When Chief Minister N Chandrababu Naidu rang the bell amid much fanfare at the Bombay Stock Exchange listing the Amaravati bonds, he inadvertently set off alarm bells as well, drawing flak from experts and Opposition alike for pushing Andhra Pradesh into a debt trap.
Questions have since been swirling over the need to tap capital markets to raise Rs 2,000 crore at a hefty fixed interest rate of 10.32 per cent for the proposed greenfield capital Amaravati. The state, which inherited a debt burden of Rs 1.19 lakh crore following the formation of Telangana in 2014, has borrowed Rs 68,000 crore more in the last four years, most of it for debt servicing.
Currently, its debt-to-GDP ratio stands at 28.25 per cent and by the government’s own account, the total debt is expected to touch Rs 2.50 lakh crore by next fiscal. Given this scenario, the government in February laid down guidelines for borrowings stating clearly that interest rate should be less than six per cent and efforts should be made to float infrastructure bonds with tax exemption. Inexplicably, it rolled back its own guidelines to issue the Amaravati bonds, agreeing to pay almost double the amount raised in 10 years.
The reason given for it is the BJP-led NDA government’s alleged unwillingness to help the state build the capital. Ever since the TDP exited the NDA, the saffron and yellow parties have been at daggers drawn but should people pay the price for their political feud? Didn’t the Centre commit itself to providing financial support for the creation of essential facilities in the new capital? People have the right to know why the state government is burdening them instead of negotiating with the Centre to find a solution.
After all, thanks to the ballooning debt of the state, it is they who are being squeezed. For instance, VAT on fuel in the state is the highest in the country. The raw deal being meted out to the people by the state and the Central governments is not only a betrayal of trust but also a violation of the law.