Urban Local Governments In Tamil Nadu May Issue Bonds And Other Debt Instruments

As a result of the Sixth State Finance Commission's suggestion, the Urban Local Bodies (ULBs) may soon issue bonds and other financial instruments to supplement funding for capital projects (SFC). The state government will provide comprehensive rules for all ULBs now that it has accepted this recommendation.

In order for ULBs to be able to raise infrastructure bonds, the government was advised to undertake extensive efforts to improve their credit ratings through specialised organisations. The requirement that ULBs be surplus for three consecutive years in order to issue bonds seems onerous considering the funding needs of ULBs and the fact that the other two tiers of government are permitted to finance their budgets with a deficit.

According to the commission's recommendations, which were laid before the Assembly on Friday, efforts need to be made by the government to amend the requirements for issuing bonds in conjunction with appropriate regulatory bodies. Meanwhile, the SFC has issued a number of recommendations on a variety of subjects, including the distribution of state tax revenue, income from assets, capital grant fund, vertical sharing across tiers of RLBs and ULBs, non-tax revenue, creative financing methods, human resource management, etc.

The SFC stated that state governments have been able to control their accounts and deficits through statutory fiscal reforms and budgetary management compliance. It is past time to acknowledge the need for such discipline, at least in organisations. To guarantee fiscal restraint among municipal corporations, the state government should endeavour to include statutory measures in the current statutes or adopt new legislation.

The committee recommended developing a state-wide capacity building and training policy as well as a capacity building and training programme (CBTP) with sufficient budgetary provisions for both urban and rural local governments. To make sure that the elected officials of local bodies have the information and behavioural skills necessary to carry out their jobs effectively, capacity training should also be provided to them.

To investigate and report on the steps that need be taken for good governance at the grassroots level in local bodies, an administrative reform commission or committee should be established. To strike a balance between autonomy and accountability at the final mile, a panel of this kind may also evaluate the organisational structure and service regulations and make recommendations for changes. Furthermore, to assist local bodies with property mapping, value capture options, contract reviews, and auction process support, a state-level cell should be established. Additionally, this cell would keep track of pertinent contacts for other regional organisations as well as a database of profitable monetisation initiatives.