Ludhiana Municipal Corporation's Bond Initiative Hits Roadblock Over Expertise Shortage
The Municipal Corporation (MC) of Ludhiana has revived discussions on issuing bonds to attract public investment, a move that lay dormant for eight years. However, the plan appears to be stalling in its initial stages, with civic officials citing a critical lack of in-house expertise as the primary hurdle.
PMCIDC Directive and Immediate Challenges
This renewed effort was triggered by instructions from the Punjab Municipal Infrastructure Development Company (PMIDC), which directed the civic body to commence work on the MC bonds scheme. In response, Ludhiana MC officials have expressed their inability to proceed without relevant technical knowledge and specialized skills.
They emphasized that before any bonds can be issued, the corporation must first obtain a formal credit rating. This process requires an expert officer with specific technical capabilities to hire and oversee a credit rating agency. Consequently, the office of the MC additional commissioner has formally requested PMIDC to take the lead in hiring a credit rating agency at its own level, highlighting the internal resource gap.
Historical Context and Past Efforts
Back in 2017, the MC was similarly tasked with advancing the bond issuance exercise. At that time, it entered into an agreement with a private company. The firm was commissioned to conduct a comprehensive survey of MC properties and assess the financial status of the department. Based on this evaluation, the value of the bonds was to be determined, enabling officials to issue them as a means to encourage public investment.
During a credit rating conducted in the 2017-18 period, the Ludhiana MC received a BBB+ rating. This assessment was based on various parameters, including assets, liabilities, and recovery sources. It was undertaken following directives from the central government, underscoring the national push for municipal financial reforms.
Pune MC's Successful Model as Inspiration
Inspired by the example of Pune Municipal Corporation, Ludhiana civic officials had planned to issue bonds for public investment. The strategic move was aimed at generating much-needed revenue for the civic body, which has been grappling with a severe scarcity of funds. Even presently, the corporation struggles to pay salaries to its staff on time, a situation that has prompted a renewed focus on recovering pending dues.
An official pointed to Pune MC's achievement, noting that it raised Rs 200 crore in June through the first instalment of a five-year bond programme designed to raise a total of Rs 2,264 crore. This success story is viewed as a model that Ludhiana could emulate to alleviate its financial constraints and foster urban development through public participation.
Key Takeaways:
- The Ludhiana MC bond plan has resumed after an eight-year hiatus but faces immediate delays.
- Officials lack the expertise needed for credit rating and bond issuance, requesting PMIDC assistance.
- Past efforts in 2017 included a private survey and a BBB+ credit rating under central govt direction.
- Pune MC's successful bond issuance, raising Rs 200 crore, serves as a benchmark for Ludhiana.
- The initiative aims to address fund shortages and timely salary payments through public investment.
