Rs 40,000-crore development projects in limbo in Andhra

Development projects worth more than Rs 40,000 crore, including one related to the new capital city, are in a limbo as the Andhra Pradesh government is caught in a fix over the utilisation of funds under the Externally-Aided Projects (EAPs).
Chief Minister Chandrababu Naidu himself sounded sceptical about the "benefits" of the EAPs but it was a political decision which he now cannot shy away from.
"It is difficult to understand about the immediate benefit that would accrue to the state which is struggling to put its finances in order, while ensuring investments in capital works, so that growth does not suffer," he told the Legislative Assembly in the just-concluded session.

Under the Special Assistance Measure, announced by the Centre in September 2016 in lieu of Special Category Status to AP, the former was to fund the state for EAPs only "signed and disbursed" during 2015-16 to 2019-20.
The AP government anticipated an amount of Rs 20,010 crore under the Special Assistance Measure (SAM) but expressed inability to spend it within the stipulated five years.
As such, the state wanted the Centre to permit it to clear "other outstanding loans" towards EAPs and also use the gap to pay interest commitments to the Government of India, Nabard and other external agencies, a senior bureaucrat told PTI.

The Union Finance Ministry rejected this proposal and also refused to concede the state's demand to not make the SAM a part of the FRBM (Fiscal Responsibility and Budget Management) limit.

"It is an area of concern for us. The chief minister is pursuing the issue with the Centre since the state is not directly lending the money. As such, our contention is that it should be out of the FRBM limit," the bureaucrat said.
For over two years now, the state government has been requesting that the borrowing limit under FRBM Act be raised to 4 per cent of the GSDP, given the state's precarious financial position post-bifurcation.

The Centre, however, has not agreed to it either, even as the state has been borrowing quite heavily to make ends meet. AP targeted to borrow Rs 30,019 crore during the current financial year, excluding the EAPs.
Among the 13 EAPs proposed by the state, the Amaravati Capital City Development Project is critical besides the Vizag -Chennai Industrial Corridor Development Programme.
Though the Department of Economic Affairs (DEA), under the Union Finance Ministry, cleared the state's proposal for a USD 500 million loan in 2016, the World Bank is yet to approve and sanction it.
Of the total project cost of Rs 4,749 crore, the World Bank is expected to lend Rs 3,324 crore for the Amaravati project, under which critical infrastructure in the new capital is supposed to be developed.

The Chief Minister wrote a letter to Union Finance Minister Arun Jaitley on October 24, 2016 proposing to take up construction of residential school buildings in the state at a cost of Rs 3,000 crore with funding from AIIB (Asian Infrastructure Investment Bank.
A government note on the "latest status" of EAPs states that "the above proposal is in final stage (with the state government) and not yet submitted to the DEA".
The state government also proposed the AP Rural Road Project at a cost of Rs 4,234 crore with funding from the AIIB for "providing new connectivity to unconnected habitations".

The DEA sought comments of the Union Rural Development Ministry in May this year. The Ministry, in turn, wrote a letter to the state government on July 31 asking it to "recast the proposal". The state government is yet to do that.
Similarly, the Rs 4,500 crore AP Rural Water Supply Project is stuck after the Screening Committee of the DEA asked the state to "recast the project financials by restricting to USD 500 million USD".
The Union Health Ministry sought comments from the state government last year on curtailing the AP Health System Strengthening Project cost from the proposed Rs 4,807 crore to Rs 2,900 crore but the states comments are (still) "awaited".

In all, seven projects worth a total Rs 18,313 crore are languishing due to "no response" from the state government, a senior official pursuing the EAPs said.
Though the Amaravati Capital City Development Project, too, has been shown as "approved", among the six EAPs totalling Rs 19,162 crore, it cannot actually take off till the World Bank "sanctions" the loan, he added.