Rajkot Municipal Corporation Drives Innovative Growth With Rs 100 Cr Bond Issue, Boosting Infrastructure And Transparency

Rajkot is a city in the Western Part of Gujarat. It is the fourth largest city in Gujarat. In terms of migration, it has the highest migration in western Gujarat, popularly known as Saurashtra. Due to this migration, the city has witnessed huge growth in population. The city is very popular for MSME and light automobile ancillary industries. The city has a distinct DNA of innovation, which keeps it ahead of its competitors in terms of cost advantage. Also, looking at this aspect, the State Government expands the city limit almost every five years. As a result, the growth is not just limited to the city but to adjoining areas.

One notable aspect of Municipal Corporations in Gujarat and Maharashtra is that they are the institutions which have maximum civic services under one umbrella, unlike others in the country. To explain it further, say, for example, a city outside this state is likely to have more than one entity providing civic services. In these two states, the municipal corporations provide more than 26-30 different services. Even in Gujarat, for the same service area, there would be almost 25/26 different departments giving the same service, which a Municipal Corporation does in its jurisdiction. In a nutshell, Municipal Corporation is a huge organisation which impacts the growth of the city, both physically and financially/economically. 

The service area of Rajkot Municipal Corporation is 164 square km. The Municipal Corporation also has a culture of innovation; for example, it started concepts like outsourcing and privatisation in the early 1990s much before they became industry standards. Hence, it has gone beyond providing just basic city services like water, sewerage, solid waste, etc.. Rajkot Municipal Corporation maintains a zoo, planetarium, modern libraries, reading rooms, state-of-the-art sports facilities, auditoriums, etc. Taking the culture of doing things differently, city made Gujarat the first greenfield smart city with an area of 730 acres. The project was made under Smart City Mission and it is a unique amongst other smart city mission projects. The city also leads in climate action and has been the winner of the One Planet One City award four times, consecutively from India. The city has also announced Net Zero action plan by 2070 recently.

It is also pertinent that the financial health of Municipal Corporations is of vital importance to ensure growth. Rajkot Municipal Corporation has undertaken many reforms and initiatives to ensure healthy fiscal discipline.

As a part of this endeavour, Rajkot Municipal Corporation raised Rs 100 crore via Municipal Bonds. The issue was oversubscribed by 4.95 times and interest received was 7.90%. The tenure of the bond is five years. The Credit Rating of Rajkot Municipal Corporation is AA by Crisil. The bidding was done on the Electronic Bidding Platform of the National Stock Exchange. 

Rajkot Municipal Corporation started preparation for bond issue long time back. First step was financial reforms like conversion to double entry accounting and also digitization and computerization of all transactions. Next step was to improve the credit rating. The first credit rating of Municipal Corporation was A- which has now improved to AA+ by Crisil. There were lots of efforts over the years to improve service level benchmarking for services, rationalisation of user charges, improving recovery of both tax and non tax revenue and overall improvement in governance of Municipal Corporation which lead to the present credit rating. The Municipal Corporation further intends to improve the rating to AA+ to take it par with other progressive cities of lndia like Ahmedabad, Surat, Pune, Indore etc.

The proceeds will go for creating water supply and sewerage infrastructure for newly merged areas of the city. One 23 MLD STP, One 14 MLD ESR, and about 500 km water distribution and sewerage collection network will be part financed by the proceeds received from the bond issue.

The average borrowing cost for the cities will be much lower due to Rs. 13 crore interest subsidy given by Government of India to cities which issue Municipal Bonds. The major impact which will be on the Municipal Corporation post-bond issue would be the increase in transparency and reporting of financial and non-financial data. The overall performance review mechanism in the Municipal Corporation will also see a lot of improved transparency. The Municipal Corporation will also benefit from strong internal control systems, which will have to be institutionalised as a part of bond compliance.