Lucknow, Ghaziabad to float municipal bonds worth Rs 350 cr for infra

UP cabinet approves first such proposals in the state, instruments likely to be out in a month, with listing on BSE or NSE

Lucknow and Ghaziabad, two of the biggest urban centres in Uttar Pradesh, will soon float municipal bonds totalling Rs 350 crore to fund infra projects.

A state cabinet meeting chaired by chief minister Yogi Adityanath here today approved the proposal of floating bonds by the respective municipal corporations of the two cities.

A municipal bond is a debt instrument issued by a civic body to finance capital expenditure, while the investors get payments on predetermined rate of interest over a stipulated time period.

While Lucknow Municipal Corporation (LMC) will float bonds worth Rs 200 crore, Ghaziabad Municipal Corporation (GMC) will raise Rs 150 crore, UP urban development principal secretary Manoj Kumar Singh told the media in Lucknow on Monday afternoon. These bonds were likely to be floated within a month.

“This is for the first time in UP that municipal bonds are being floated. The funds so raised would be used for ramping up infrastructure in the two cities, including drinking water and sewerage,” he informed.

Singh said not only would these municipal corporations get funds via bonds, but the development also indicated the ‘market orientation’ of the two urban local bodies for improving public amenities.

He said the bonds would be floated for 10 years with annual returns of 8½-9%. The funds would be invested in projects having the viability of generating enough returns for repayment to investors. The bonds would be listed either on Bombay Stock Exchange (BSE) or National Stock Exchange (NSE).

“Since the Centre provides a subsidy of Rs 13 crore for every Rs 100 crore raised via such bonds, it would provide these urban local bodies with the legroom to meet the repayment commitments,” Singh noted.

Earlier, the state urban development department had made a presentation before the BSE in this regard. To a Business Standard query, he said institutional investors were more likely to invest in these bonds than retail investors.

Besides, these municipal bodies would create wings for the monitoring of projects invested with funds raised via bonds.

Indore had become India’s only third city after Hyderabad and Pune to list municipal or muni bonds on NSE’s debt market platform last year. Indore Municipal Corporation (IMC) had issued debt papers aggregating Rs 100 crore with green shoe option of Rs 70 crore and received an over-subscription of 1.26 times.

Meanwhile, the Adityanath cabinet approved the transfer of 43 hectares of state agricultural department land to industrial development department for Bundelkhand Defence Corridor.

Nearly 2,500 acres of land had been acquired for the mega project, which spans 6 districts viz. Aligarh, Agra, Jhansi, Kanpur, Lucknow and Chitrakoot. On February 15, Prime Minister Narendra Modi had laid the foundation of the Corridor during a ceremony in Jhansi. The Corridor is expected to attract initial investment of Rs 20,000 crore.