Andhra Is Paying Debt On Behalf Of Telangana

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Cash-starved Andhra Pradesh left paying off Telangana debt!

 

Close to ₹1,500 crore has been paid since June last year

HYDERABAD, JULY 15:  

 

Funds-starved Andhra Pradesh is now bearing the debt burden of Telangana, thanks to the delay in distribution of outstanding debt between the two States.

Even after 13 months of bifurcation, the fate of ₹18,000 crore central loans borrowed by united Andhra Pradesh has not been decided.

“These loans have been taken and were spent on joint purposes of the two States in erstwhile AP, and fixation of liability for repayments has become a contentious issue since then,” a senior official in the Department of Revenue, Government of AP, told BusinessLine here on Wednesday.

The matter is being discussed by the AG with the two States. Once a mutually acceptable decision is arrived at, the Centre will have to notify the individual liabilities. As of now, no timeline has been fixed.

Debt servicing

Meanwhile, the debt has to be serviced. Every month since June, 2014, Andhra Pradesh is repaying ₹156 crore, including ₹56 crore claimed to be the share of Telangana, to the Centre. Over the last 13 months, AP has paid ₹728 crore on behalf of Telangana. “If we also include various other payments made on behalf of Telangana, the amount goes up to ₹1,500 crore which is quite substantial, given the financial obligations of the State,” the official said.

Can AP defer payment till a final decision is arrived at on debt sharing? No. “These loans were borrowed in the name of Andhra Pradesh and the State still continues to exist in the same manner. So, legally, the State is bound to honour its commitment while Telangana, as a new State, has not been bound by such legalities,” he added.

Huge burden

The increasing need for funds is also making the State raise funds by selling government stock. According to the 3 per cent norm prescribed by the Fiscal Responsibility and Budget Management Act, it is permitted to raise market loans to the tune of ₹13,000 crore.

So far, including an auction of stock conducted by the RBI to raise ₹1,000 crore on Tuesday, AP has raised ₹3,800 crore. The headroom left for the year is to the tune of ₹10,000 crore.

Given the scenario, it will be a daunting task for the State Government to raise funds for the proposed new capital, Amravathi, coming up in over 33,000 acres near Vijayawada-Guntur.

(This article was published on July 15, 2015)

 

original article - the hindu

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