Online edition of India's National Newspaper
Wednesday, Oct 17, 2007
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Online edition of India's National Newspaper Wednesday, Oct 17, 2007 ePaper |
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Tamil Nadu
State plans to mobilise resources for underground sewerage projects Matter referred to Union Finance Ministry for final clearance CHENNAI: Tamil Nadu is all set to become the first State to receive the Union Finance Ministry’s approval to float tax-free bonds for mobilising resources for water and sanitation projects in a group of urban local bodies. A few weeks ago, a panel of officials, headed by a senior officer of the Union Urban Development Ministry, approved the State’s application. The matter has been referred to the Finance Ministry for final clearance. According to a senior State Government official, the Ministry is expected to give its approval in a couple of weeks. By November-end a decision will be taken on issuing the bonds. Ambattur, Pallavaram, Kancheepuram, Namakkal, Ramanathapuram and Virudhunagar municipalities will covered under the scheme in addition to the Salem Municipal Corporation. The funds raised will be used for ongoing underground sewerage projects in these municipalities and a water supply project in the corporation. All the projects are estimated to cost about Rs.187.5 crore. Half the project cost is expected to be met through the bond issue. The authorities plan to raise the required funds in two phases. Last year, the Union Urban Development Ministry introduced the Pooled Finance Development Fund Scheme, aimed at helping urban local bodies access capital and financial market for investment in essential municipal infrastructure. While presenting the Budget for 2007-08, Union Finance Minister P. Chidambaram announced that issue of tax-free bonds would be allowed through the State Pooled Finance Entities formed to raise funds for a cluster of urban local bodies. The rationale behind the scheme is that unlike bigger urban local bodies smaller ones are in no position to approach the domestic markets directly. And, direct access may not be cost effective. This is why the pooled finance model has been thought of. The model is akin to the concept of bond banks in the United States. On receiving the Finance Ministry’s approval, the Water and Sanitation Pooled Fund, a State Government trust, will go in for private placement of bonds. The asset management company for the fund is the Tamil Nadu Urban Infrastructure Financial Services Limited, an organisation under the Municipal Administration and Water Supply Department. Though the State, five years ago, issued a bond under the pooled finance model, this will be the first time it will issue a tax-free bond. Then, 13 urban local bodies benefited and Rs.30.41 crore was mobilised.
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