Centre issues warning to AP on foreign loans piling up

The Centre has sought a report from the Andhra Pradesh government on ₹ 960 crore received as loans from foreign agencies for various Externally- Aided Projects (EAPs) remaining unutilised. The departments that are supposed to get these funds for executing the projects have drawn a blank, while payments running into hundreds of crores are yet to be made to contractors on the works done so far.

The EAPs now remain derailed because the state is unable to draw further loan amounts from the external agencies due to poor progress of the works and non-clearance of payment (dues).

The Department of Economic Affairs (DEA) under the Union Finance Ministry has taken a strong view and written a letter last week seeking an explanation from the state Finance Department on the issue. 

‘Sorry state of affairs in AP’

“The overall position of utilisation of advances extended by various authorities is not so encouraging as a very heavy amount of advance is lying in the accounts of Government of Andhra Pradesh. As on September 7, the amount released as advance is USD 124.65 million, roughly equivalent to ₹ 960 crore,” the DEA pointed out in its letter to the Principal Finance Secretary.

The DEA also noted that utilisation of the loan amount “is not so high,” which indicated a “situation wherein the interest cost is increasing but the project execution is at a slow pace.” Also, officials of the DEA personally called up top officials of different state departments and “gave us an earful”over the sorry state of affairs, a senior bureaucrat said.

“We are being bombarded with queries on the status of works and utilisation of funds (advanced by foreign agencies), but our report card is filled with only blanks. They gave us money but we can’t tell them we actually don’t have it,” the bureaucrat observed. On one hand, the state government has been scampering for loans but, on the other, the loans secured were obviously not being spent for the intended purpose, he explained. 

There are 14 EAPs in execution in AP now, with loans from foreign lenders like World Bank, Asian Infrastructure Investment Bank, International Fund for Agriculture Development, Asian Development Bank, International Bank for Reconstruction and Development, Japan International Cooperation Agency, New Development Bank and KfW of Germany.

6 EAPs under DEA lens

The DEA, in particular, referred to six of these projects for which ADB, AIIB, IBRD and IFAD have already released a sum of 124.65 million USD in advance.

The AP Rural Roads Project is a classic case. The 666 million USD project was taken up in November 2018 with 70 per cent loan (455 million USD) from AIIB to provide road connectivity to unconnected habitations with 250-plus population and also reconstruct existing roads in 137 rural Assembly constituencies in 13 districts.

Of the total 6,323 km length of roads proposed under the project, only 865 km has been completed so far. A recent note presented to the Chief Minister by the Panchayat Raj and Rural Development Department said there were “no bidders” for 169 works though the tender notifications were issued four times. In some cases, the bids were rejected because of excess rates quoted.

The note said ₹ 507 crore has been received from AIIB so far and an expenditure of ₹ 405 crore has been incurred. Since September 2020, ₹ 341 crore has not been paid to the contractors (on completed works) while bills for another ₹ 349 crore worth works (done) have to be raised.

No money for works, but loans being taken haphazardly

According to the DEA letter, 43.35 million USD (about ₹ 316 crore) should be available (with the state) as balance (advance) out of the total disbursement of 71.13 million USD. Worse is the case of the 468.10 million USD AP Health Systems Strengthening Project, taken up in 2019 with 100 per cent assistance from the World Bank.

The Medical and Health Department as such got “zero” (money) under the project so far though for the record it is still “on track. What we are doing under the National Health Mission, we are showing it as done under the World Bank project since most of the works under the two schemes are similar,” a top official said.

“It’s a different matter that our department is not given even the NHM funds,” he lamented. The DEA has warned the state to ensure the EAPs are “completed at a faster speed” by liquidating the advances since the terminal date in the case of four projects is very near.

Going by this kind of a dire financial situation, it is evident that Andhra Pradesh could soon be declared bankrupt by the Centre while the current government run by Y.S. Jaganmohan Reddy seems to care the least about the sorry state of affairs in the state. Only time will tell how the Centre will take this forward and save Andhra Pradesh from being duped. 

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Tejaswini Pagadala

Communications Consultant: TEJASWINI PAGADALA is an independent communications consultant. She has previously worked with the Andhra Pradesh Chief Minister’s Office as the Communications Officer where she has written English speeches for the CM, managed English media communication from the CMO and handled social media accounts of Andhra Pradesh Chief Minister and the Government.
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