VIJAYAWADA: Even as financial analysts and opposition parties continue to question the rationality of issuing Amaravati Bonds at high-interest rates, the AP Capital Region Development Authority (APCRDA) and State officials defended the issuance of bonds in the capital market. They maintained that the interest rates were arrived at after evaluating all the available options, and claimed that it was at par with the lending rates of major central institutions.
The analysts and experts had raised doubts over the viabilIty of issuing the bonds at high-interest rates especially when the exchequer was already burdened with huge debts. They also said that creating infrastructure will not necessarily spur economic growth, as it was claimed by the State government. It would burden the government more, they said.
Former Chief Secretary IYR Krishna Rao said that the very objective of the government to pool in quick funds to avoid project cost over-run, raises questions over the financial viability of the capital. He pointed out the high arranger fee had to be paid, besides the interest rates, for mobilising funds through the bonds.
“The fee payable to the arrangers of the bonds is 0.85 per cent, which amounts to Rs17 crore. While floating GHMC Bonds, the arranger fee was 0.1 per cent. Is the rate high because Amaravati Bonds are inherently risky, or because there was no transparency in selecting the arranging agency,” he sought to know.
For the record, the APCRDA floated the bonds worth Rs 2,000 crore with a face value of Rs 10 lakh each. With a fixed coupon rate of 10.32 for a tenure of ten years, the State would incur an interest burden of Rs 1,573 crore for the tenure.
For the first five years, the interest to be paid would be Rs 54 crore per quarter. After the fifth year, 20 per cent of the principal would be repaid annually, thus resulting in a total repayment of close to Rs 3,600 crore for borrowing Rs 2,000 crore.
However, the Vice Chairman of AP Planning Board, C Kutumba Rao, who is also the head of the Standing Committee constituted by the government for the issuance of Amaravati Bonds, defended the rates fixed by the State government. Speaking to TNIE, he said, “The lending rates of Hudco for core infrastructure projects are 10.10 per cent, 10.25 per cent and 10.35 per cent for a period of one year, three years, and over three years respectively. We have given the bonds for 10.32 per cent for 10 years. Similarly, the interest rates of World Bank, after factoring in the processing fee, sovereign guarantee and other correction rates, would be anywhere between 8.2 per cent and 11 per cent,” he said.