Raising capital for infra projects: BMC floats plan to appoint bank for issuing municipal bonds
Faced with a ₹2.13 lakh crore infra liability, the BMC plans to appoint a merchant bank to issue municipal bonds.
At present, the BMC has taken up infrastructure projects having a total capital size of Rs 2.13 lakh crore. (File Photo) With its liability crossing Rs 2.13 lakh crore owing to the slew of infrastructure projects it has taken up, the Brihanmumbai Municipal Corporation (BMC) has floated a proposal to appoint a merchant bank for issuing municipal bonds. The appointed bank will design the bond structure, fix interest rates and repayment schedule.
The move comes nearly a month after the civic body floated a tender to appoint a Securities and Exchange Board of India (SEBI)-registered agency for analysing BMC’s credit rating, an important step towards initiating the process of future borrowing through markets.
Municipal bonds are debt securities issued by municipal corporations to raise capital for funding key public infrastructure projects. At present the BMC has taken up infrastructure projects having a total capital size of Rs 2.13 lakh crore — nearly double than BMC’s current reserve corpus, which stands at Rs 81,774 crore.
Apart from this, 51 percent of the total reserves, held as Fixed Deposits, are earmarked for internal commitments. These include funds set aside for employee gratuity, pensions, Provident Fund contributions, and refundable bank guarantees taken from contractors as security deposits, which must be returned upon completion of projects.
“As we can see, out of the Rs 81,000 crore reserve that we have, only 49 per cent or Rs 39,500 crore could be used for the infrastructure projects, while the overall size of these projects is nearly four times of this usable amount. This clearly indicates that in the next few years, we (BMC) will need additional cash flow to complete these projects,” said a civic official on condition of anonymity.
Meanwhile, leaders from opposition parties said that municipal bonds effectively amount to debt. Samajwadi Party legislator Rais Shaikh said that the interest burden will ultimately have to be borne by the corporation, indirectly placing a financial burden on the citizens of Mumbai. He added that Prime Minister Narendra Modi and the state government have appealed to all government departments and local bodies to practice austerity.
“The state’s chief secretary recently issued directives discouraging wasteful expenditure through the appointment of consultants. Against this backdrop, the BMC issued an advertisement for appointing consultants for bond issuance. Instead of spending money on consultants, the BMC’s own officials could handle the process,” Shaikh said on Tuesday.
“The municipal commissioner had stated that future projects would be approved only after proper feasibility assessments. In that case, why is the BMC trying to raise funds from the market through bonds,” he asked.
The new venture of green bonds, aimed at achieving Mumbai’s climate action plan goals, comes along the heels of Finance Minister Nirmala Sitharaman in the Union Budget 2026-27 announcing a Rs 100-crore incentive for a single municipal bond issuance of Rs 1,000 crore.
According to civic authorities, the BMC intends to generate revenue between Rs 5,000-10,000 crore through green bonds and some of the projects that will be funded through these bonds include the BMC’s upcoming wastewater treatment facilities at Dharavi, Versova, Bhandup, Ghatkopar, Bandra and Malad, as well as the upcoming desalination plants, alongside two water tunnel project, and the proposed Gargai dam project.
Share
