GHMC bond plan awaits PMO approval

GHMC bond plan awaits PMO approval
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The proposal of Greater Hyderabad Municipal Corporation to raise bonds to the tune of Rs 1,000 crore hinges on the clearance from the Prime Minister’s Office as the Union Finance Ministry has opposed the proposal mooted by Union Urban Development Ministry to give tax-free status to urban bonds.

Hyderabad: The proposal of Greater Hyderabad Municipal Corporation to raise bonds to the tune of Rs 1,000 crore hinges on the clearance from the Prime Minister’s Office as the Union Finance Ministry has opposed the proposal mooted by Union Urban Development Ministry to give tax-free status to urban bonds.

It may be recalled that Urban Development Minister M Venkaiah Naidu had many a time emphasised the need for urban local bodies to become financially self sufficient. “Urban governance is in a bad shape and needs to be reformed,” he had stated both inside Parliament and at various foras.

The need to raise funds through bonds has become necessary for the local bodies as they have to implement Smart Cities on a mission mode. But since the bonds do not enjoy tax-free status and as it involves a cumbersome process, the local bodies are not showing interest in raising the bonds. The Union Finance Ministry it is said is objecting to according tax-free status on the grounds that it would lead to revenue loss to the Centre. The ULBs have to undergo a 45-step process which includes urban reforms.

According to senior officials of GHMC, though they have proposed to mobilise funds to a tune of Rs 1,000 crore in the budget, they would prefer to go in for term loans of Rs 2,500 crore this year for two reasons. One the process is not as complicated as it is in case of bonds and on the other hand with the banks having reduced interest rates, it would be more economical for them.

The banks, they say offer loans to urban local bodies for various developmental projects at less than 8 per cent where as if they raise bonds, they will have to pay an interest of 8 per cent to 8.5 per cent. Secondly, the banks do not impose restrictions that the ULBs have to take up simultaneous reforms.

The sources said that they were in the process of implementing the reforms as advised by the Centre but it cannot be done overnight.

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