4.1 Taxable Municipal Bonds in India Eight municipal corporations in India had mobilised an amount of Rs 445 crores through the floatation of taxable municipal bonds during the period of 1997-2004. The size of these bonds varied a lot between Rs 10 – 125 crores (average size of Rs 55.6 crores) and so also the interest rate offered on them which varied from 7.75-14.75%. Further, most of the bonds were privately placed with only a few of them making use of State government guarantee. The objective/purpose of bond was either water supply and sanitation or roads. Escrow account was well designed in most of the bonds. It may be noted the National Democratic Alliance (NDA) Government was ruling the nation during most of the period of bonds floatation. It was the NDA Government that emphasized upon private sector participation in public infrastructure development, especially through PPPs in road development. Table 1 shows the municipal corporations of the cities that tapped bond markets along with details/ characteristics of each such bond. Table 1: Taxable Municipal Bonds in India City Amount Placement Annual Escrow Purpose Rating (in Rs. Interest Crores) Private Bangalore 125 State 13% State Govt grants City roads/ A- (SO) (1997) Govt. and property tax street drains Ahmedabad 100 Public & No 14% Octroi from 10 Water AA- (1998) Private collection points &Sewerage (SO) Ludhiana 10 Private No 13.5% Water & Water LAA- (1999) to 14% Sewerage taxes &Sewerage (SO) and charges Nagpur 50 Private No 13% Property tax and Water LAA- (2001) water charges Supply (SO) Nashik 100 Private No 14.75% Octroi from four Water AA- (1999) collection points &Sewerage (SO) Indore 10 Private State 13.0% Grants/property A (SO) (2000) Govt tax of city roads Madurai 30 Private No 12.25% Toll tax collection City roads (2001) 20 Private No 7.75% Property tax Water (2004) supply Source: Based on Vaidya and Vaidya (2008)
4.1 Taxable Municipal Bonds in India Eight municipal corporations in India had mobilised an amount of Rs 445 crores through the floatation of taxable municipal bonds during the period of 1997-2004. The size of these bonds varied a lot between Rs 10 – 125 crores (average size of Rs 55.6 crores) and so also the interest rate offered on them which varied from 7.75-14.75%. Further, most of the bonds were privately placed with only a few of them making use of State government guarantee. The objective/purpose of bond was either water supply and sanitation or roads. Escrow account was well designed in most of the bonds. It may be noted the National Democratic Alliance (NDA) Government was ruling the nation during most of the period of bonds floatation. It was the NDA Government that emphasized upon private sector participation in public infrastructure development, especially through PPPs in road development. Table 1 shows the municipal corporations of the cities that tapped bond markets along with details/ characteristics of each such bond. Table 1: Taxable Municipal Bonds in India City Amount (in Rs. Crores) Placement Annual Interest Escrow Purpose Rating Bangalore (1997) 125 Private State Govt. 13% State Govt grants and property tax City roads/ street drains A- (SO) Ahmedabad (1998) 100 Public & Private No 14% Octroi from 10 collection points Water &Sewerage AA- (SO) Ludhiana (1999) 10 Private No 13.5% to 14% Water & Sewerage taxes and charges Water &Sewerage LAA- (SO) Nagpur (2001) 50 Private No 13% Property tax and water charges Water Supply LAA- (SO) Nashik (1999) 100 Private No 14.75% Octroi from four collection points Water &Sewerage AA- (SO) Indore (2000) 10 Private State Govt 13.0% Grants/property tax of city roads A (SO) Madurai (2001) 30 Private No 12.25% Toll tax collection City roads (2004) 20 Private No 7.75% Property tax Water supply Source: Based on Vaidya and Vaidya (2008)
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