹100 crore is on the agenda of the executive committee meeting scheduled on Monday.

The bonds would be issued for the housing project on LMC land near SGPGIMS, if the proposal is passed by the LMC executive committee and house and accepted by the state and centre.

Last year, it was said bonds could be allowed only if the municipality enjoyed AA rating

The AA rating goes to the municipalities which have implemented the 74th amendment. However, LMC has BB rating which is not sufficient to get permission to float bonds.

The state government has still not implemented the 74th amendment . Hence it’s a million dollar question as to how the LMC will be able to get permission to issue bonds.

WHAT IS A MUNICIPAL BOND?

A municipal bond is a tool to raise capital from the market to fund projects like roads, drains, sewer, flyovers, housing, water and power supply, street lights, river cleaning, sanitation, solid waste management and other development projects within a municipal corporation area.

These bonds can be purchased by individuals and institutional investors or both. The municipal corporations like Pune and Ahmedabad have already been benefited by such bonds.

The civic bodies repay the investors the interest and principal amount from the revenue generated from the projects funded through the bonds.

Additional municipal commissioner PK Srivastava said , “Municipal bonds are a big necessity for the corporation. We will pass the proposal and send it to the state government for clearance.”

“Today, most of the projects are completed under public private partnerships, so LMC has the option of municipal bonds,” he said . .

“We will try to meet all criteria necessary for the AA rating and will be able to get the permission for issuing bonds. Many corporations are giving such bonds a sovereign guarantee, which means in case there is any chance of investors losing their money due to any reason, their principal amount will be safe.”

Another proposal which is going to interest Lucknowites is charging just ₹5,000 for change of name in case one owns an apartment. By paying just ₹5,000, apartment owners can update their names in municipal records.

There are around 50,000 apartments owners who have yet to change their names in LMC records despite registry of flats.

This is a big opportunity for residents as the LMC usually charges 1% of the registry cost for change of name.

THE BONDS WOULD BE ISSUED FOR THE HOUSING PROJECT ON LMC LAND NEAR SGPGIMS.