Trichy Corporation Achieves Milestone with Rs 100 Crore Municipal Bond Issue
In a significant financial move, the Trichy Corporation has, for the first time, mobilized Rs 100 crore through the municipal bond scheme. This substantial funding is earmarked for the construction of the Periyar integrated vegetable market located at Panjapur on the Trichy-Madurai National Highway. This initiative marks a pivotal step in leveraging capital markets for local infrastructure development.
Funding Breakdown and Government Subsidy
By securing these funds, the corporation has positioned itself to receive a Rs 13 crore subsidy from the Union government under the Amrut 2.0 scheme. This incentive is part of a broader effort to encourage local bodies to explore alternative financing methods beyond traditional bank loans. The construction work for the Periyar market commenced on May 9 last year, with the total project estimated at Rs 236 crore.
Out of this total, Rs 120 crore was obtained through the infrastructure and amenities (IA) fund, while Rs 8 crore each came from the Capital Grant Fund (CGF) and the local body's general funds. The recent municipal bond issue adds a crucial Rs 100 crore to this financial pool, enhancing the project's viability and scope.
Investor Engagement and Financial Terms
Officials revealed that through the Bombay Stock Exchange (BSE), the corporation attracted three investors for this project. The investment breakdown is as follows:
- One investor committed Rs 85 crore.
- Two other investors contributed Rs 10 crore and Rs 5 crore, respectively.
These investments come with a fixed interest rate of 8.5%, providing a stable return for the investors. The local body has planned to close the loan by 2036, outlining a structured repayment schedule.
For the initial five years, the corporation will pay interest amounting to approximately Rs 70 lakh per month. Starting from the sixth year, a portion of the principal sum will be repaid to the investors at a rate of Rs 20 crore per year. This phased approach ensures manageable financial obligations for the corporation.
Credit Rating and Future Implications
A senior corporation official highlighted that the Union government's recent budget announcement includes an interest subsidy of Rs 13 crore for local bodies that secure Rs 100 crore through municipal bonds. The official stated, "Our credit rating and repaying capacity were evaluated and observed to be in a better position to repay the loan." This positive assessment underscores the corporation's financial health and strategic planning.
The corporation expressed that this incentive may encourage it to mobilize funds through the municipal bond scheme for other major infrastructure projects in the future, rather than relying solely on bank loans. This shift could lead to more sustainable and diversified funding sources for urban development initiatives across the region.
This development not only supports the Periyar market project but also sets a precedent for other local bodies to explore innovative financing mechanisms, potentially transforming how public infrastructure is funded in India.
