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India’s Largest Municipal Bond Programme Launched

Union Urban Development Minister Venkaiah Naidu has launched India’s largest municipal bond programme.

Salient Highlights

The Pune Municipal Corporation (PMC) became the first municipal corporation in the country to tap money through municipal bonds in 14 years. The AA+ rated PMC’s municipal bonds raised Rs 200 crore at 7.59 per cent rate at the Bombay Stock Exchange (BSE).

This is the first-ever mobilisation of debt capital by a municipal corporation on the BSE BOND platform. This will also be the first issuance since the publication of ‘Issue and Listing of Debt Securities by Municipalities Regulations, 2015’ by Securities and Exchange Board of India (SEBI).

The 10-year bonds will be used by the Pune Municipal Corporation (PMC) for a Rs 2,300-crore water project. The scheme is aimed at providing water 24×7 for all residents of Pune.

Pune Municipal Corporation (PMC) was assisted by the US Department of Treasury to create a debt policy. PMC has also planned to prepare a case study based on its experience and share it with other urban bodies to help them raise money from the bond markets.

Since the bonds do not have any guarantee from the state government, an escrow account has been created to deposit the funds for the comfort of investors.

Municipality Bonds

Municipality bonds can be issued by the city corporations to fund developmental projects. Institutional investors, as well as the public, can buy these bonds. The corporations can use the revenues earned from the developmental projects like Metro rail network to repay the interest and principal on these bonds. These municipal bonds have now been permitted for public offering by SEBI.

Municipal bonds have been in existence in India from the year 1997. Cities such as Ahmedabad, Bengaluru, Nashik and Madurai have already issued them. These bonds will help the city corporations to directly raise funds without the help of grants from the state governments or agencies such as World Bank.

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Reliance Defence inks Pact with Serbia’s Yugoimport to Manufacture Ammunition in India

Anil Ambani’s Reliance Defence Ammunition which is a subsidiary of Reliance Infrastructure has entered into a strategic partnership with Serbia’s state-run Yugoimport to manufacture ammunition in India. The joint venture is expected to target business opportunities worth Rs 20,000 crore from Indian armed forces in the next 10 years.

Salient Highlights

The two companies will work jointly in the field of ammunition amongst others. Both the companies would undertake joint development of next generation ammunition to cater to the needs of the future requirements of the Indian armed forces.

The proposal also involves the transfer of technology by the original equipment manufacturers (OEMs) and indigenous manufacturing in India.

Reliance Defence Ammunition will set up a greenfield facility for the production of ammunition.

India at present imports around 50% of its ammunition with an annual spending of more than Rs 10,000 crore.

Yugoimport is Serbia’s state-owned defence major and is a market leader in the field of ammunition production. Prime Minister Narendra Modi’s Make-in-India initiative requires building a domestic industrial base in India. This is aimed at cutting outright imports. Accordingly, Yugoimport has offered a fully compliant technical solution to meet the Make in India requirements of the Indian government.

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GST: Anti-profiteering Panel to be set up

The GST Council headed by Union Finance Minister Arun Jaitley comprising of state finance ministers as members have decided to set up a five-member anti-profiteering authority to decide on levying the penalty if businesses do not pass on the benefit of price reduction to consumers under GST regime. The GST Council has also approved the anti-profiteering rules.

Salient Highlights

The anti-profiteering committee would be headed by a retired secretary-level officer. The authority would ask the businesses to pass on the benefit of price reduction on a proportionate basis to consumers. Apart from the chairman, the other members of the committee will be joint secretary-level officers who have been commissioners in central excise and service tax either at the Centre or states.

The government will constitute a search-cum-selection committee for finalising the members of the anti-profiteering authority.

In cases where consumers cannot be identified, the amount would be credited to the consumer welfare fund.

The committee would be given powers to take Suo Motu action, besides acting on complaints of profiteering. The complaints of profiteering will initially come to the Standing Committee constituting of tax officials from states and the Centre. Then the complaint will be forwarded to the  Directorate of Safeguards (DGS) for investigation, which will take about 2-3 months to complete the inquiry. After the investigation, the report would be submitted to the anti-profiteering authority which will take a decision on the penalty.

The anti-profiteering authority will have a sunset date of two years and will decide on the penalty to be levied.

Section 171 of the Central GST Act provides that reduction in tax rate has to be passed on to the customers by way of commensurate reduction in prices.

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