The Pooled Finance Development Fund (PFDF) Scheme is an initiative by the Government of India aimed at enabling urban local bodies (ULBs) to access capital markets for infrastructure development. This blog provides an overview of the PFDF scheme, its objectives, and its key components.
Objective
The primary objective of the PFDF scheme is to strengthen the financial capabilities of ULBs, allowing them to raise funds for urban infrastructure projects through the issuance of municipal bonds. The scheme aims to:
- Improve the creditworthiness of ULBs.
- Encourage ULBs to undertake revenue-generating projects.
- Promote sustainable urban development.
Key Components
The PFDF scheme has two main components:
- State-Level Pooled Finance Entity: Each participating state establishes a State-Level Pooled Finance Entity (SPFE) responsible for pooling the borrowing requirements of ULBs and issuing bonds in the capital market.
- Central Government Support: The central government provides financial assistance in the form of grants and interest subsidies to enhance the creditworthiness of the pooled bonds and reduce borrowing costs for ULBs.
Implementation
The PFDF scheme is implemented through the following steps:
- Formation of a SPFE as a trust, company, or other legal entity.
- Identification and appraisal of urban infrastructure projects by ULBs.
- Pooling of projects and borrowing requirements by the SPFE.
- Issuance of bonds by the SPFE with credit enhancement support from the central government.
- Utilization of funds for the execution of infrastructure projects.
Impact and Benefits
The PFDF scheme has several benefits, including:
- Increased access to finance for ULBs, enabling them to undertake critical infrastructure projects.
- Improved financial management and project execution capabilities of ULBs.
- Enhanced urban infrastructure leading to better quality of life for citizens.
The Pooled Finance Development Fund Scheme is a significant step towards empowering urban local bodies to meet their infrastructure development needs and promote sustainable urbanization in India.
