AP government borrows more than ₹29,000 crore through SPVs, Public sector companies

Minister Pankaj Chaudhary said that the Andhra Pradesh government has declared borrowings of ₹22,549.50 crore during 2020-21, ₹6,287.74 crore during 2021-22 and ₹500 crore during 2022-23

The State Government has borrowed more than ₹29,000 crore since the 2020-21 financial year through State Public Sector companies/corporations, Special purpose vehicles (SPVs) and other equivalent instruments. The Central Government has asserted that such borrowings where principal and/or interest are to be serviced out of the State Budgets and/or by assignment of taxes/cess or any other State’s revenues would be considered as Borrowings made by the State Government itself. 

Replying to a question by TDP Rajya Sabha member Kanakamedala Ravindra Kumar on Tuesday, Union minister of state for Finance Pankaj Chaudhary said that the Andhra Pradesh government has declared borrowings of ₹22,549.50 crore during 2020-21, ₹6,287.74 crore during 2021-22 and ₹500 crore (estimated) during 2022-23. These borrowings were through  State Public Sector companies/corporations, Special purpose vehicles (SPVs) and other equivalent instruments. AP Government submitted this information along with their request for obtaining consent of Government of India for borrowings of 2022-23 under Article 293(3) of the Constitution of India, he said.

Considering the effect of bypassing the normal Net Borrowing Ceiling (NBC) through such borrowings by some States including Andhra Pradesh, it was decided and communicated to the States in March 2022 that such borrowings would be considered as Borrowings made by the State itself for the purpose of issuing the consent under Article 293(3) of the Constitution of India, he added.

To a question by YSRCP MP Vijaysai Reddy, 

Union Minister of state for Finance Dr. Bhagwat Karad said that  instances of borrowings by certain State Public Sector companies, including Andhra Pradesh State Development Corporation (APSDC) etc. had come to the notice of the Union Ministry of Finance.The Central Government had received a copy of the opinion of the former Chief Justice of India with respect to the legality/validity of debt servicing of loan taken by APSDC.

As per RBI, it has come across instances where banks have not been strictly in compliance with extant instructions on assessment of commercial viability, ascertainment of revenue stream for debt servicing obligations and monitoring of end use of funds in respect of their financing of Government owned entities. The RBI has advised banks to follow RBI’s extant instructions on bank finance to Government owned entities while extending loans and advances to these entities, and also to carry out a review and report to their boards the status of the compliance, he added.