Smart city project: ULBs told to hire rating agency

Credit rating will help cities raise funds: Official

Cities chosen for smart city projects have to engage rating agencies to assess their performances in various aspects to help investors decide on funding them.

An Urban Development Ministry official told Deccan Herald that credit rating would help cities raise funds as most infrastructure projects will be funded either on borrowing or on the Public-Private Partnership basis.

The ministry has issued guidelines in choosing an agency, which states that its assessment is key to determine the credit worthiness of a city and help raise additional fund from the market based on its sustainable revenue stream to fund the Special Purpose Vehicle (SPV).

It said rating must highlight both financial and non-financial performance of an Urban Local Body, while also help identify its strength and weakness in managing finance for roadmap for credit enhancement.

The Centre has asked ULBs to hire an accredited credit agency through open bidding at the earliest.

With the Centre promising to release Rs 200 crore for the first 20 ULBs chosen for smart city project, the cities have to form the SPVs immediately since the funds will be directly released to the SPV.

The SPV, with a full-time CEO and central, state and ULB representatives on the board, will plan, appraise, approve, fund, implement, manage, operate, monitor and evaluate the smart city project.

The SPV will be established as a Limited Company under the Companies Act, 2013 and will be promoted by the State and the ULB jointly, both having 50:50 equity shareholding, the official said.

The chairperson of the SPV will be either Deputy Commissioner or Municipal Commissioner or Chief Executive of the local Urban Development Authority as decided by the State Government, he added, though the CEO should be appointed with the Urban Development Ministry’s approval.