The Pune Municipal Corporation (PMC) has created history by becoming the first civic body in 14 years to raise money through municipal bonds. It has raised ₹200 crore as the first tranche of a ₹2,300-crore fund raising programme to fund a 24/7 water supply project for Pune city.

The project involves modernising its aging water supply system — through improving distribution, replacing old pipelines, introducing smart metering and improving networks.

Oversubscribed

The issue also saw robust interest from investors with the issue being subscribed 6 times. The entire municipal bond market itself is just a little over ₹1000 crore, so the level of oversubscription is significant, Ashwani Bhatia, President and Chief Operating Officer, SBI Caps, lead arranger for the issue, said. It was also a matter of satisfaction that the pricing was very competitive, he said. The pricing for the 10-year bond was at 7.59 per cent, which, given the current market conditions, was a good rate, he said. While the Central government paper of comparable maturity was trading at 6.64 per cent, a ‘Triple A’ rated corporate was trading at 7.45 per cent, he said.

Mukta Tilak, Mayor of PMC, said that this was a small but bold step which would plug the gap in amenities and disparities and mitigate leakages in the system. She said the total cost of the project was ₹3,500 crore and the repayment of interest and principal would be done through contributions from the municipality, suitable and graded increases in user tariff (water charges) as well as escrow arrangements for a portion of the property tax collections. Kunal Kumar, Municipal Commissioner, pointed out that user charges are currently at 50 paise for 150 litres per person per day. This is slated to go up to ₹1 by 2021 and further to ₹4 by 2037. He said the water project is expected to be completed within 5 years.

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