Vadodara Municipal Corporation Aims to Launch India's First Blue Municipal Bonds
The Vadodara Municipal Corporation (VMC) is poised to make financial history by becoming the first civic body in India to issue blue municipal bonds. This ambitious move follows VMC's existing distinction as the pioneer in issuing globally certified green municipal bonds in the country, showcasing its leadership in innovative municipal financing.
Understanding Blue Municipal Bonds
Blue municipal bonds are specialized financial securities designed to fund projects that protect, restore, or manage water resources sustainably. Unlike traditional bonds, these instruments are specifically earmarked for water-related infrastructure and environmental initiatives, aligning with global sustainability goals.
VMC's Track Record with Municipal Bonds
The corporation has successfully utilized municipal bonds to finance its contributions to several central government schemes aimed at urban development. These include:
- Jawaharlal Nehru National Urban Renewal Mission
- Pradhan Mantri Awas Yojana
- Atal Mission for Rejuvenation and Urban Transformation (AMRUT)
- Smart City Mission
- Swachh Bharat Mission
In 2022, VMC raised Rs 100 crore through municipal bonds at a coupon rate of 7.15%. Building on this success, the corporation issued globally certified green bonds in 2024, raising another Rs 100 crore at a 7.9% coupon rate. Both issues were exclusively available to institutional investors and were oversubscribed significantly—10.07 times and 14.6 times respectively.
Financial Benefits and Current Obligations
One significant advantage of issuing these bonds is the 10% incentive provided to civic bodies, capped at Rs 20 crore, on the amount raised. VMC has a total obligation of Rs 2,150 crore as its share in various schemes, of which it has already paid Rs 1,653 crore. The remaining Rs 497 crore must be settled within the next three to four years.
The Blue Bond Initiative
To address part of this financial commitment, VMC plans to raise Rs 200 crore through blue municipal bonds. These funds will specifically support the corporation's share in water supply projects under the AMRUT scheme, ensuring sustainable water management infrastructure development.
Strategic Advantages Beyond Funding
VMC Chief Accountant Santosh Tiwari emphasized that the bond issuance process offers benefits extending beyond mere capital raising. "Besides raising funds, the process of bringing out bonds helps build financial self-reliance, transparency, up-to-date bookkeeping and a credit rating for the organization," he stated.
Tiwari further noted that their previous bond successes have garnered national attention: "The processes followed by us in the last two issues and their success caught the attention of various agencies, and we were also invited to share our experience and expertise on various forums."
Administrative Preparations and Investor Access
The VMC administration has formally requested its standing committee to authorize the Municipal Commissioner to execute all necessary procedures for the blue bond issuance. This upcoming bond issue will be accessible to a broader investor base, including:
- Qualified Institutional Buyers
- High Net Worth Individuals
- Retail Investors
- Corporate Houses
This expansion marks a strategic shift from previous issues that were limited to institutional investors, potentially increasing market participation and capital availability.