The current rating, `AA (so)', was based on the strength of the credit enhancement mechanism in the form of escrow arrangement for collating octroi revenues from specified octroi `nakas,' Crisil said.

In the event of the government deciding to abolish octroi and imposing an alternate tax as proposed, Crisil opined any shortfall in alternate revenue sources would impact the debt servicingcapacity and financial risk profile of AMC.

Crisil would make a detailed evaluation of the impact once the government takes a final decision after the elections. According to Crisil, the structured payment mechanism of AMC's bond programme was partially protected from the risk of abolition of octroi by the legal agreements between AMC and the trustee, which require the municipal corporation to make available further security and other funds out of its revenue in case the octroi is abolished.

The AMC has also agreed that it would make available all the grants that may be paid to it by the state government in lieu of abolition of the octroi.The abolition of octroi without commensurate substitution would have a negative bearing on the rating assigned to the structured instrument, Crisil said adding that it expects a greater degree of linkage between AMC's bond programme rating and the governments credit profile.

At the same time, Crisil has downgraded the rating of IPICOL from `BBB (so)' to `BB (so)'indicating inadequate safety. The Rs 130-crore bond programme, which is supported by an irrevocable guarantee of the government of Orissa, has been rated by Crisil based on the government's support to IPICOL.The downgrade is reflective of a severe strain on the state's finances indicated by a sharp increase in revenue and fiscal deficits in addition to high and rising debt levels. Deterioration in the state's fiscal position has been precipitated by an increase in revenue expenditure on account of a large pay commission liability and continuous rise in debt servicing burden, it said.