Smart cities might be financed by the Municipal bonds
The government wants to give a thrust to the nascent municipal bonds market. It has identified it as one of the ways to raise finances for infrastructure, including creation of 100 smart cities proposed in the FY15 budget.
A government official mentioned that the government has options like PPP (Public- Private Partnership), infrastructure bonds, etc. to mobilise funds for the proposed smart cities. Along with this the government is looking at bolstering the municipal bond market. Through this route at least 10 % of the funds needed can be raised.
Ahmedabad was the first Indian city to issue municipal bonds in 1998. Since then, 25 municipal bond issues have taken place in India, including taxable and tax-free bonds and pooled financing issues. These routes have mobilised funds to the tune of nearly $300 million. This data was shared through a report by Prof Mukul Asher of National University of Singapore and Shahana Sheikh of the Centre for Policy Research, New Delhi.
This amount is just a fraction of the municipal bond market in the developed markets. For instance, in the US, this market is worth $50 billion.
The Finance Ministry and Urban Development Ministry are discussing various options to raise funds to develop the smart cities. The contours for the smart city scheme are being worked out and a cabinet note will soon be prepared on this. The country is waiting with a bated breath to see the smart cities coming up and India progressing.
Source- The Financial Express
100 smart cities, Finance ministry, infrastructure bonds, Municipal bonds, National University of Singapore, PPP, Public-private partnership, Urban development ministry
