How Vadodara corporation plans to raise money via municipal bonds

Vadodara (a city in Gujarat) municipal corporation is about to raise money through municipal bonds for its developmental work under the Atal Mission for Rejuvenation and Urban Transformation (AMRUT).
It will be the third urban local body in Gujarat after Ahmedabad and Surat to use municipal bonds under this scheme.
Let us understand what municipal bonds are and how it will work.

The Government of India has launched the Atal Mission for Rejuvenation and Urban Transformation (AMRUT) with the aim of providing basic civic amenities like water supply, sewerage, urban transport, parks as to improve the quality of life for all especially the poor and the disadvantaged. The focus of the Mission is on infrastructure creation that has a direct link to provision of better services to the citizens.
The purpose of “AMRUT” mission is to (i) ensure that every household has access to a tap with assured supply of water and a sewerage connection (ii) increase the amenity value of cities by developing greenery and well maintained open spaces e.g. parks and (iii) reduce pollution by switching to public transport or constructing facilities for non-motorized transport e.g. walking and cycling.
The project fund is divided among States/UTs in an equitable formula in which 50:50 weightage is being given to the urban population of each State/UT and number of statutory towns.

A municipal bond or muni bond is a debt instrument issued by municipal corporations or associated bodies in India.
These local governmental bodies utilise the funds raised through these bonds to finance projects for socio-economic development through building bridges, schools, hospitals, providing proper amenities to households, et al.
The difference between a bank loan and a municipal bond is that any institution can secure a bond only if it has favourable credit ratings.
It is usually for 10 years tenure and Bonds are issued to institutional and high networth individuals. The face value of each instrument slot of a municipal bond is a minimum of Rs 10 lakh. It can be subscribed to (purchased) by a single investor or multiple investors.

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