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Thursday, July 19, 2018

Eye on 100, PMC to opt for credit rating exercise

The objective of the rating is to make a report of the financial status of the civic body.

Written by Ajay Khape | Pune | Published: April 25, 2015 3:33:36 am
 PMC, credit rating exercise, smart city, Pune smart city, 100 smart cities,LBT, JNNURM,  pune news, city news, local news, pune newsline, indian express ‘During the exercise, the PMC would provide all the required and available information to the credit rating agency within 30 days of the demand being made.’

The PMC has opted for a credit rating exercise to be in the reckoning for smart city status that the union government is listing. Officials at the PMC said the competition to make it to the 100 smart cities is expected to be tough and PMC is leaving no stone unturned to be in the race. Creditworthiness is expected to be a deciding factor.

“The PMC is gearing up for competition to be among one of the 100 smart cities the union government wants to create in the country. There are various criteria set for civic bodies to be included and one of them is credit rating. PMC, to avoid any delay, has decided to undertake credit rating through a qualified agency,” said Ulka Kalaskar, chief accountant of PMC.

The objective of the rating is to make a report of the financial status of the civic body that would be based on revenue source, expenditure, civic property, development projects undertaken and strength of civic staff, she said.

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“The credit rating agency would carry out domestic credit rating, which would be used by the corporation at the time of raising funds from borrowings, and raising non-fund based requirements of PMC from the domestic market,” Kalaskar said.

The agency has to conduct credit rating for the first year and carry out surveillance and annual review of the rating for the next five years, she said.

During the exercise, the PMC would provide all the required and available information to the credit rating agency within 30 days of the demand being made, Kalaskar said. “The agency must be registered with SEBI for credit rating assignment with a minimum of 10 years of experience in rating assignment,” she said.

In 2011, the PMC had carried out a credit rating through Fitch that rated the civic body ‘AA’ for financial performance. “The previous rating was done four years ago and is not applicable now,” she added.

The PMC, as of now, is facing financial problems and projects sanctioned under JNNURM have stopped receiving funds following the regime change at the Centre last year. The water supply project and stormwater drainage project are incomplete and large amount of funds are required for completing them. “The credit rating would enable the civic body to raise funds for completing the projects,” she said.

In its previous credit rating report, Fitch had rated PMC financial performance as moderately strong. It considered octroi collection, and property tax as the PMC’s main source of revenue. The previous credit rating mentioned PMC’s low dependence on grants and suggested that although corporation finances were fundamentally strong,heavy dependence on octroi was a risk.

After octroi was abolished, Local Body Tax (LBT) was introduced in its place and that too is set to be revoked. The last credit rating exercise had rated reforms undertaken by PMC as part of JNNURM norms as good. There were a lot of infrastructure projects undertaken through JNNURM to meet demand of civic facilities.

Another factor to be borne in mind is that the PMC has witnessed an exponential population growth in the last few years and that had changed the requirements of the civic body.

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