When smaller cities of Pune and Hyderabad can raise money by approaching the stock market through bonds, why can’t Bengaluru? The answer may lie in the red ink all over the Bruhat Bengaluru Mahanagara Palike’s (BBMP) balance sheets.
As State Ministers raised the issue of Central funds and allocation of money during a review meeting with Hardeep S. Puri, Union Minister of State for Housing and Urban Affairs, he said he was “disappointed” that a rich city like Bengaluru could not raise money on its own.
“Both Pune and Hyderabad have raised money through municipal bonds. Bengaluru should be able to do it too. Why should municipalities not raise money on their own, instead of relying on external agencies for it,” said Mr. Puri.
Earlier this year, Pune Municipal Corporation (PMC) raised over ₹200 crore by selling 10-year bonds; while, Greater Hyderabad Municipal Corporation has made plans of raising over ₹1,000 crore. Credit rating agency CRISIL said in a report that urban local bodies would raise as much as ₹6,000 crore through municipal bonds — or, nearly four times the ₹1,550 crore raised by cities in the past two decades.
City may miss the bus
However, Bengaluru might completely miss the bus. BBMP officials said municipal bonds would require bank support, which the civic body may not have considering the large debt it is still servicing. The city has a loan burden of ₹1,348 crore. Similarly, with no will to raise taxes, the city cannot deal with the loans and pending bills, said the officials.
As a result, rating agencies have awarded Pune with an ‘AA’ grading, Hyderabad with an ‘A+’. Bengaluru has a ‘BB’ rating — which is not just much lower in the scale, but which most rating agencies consider “non-investment grade”.
“For any investor, an audited financial statement is a necessity and a proven track record in rising revenues. The BBMP has neither of them. There are no audited statements, and the accounting system is a mess. No investor can take confidence from this,” said Anil Nair, Deputy Head, Advocacy and Reforms, Janaagraha, a non-profit group.
Bonds are among the routes urban bodies can take to achieve some semblance of self-sufficiency, he said. “Without the ability to raise revenues, the level of dependency on the State government and other grants increases. This implies that the State government dictates projects, rather than the municipal body,” said Mr. Nair.
Sapna Karim, who heads Civic Participation at Janaagraha, said the BBMP was trapped in a “vicious cycle” where it could not raise enough money through tax collection, nor could it spend the money it had raised. “Officials can only firefight now for basic works, while pending bills will rise. Any new project can be taken up only through State funds,” she said.
Smart City project to see progress
Having recycled existing projects, Bengaluru may be quick off the blocks to implement the Smart City project.
Recently, the State Cabinet approved the delegation of powers to the special purpose vehicle (SPV) which is implementing the project in the city. “We already have around five DPRs (detailed project reports) that are ready and can approve them in the next SPV meeting. With this, the process of starting the construction of projects worth around ₹1,000 crore can begin,” said Mahendra Jain, Additional Chief Secretary, Urban Development Department, who also heads the SPV.
The projects to be implemented include renovation of Russell Market and K.R. Market, and TenderSURE roads in Shivajinagar and Kempegowda Bus Stand areas, said officials.
