Following the incentives announced in the Union Budget, Tamil Nadu’s cash-starved urban local bodies, including Greater Chennai Corporation (GCC), are likely to turn to municipal bonds to fund their projects.The Budget offers a 10% incentive of `100 crore for a municipal bond worth `1,000 crore. Banks don’t offer such waivers. Besides, smaller local bodies do not have enough capital to get funding from big banks; but now local corporates may be willing to buy bonds to fund them. Officials said the state govt, too, can support smaller local bodies by repaying the bonds through grants.Madurai Corporation was among the first local bodies to raise resources through municipal bonds – it got `30 crore in 2001. GCC took this route 20 years later. Any local body can float bonds and private players, including individuals and corporates, can buy them. The identity of the donor doesn’t have to be disclosed while the local body signs an agreement on payback through half-yearly EMIs at market interest rate. Corporates, stakeholders or individuals seeking development in their sector or neighbourhood could thus fund projects. At least 60% of GCC’s `8,000-crore budget goes off in administrative and salary expenses, and, off late, foreign bank funding for projects, too, has dried up. This makes municipal bonds a more attractive option. Recently, GCC got `400 crore through municipal bonds for the Kodungaiyur bio mining project and Kosasthalaiyar basin stormwater drain project at an interest rate of 7.9%. Standing committee chairman (accounts) K Dhanasekaran said private donors are not queuing up to fund GCC. “We only secured two bonds in a period of six months. Everybody sees our payback strength and it is weak,” he said, adding that only if GCC improves its in-house revenue will it get donors. “The waiver is meagre. Yet, useful,” he said.Residents said the state govt too must offer a similar incentive. D Neelakannan, president of Alliance of Residents Welfare Associations, said the added areas of the city, despite being merged into GCC 15 years ago, have not seen basic development such as roads and drinking water. “If the state too offers a similar waiver, the local bodies can issue more bonds for immediate needs,” he said. Looking at how public co-funded projects such as ‘Namakku Naame Thittam’ faltered, residents were skeptical on how funds would flow easily. “They floated a lot of funding models but nothing took off. Under Namakku Naame Thittam, we spent 50% of funds to develop a park but GCC did not release the remaining 50% as promised. The project overall lost sheen,” said Suresh Subramanian of united residents association of Ambattur.
