To boost infrastructure and community services, Rajkot Municipal Corporation raised Rs 100 crore via Municipal Bonds. The issue was oversubscribed by 4.95 times and interest received was 7.90%. The tenure of bond is five years. The Credit Rating of Rajkot Municipal Corporation is AA by Crisil. The bidding was done on the Electronic Bidding Platform of National Stock Exchange (NSE).
Rajkot Municipal Corporation started preparation for bond issue a long time back. First step was financial reforms like conversion to double entry accounting and also digitization and computerization of all transactions. Next step was to improve the credit rating. The first credit rating of Municipal Corporation was A- which has now improved to AA+ by Crisil. There were lots of efforts over the years to improve service level benchmarking for services, rationalization of user charges, improving recovery of both tax and non-tax revenue and overall improvement in governance of Municipal Corporation which lead to the present credit rating. The Municipal Corporation further intends to improve the rating to AA+ to take it par with other progressive cities of lndia like Ahmedabad, Surat, Pune, Indore etc.
The proceeds will go for creating water supply and sewerage infrastructure for newly merged areas of the city. One 23 MLD STP, One 14 MLD ESR, and about 500 km water distribution and sewerage collection network will be part financed by the proceeds received from the bond issue.
The average borrowing cost for the cities will be much lower due to Rs. 13 crore interest subsidies given by the Government of India to cities which issue Municipal Bonds. The major impact which will be on Municipal Corporation post bond issue would be the increase in transparency and reporting of financial and non-financial data. The overall performance review mechanism in the Municipal Corporation will also see a lot of improved transparency. The Municipal Corporation will also benefit from strong internal control systems which will have to be institutionalized as a part of bond compliances.