The cash-strapped BBMP is now hocking its “family jewels” to raise money for its development projects.
On Tuesday, the Palike Council approved a proposal to deposit title deeds, referred to as ‘collateral’, of the Public Utility Building on MG Road and the Jayanagar Market complex, to raise Rs 1,000 crore from the Housing and Urban Development Corporation Limited (HUDCO).
The move is being seen as BBMP’s admission that it has been “incapacitated” to pay debts. Palike Commissioner Shankaralinge Gowda explained that “the loan will be availed for unproductive purpose and to reduce the Palike’s financial burden.” It is an indication that the loan from Hudco will be used to repay the loans taken from other financial institutions at higher interest.
In the face of stiff protests from the Opposition and a walk-out by the Congress, the ruling BJP managed to get the Council to approve by a majority the proposal placing the two properties as ‘collateral’ with Hudco. Tuesday’s Council meeting was particularly raucous, with the Opposition waving black flags against placing the title deeds of the two prominent City landmarks as collateral for the loan.
The Commissioner said the Palike had no choice but to go in for the HUDCO loan to reduce its debt burden.
According to sources, the Palike is currently reeling under a debt of Rs 3,600 crore acquired from seven public sector banks and Rs 610 crore in Hundi loans. The BBMP is currently paying each bank an approximate annual rate of interest of close to 13 per cent.
The Palike has calculated that this sum will be reduced by availing of the HUDCO loan at 11 per cent interest. However, it is feared that if the Palike expenditure goes up in the Budget 2012-13, and there is a drop in revenue collection, the BBMP will be sucked into an obvious debt trap.
