Arani Town - Municipal

Chapter - 14 Final Report: Arani Municipality
14.8 SCENARIO I - ESTIMATION OF INVESTMENT CAPACITY ON AS IS WHERE
BASIS
We carried out the exercise of arriving at the Investment and Borrowing Capacity
on as is where basis without any financial reforms being carried out and no new
projects taken in to consideration. The borrowing capacity has been arrived by
taking the NPV over the next 20 years on the minimum of the following :
30% of revenue projections
Primary Operating Surplus (Surplus before Interest & Depreciation)
The investment capacity has been arrived @ of 4 times the borrowing capacity
assuming that loans constitute 25% of total investment requirement.
In such a scenario, the Investment and Borrowing Capacity works out as below :
Table 14-24: Summary of Borrowing and Investment Capacity
Borrowing Capacity Rs. 2338.46 lacs
Investment Capacity (BC x 4 times) Rs. 9353.86 lacs
14.9 SCENARIO II - ESTIMATION OF BORROWING AND INVESTMENT CAPACITY
WITH PROJECTS
In Scenario II, the financial projections have been worked out for the next 30 years,
by taking in to consideration all the projects identified in CCP. Future income and
expenditure of these individual projects have been worked out and then
consolidated to arrive at the Municipalityís cash flows for the next 30 years. The
financial projections for the next 20 years have been taken to arrive at the
Borrowing and Investment capacity. We have arrived at the borrowing capacity of
Arani Municipality on the minimum of the following:
30% of revenue projections
50% of Primary Operating Surplus less Debt Service
The overall financing mix has been arrived to include 52% Loans, 34% Grants and
14% own funds. The repayment period of loans has been taken at 5+15 years for
Sewerage and Water Supply Loans and 2+8 years for other project loans. The above
factors have been taken in to account for arriving at the Annuity Factor, which has
been applied on the lowest of the above to arrive at the overall borrowing
capacity and investment capacity.
Table 14-25: Summary of Borrowing and Investment Capacity
Borrowing Capacity Rs. 3108.09 lacs
Investment Capacity (BC/0.52) Rs. 5977.10 lacs
Investment Requirement Rs. 8376.06 lacs
Sustainable Investment Capacity % - IC / IR 71.36%
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