New Delhi:
Delhiites may not be impressed by the services of Municipal Corporation of Delhi (MCD) but an international agency has given an 'AA' rating to the civic body for the reforms initiated by it in managing its finances and schemes.
'Fitch Ratings', in its latest report, affirmed the National Long-Term Rating of "AA-(ind)" to MCD and said the civic body's outlook was stable.
An 'AA' national rating denotes expectations of very low default risk relative to other issuers or obligations in the same country.
However, it warned the MCD of downgrading the rating if the civic body continues to increase its debt without augmenting its income. It advised the MCD to improve revenue
income saying it would provide a "sufficient cushion" to its finances and act as a positive rating trigger.
The agency commended the MCD for earning carbon credits in better management of revenue and capital accounts, increase in tax and non-tax revenues and launching of e-governance project and even said coverage of solid waste services in Delhi is "much better" than in other large cities in India.
It also noted that the quality of roads coverage and other civic infrastructure in Delhi are much better than that of other cities in India.
However, the rating agency was critical of MCD's implementation of JNNURM projects saying Fitch considers that MCD may not be able to execute all the projects identified for investment.
One of the highlights mentioned by the agency was the increase in revenue from the toll tax, which it said would provide a "major income boost" for MCD. While in 2008-09, the MCD got Rs 162.23 crore from toll tax, it rose to Rs 196.02 crore in the next fiscal.
"MCD will earn additional revenue of Rs 936 crore by March 2014 through award of this contract irrespective of the toll tax collection made by the contractor," Fitch Ratings predicted.
However, it noted that the MCD is "highly leveraged" though the outstanding debt has declined from 79.7 per cent of the revenue in 2006-07 to 50.8 per cent in 2009-10.
It also noted that the civic body could implement only one of the 11 schemes approved by Urban Development Ministry under JNNURM. "MCD planned to spend Rs 174.08 crore by December 2010 (on JNNURM projects).
However, actual expenditure to that date was only Rs 29.4 crore. Any cost escalation will be borne by MCD from its own sources," it said.
"At the end-December 2010 physical completion of nine projects was zero, and that of the other two did not exceed three per cent. MCD expects to complete 10 of these projects by 2011-12.
As the JNNURM has less than a year to run, Fitch considers that MCD may not be able to execute all the projects identified for investment," it added.
The agency noted that during fiscals 2005-2010, the establishment expenditure was the single largest component of revenue expenditure accounting for 80.7 per cent on average.
Noting that there was an increase every year, it said, it was due to the revision of salaries in line with the Sixth Central Pay Commission.
"Salary arrears from January 2006 to July 2009 for lower categories of employees were paid in full in two instalments during 2009-10 and 2010-11. For middle and senior level administrative staff, 70 per cent of the arrears were paid during 2009-10 and 2010-11.
"Salary expenditure in April June 2010 was INR 5, 55.08 crore compared with Rs 408.05 crore in April-June 2008," it said.
'Fitch Ratings', in its latest report, affirmed the National Long-Term Rating of "AA-(ind)" to MCD and said the civic body's outlook was stable.
An 'AA' national rating denotes expectations of very low default risk relative to other issuers or obligations in the same country.
However, it warned the MCD of downgrading the rating if the civic body continues to increase its debt without augmenting its income. It advised the MCD to improve revenue
income saying it would provide a "sufficient cushion" to its finances and act as a positive rating trigger.
The agency commended the MCD for earning carbon credits in better management of revenue and capital accounts, increase in tax and non-tax revenues and launching of e-governance project and even said coverage of solid waste services in Delhi is "much better" than in other large cities in India.
It also noted that the quality of roads coverage and other civic infrastructure in Delhi are much better than that of other cities in India.
However, the rating agency was critical of MCD's implementation of JNNURM projects saying Fitch considers that MCD may not be able to execute all the projects identified for investment.
One of the highlights mentioned by the agency was the increase in revenue from the toll tax, which it said would provide a "major income boost" for MCD. While in 2008-09, the MCD got Rs 162.23 crore from toll tax, it rose to Rs 196.02 crore in the next fiscal.
"MCD will earn additional revenue of Rs 936 crore by March 2014 through award of this contract irrespective of the toll tax collection made by the contractor," Fitch Ratings predicted.
However, it noted that the MCD is "highly leveraged" though the outstanding debt has declined from 79.7 per cent of the revenue in 2006-07 to 50.8 per cent in 2009-10.
It also noted that the civic body could implement only one of the 11 schemes approved by Urban Development Ministry under JNNURM. "MCD planned to spend Rs 174.08 crore by December 2010 (on JNNURM projects).
However, actual expenditure to that date was only Rs 29.4 crore. Any cost escalation will be borne by MCD from its own sources," it said.
"At the end-December 2010 physical completion of nine projects was zero, and that of the other two did not exceed three per cent. MCD expects to complete 10 of these projects by 2011-12.
As the JNNURM has less than a year to run, Fitch considers that MCD may not be able to execute all the projects identified for investment," it added.
The agency noted that during fiscals 2005-2010, the establishment expenditure was the single largest component of revenue expenditure accounting for 80.7 per cent on average.
Noting that there was an increase every year, it said, it was due to the revision of salaries in line with the Sixth Central Pay Commission.
"Salary arrears from January 2006 to July 2009 for lower categories of employees were paid in full in two instalments during 2009-10 and 2010-11. For middle and senior level administrative staff, 70 per cent of the arrears were paid during 2009-10 and 2010-11.
"Salary expenditure in April June 2010 was INR 5, 55.08 crore compared with Rs 408.05 crore in April-June 2008," it said.
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