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Ahmedabad Muncipal Corporation plans fresh bonds issue Monday, February 26, 2001

AHMEDABAD: Encouraged by the success of its non-convertible debentures launched in 1997, the Ahmedabad Municipal Corporation plans to go in for a fresh bond issue of Rs 100 crore to be directed at post-quake re-building of the city, municipal commissioner K Kailashnathan told TOI on Monday.

While the exact parameters of the issue are yet to be decided, Kailashnathan said if the government announced 100 per cent tax relief, then the AMC could issue the bonds at a 9-9.75 per cent rate of interest for a minimum of seven years.

"The money derived from these issues would be directed purely at urban infrastructure projects in the city," he added.

According to deputy municipal commissioner (finance) Devendra Makwana, "The AMC had planned to launch the bonds much before the quake but the scenario changed after that."

The AMC was the first municipal corporation in South Asia to have gone in for a credit rating and then to have launched municipal bonds which were oversubscribed by Rs 3 crore.

The corporation still enjoys a credit rating of AA by CRISIL, though the bonds were put under 'watch' last year when the state government announced the abolition of octroi.

Reacting to Union urban development minister Jagmohan's announcement of the guidelines for tax-free bonds up to Rs 50 crore, Kailashnathan said "the final shape of the bonds will depend on the Union Budget".

The AMC, which had earlier decided that the money from the bonds would be used for capital projects, has, after the quake, started thinking of using it for urban infrastructure, Makwana said.

When launched, the bonds will once again be NCDs for a period of seven years with the tax-free status as the prime incentive for investors, said Makwana.

The last municipal bonds of Rs 100 crore launched in 1997 at 14 per cent rate of interest are due to mature in 2002. The money from these bonds was used partially to fund the Rs 110-crore Raska water project and for other water and drainage projects in the city.

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