Financial Services

Investment Banking

Ahmedabad Municipal Corporation

The Ahmedabad Municipal Corporation (AMC) is undertaking a major investment project for water supply and sewerage (WSS). The total cost of the project was estimated to be Rs 4,393 million in 1997. To partly finance the project, AMC issued municipal bonds of Rs 1,000 million in early 1998. This was a remarkable achievement as it was the first municipal bond issued in India without a state guarantee and represented the first step towards a market-based system of local government finance. Significant fiscal and management reforms, including improved tax collection, computerisation of the accounting system, an upgrade in AMC’s workforce and financial management, and development of a comprehensive capital improvement program, laid the necessary groundwork for AMC’s access to domestic capital markets

National and state level enabling legislation and policies, such as the passage of the 74th Constitutional Amendment (CA) and the introduction of various economic reforms, provided ample opportunities to AMC to access the capital market. The Municipal Corporations of Nashik, Bangalore, Ludhiana, and Nagpur have issued municipal bonds. There is considerable interest in and outside the country regarding AMC’s approach to financing and implementing this infrastructure project. The Government of India (GOI) is to provide tax incentives for municipal bonds in the future. Therefore, the timeliness and topicality of the Ahmedabad experience, as well as the questions raised by it, have led to the carrying out of this paper