The municipal corporation is finalising the modalities to float municipal bonds and raise at least Rs 500 crore from the capital market for execution of various smart city and other infrastructure projects here.

The plan was discussed at the monthly council meeting of the Bhubaneswar Municipal Corporation (BMC) last month. At the meeting, members were sensitised about the way to raise funds from the market through bonds and utilise it for execution of infrastructure projects. It will work more like a share market system, sources said.

Municipal bonds are debt obligations issued by the city authority to raise funds from the investors. In simple words, when a person purchases a municipal bond, they are actually lending money to the local government and in return, they will get the money returned with interest.

“Municipal bond is one of the measures suggested in the smart city mission guideline. It is suggested since the smart city projects would require huge funds that can’t be borne alone by the governments. The funds raised through municipal bonds will help us execute the projects on time,” said a senior smart city official.

He said that they had hired a Delhi-based firm as transaction advisor, who would help suggest ways to float the bonds and raise funds simultaneously. “The firm will prepare the detailed project report, which will then be submitted to the government for approval,” the official said. The officials have also selected four projects where the funds raised from the municipal bonds will be utilised. The projects are development of two more multi-level car parking facilities at identified sites and construction and development of Unit-I and Unit-IV daily markets.

“The Union ministry has allowed us to float the first 10 bonds, while the rest will be done after approval of the housing and urban development department. The Delhi-based firm will take care of the project modalities and help us get the funds on time,” said mayor Ananta Narayan Jena.

The ministry of housing and urban affairs in February last year gave a credit rating to the city, which is needed for floating the bond. The civic body’s credit rating of “BBB” is considered to have moderate degree of safety regarding timely servicing of financial obligations.

The state capital was one among the 44 other cities to get the credit ratings from the Union ministry. Rourkela is the other city to get the ratings. Rourkela got “BB Plus”, which is considered to be moderately risky regarding timely servicing of financial obligations. The city proposed to invest Rs 4,537 crore under the smart city project and Rs 461 crore under Amrut over the next five years. The Centre will provide Rs 600 crore for the smart city and around Rs 230 crores under Amrut.

The rest of the cost will be borne by the state government either with own funds or through bonds.

Unit-II daily market construction site Picture by Ashwinee Pati