Bhopal (Madhya Pradesh): The Union Budget has proposed a Rs 100 crore incentive for municipal corporations issuing a single green bond of more than Rs 1,000 crore.
Aiming to boost urban infrastructure financing through the bond market, experts say the structure of the scheme makes it largely irrelevant for municipal corporations in Madhya Pradesh.
The scheme is only designed for large cities with strong financial capacity such as Mumbai, Bengaluru and Delhi.
Municipal corporations in MP generally do not execute individual projects costing more than Rs 500 crore, making a single bond issuance of over Rs 1,000 crore impractical. Indore Municipal Corporation, the state s largest urban body, has an annual budget of over Rs 8,000 crore, followed by Bhopal with more than Rs 3,600 crore.
Gwalior and Jabalpur municipal corporations have budgets of around Rs. 2,500 crore and Rs. 1,800 crore respectively. Despite these figures, officials note that raising Rs. 1,000 crore in one bond would place heavy financial pressure on these bodies.
High cost of borrowing
Economist Mahipal Singh Yadav pointed out that if a municipal corporation borrows Rs 1,000 crore through a bond, it would have to pay nearly Rs 80 crore annually as interest, along with adjustments for about 6% inflation over a 20-year period. According to him, such borrowing is feasible only for urban local bodies with multiple and stable revenue sources. In comparison, official data shows Bhopal Municipal Corporation s total annual revenue is just over Rs 1,100 crore.
AMRUT 2.0 support continues
While the new incentive may not suit MP cities, the Budget has continued support under the AMRUT 2.0 scheme. Under this, smaller urban local bodies can receive interest subvention of up to Rs. 13 crore per Rs 100 crore for their first municipal bond issuance and Rs. 10 crore per Rs 100 crore for subsequent green bonds, subject to specified caps.
Experts raise concerns
Rajendra Kothari, development activist and former resident director for Madhya Pradesh and Chhattisgarh at the PHD Chamber of Commerce and Industry, criticised the green bond incentive, stating that municipal corporations in MP generate far less revenue than required for such large investments and lack guaranteed returns from projects.
Official statement
BMC Commissioner Sanskriti Jain told Free Press that the incentive is expected to lower borrowing costs and encourage larger bond issuances, building on earlier successes in the municipal bond market.
