Amaravati: Officials of the Andhra Pradesh State Finance department and critics are pointing out that the state Chief Minister N Chandrababu Naidu, is pushing the state into a severe debt trap in the last leg of his regime. Incidentally, this is also the end of the financial year. It is reported that in the last three months and during the elections phase the Chief Minister has taken loans at high interest rates to fulfill election promises, pay the contractors' bills for various projects and fund the various corporations that he had floated.
Financial analysts have said that since the previous financial year, he had been running the government by taking overdrafts and loans which has brought the state to such a position making it difficult for the new government to get further new loans. It was the same case in the year 2004, where right before the elections Chandrababu had emptied the state coffers and pushed the state into heavy revenue and fiscal deficit.
In the beginning of the financial term this year, the state government had asked for the Central Finance Ministry to grant loans Rs 32,000 Crore through the open market based on 3% of the Gross Production. But the Central finance ministry refused to take it into account and informed the state that they would allow financial aid based only on their calculations. Since the Vote On Account budget was for approved for four months by the State Assembly, the Centre agreed to grant loans amounting to Rs 8,000 Crore only. The state government was getting ready to take heavy loans in the open market through Security sales, but the Reserve Bank of India (RBI) had issued a notification on April 2 banning Security sales. However on April 9 it removed the ban on security sales and the State government had taken a Rs 5,000 crore loan at an interest rate of 8.18%, that too just two days before the elections. Therefore, in just one month the state government had taken Rs 5,000 crore loans and it now had the permission to take another Rs 3,000 loan within three months from the open Market.
The Central Finance ministry will start verification of whether the state has taken loans based on the Gross Production (GP) in the past four and half years. Based on this data and whether the loan taken was more that 3% of the G, the Centre will slash the loan eligibility for the state and the same has been intimated to the state finance authorities. Officials have explained that it would become difficult for the state to take loans from the open market this financial year.
A senior official from the state finance department has informed that the since the state had taken Rs 6,000 Crore loans in the end of the financial year, they would reduce the amount in the coming finance year. This clearly shows that Chandrababu has pushed the state into such a situation that the upcoming government would not be any position or eligible to take further loans.
The newly appointed Chief Secretary LV Subramanyam has criticised the actions of the state government for taking loans at such high interest rates. In a review meeting LV Subramanyam questioned the action taken by the state finance department for issuing GOs stating that the interest rate on loans taken should be less than 8 % initially. But that was digressed and he asked as to how the state had given permission to take loans at such high interest later. He also questioned as to the state in the name of corporations had taken loans at an interest rate of 9 % for which it had given guarantees for such loans, that too in excess of the Budget.
The Finance Department officials in their explanation to his queries said that they had appraised the state governed of the financial rules and regulations, but were helpless as the cabinet already approved of these loans.
It is reported that the State government had tried to take another loan to the tune of Rs 1,000 Crore on April 15, but the Chief Secretary had refused to sign on the dotted line for granting permission...