If the promised pie of ₹15,000 crore is a grant, then it is surely a windfall. But if it is a low-cost loan, who will repay it?
Published Jul 23, 2024 | 9:00 PM ⚊ Updated Oct 10, 2024 | 8:30 PM
Finance Minister Nirmala Sitharaman and Andhra CM Chandrababu Naidu
On the face of it, it looked as though manna was raining on Andhra Pradesh when Union Finance Minister Nirmala Sitharaman began what appeared like loosening of her purse strings while presenting the Union Budget in Lok Sabha on Tuesday, 23 July.
Her promise of ₹15,000 crore for the development of the capital Amaravati was the only specific promise made for Andhra. Even here, there is a catch. The promised help will come from Multilateral Development Banks (MDBs).
Multilateral Development Banks are international financial institutions, sponsored jointly by two or more affluent countries. These financial institutions advance loans to countries in developing nations to support social and economic development projects like energy, infrastructure and education. Unlike commercial banks, these MDBs issue grants and low-cost loans to developing nations.
If the promised pie of ₹15,000 crore is a grant, then it is surely a windfall. But if it is a low-cost loan, the question remains who will repay it. The finance minister did not say if the centre would bear repayment fully or at least partially leaving the remainder to the beneficiary state.
In all likelihood, the state would end up repaying the loan. If that were the case, the only benefit the state got was that centre was willing to facilitate the loan without raising awkward questions.
Chief Minister N Chandrababu Naidu, leveraging his position as an important constituent in the NDA, sought ₹1 lakh crore recovery package from the centre when he met the Prime Minister after winning the assembly elections in Andhra Pradesh and emerging as a party whose 16 MPs support was essential for the NDA government to survive.
He had brought to the Prime Minister’s’ notice the state’s dire need for hand-holding and pointed out his two priority projects – Amaravti and Polavaram needed urgent funding.
The Finance Minister granted the first wish of funding for Amaravati with ₹15,000 crore promise and topped it up with an assurance that there would be many more acts of similar largesse in the future.
As regards Polavaram, the Finance Minister was non-committal in specifying the quantum of help that would flow into the project. While acknowledging that Polavaram is Andhra Pradesh’s lifeline, she said that the centre was fully committed to financing and early completion of the project. She said by financing the project, the nation would benefit as it would aid in ensuring food security.
Naidu needs an infusion of ₹12,175 crore into Polavaram project to get the project going, which may take four years for completion. The chief minister had briefed the centre about his requirement already but the Nirmala Sitharaman did not indicate the quantum of help that would come to the state from Delhi to resume Polavaram project work.
The Minister also made promises of help without specifying how much for infrastructure projects. She said funds would be provided for ensuring water, power, railways and roads infrastructure at Kopparthy node on the Vishakhapatnam-Chennai Industrial Corridor and Orvakal node on Hyderabad-Bengaluru Industrial Corridor.
Nirmala Sitharaman, however, granted the request for release of funds for backward districts of Rayalseema, North Andhra and Prakasam, which in fact was guaranteed by the Andhra Pradesh State Reorganisation Act, 2014. Till now, the centre’s help under this count has been in fits and starts.
Interestingly, Sitharaman’s “munificence” was restricted to Andhra and Bihar, the two states which are ruled by Chandrababu Naidu and Nitish Kumar, whose support is sine qua non for the survival of the BJP government at the centre. As Sitharaman was announcing the support to the two states, there were protests from members of non-NDA parties as to why she was showing step-motherly treatment towards the other states.
A senior journalist and financial analyst M Somasekhar said that it is quite probable that Naidu may have sought the help in the form of loan as flow of money would be quicker that way. With India’s rating being high, financial institutions would not mind advancing loans to India as long as it gives counter guarantees. This way the funds could be channeled to the state quicker without losing much time.
He said that the centre appears to be preferring to facilitate the loan rather than financing the projects by way of grants from the national exchequer.
Chandrababu Naidu too does not appear to bother too much how the money comes from as long as it arrives fast. Amaravti and Polavaram are long overdue with TDP’s rule being interrupted for five years by the YSRCP government in 2019. “Naidu is in a hurry to fast track the projects,” he said.
(Edited by Venugopal)
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