Andhra Pradesh to mortgage institutions

Government proposes to set up a ‘Special purpose Vehicle’ shortly

Update: 2014-07-20 04:42 GMT
Andhra Pradesh Chief Minister N. Chandrababu Naidu

Hyderabad: The Andhra Pradesh government is considering mortgaging profit making public undertaking institutions to mobilise additional funds for the implementation of waiver of farm loans. For this, the government is proposing to set up a ‘Special Purpose Vehicle.’ The government has decided to mobilise funds without depending on RBI rules to implement the waiver of farm loans. Another option under consideration by the state government is issue of development bonds.

Mobilisation of additional funds to implement waiver of farm loans has become a big problem for the Andhra Pradesh government. Andhra Pradesh Chief Minister N. Chandrababu Naidu and government chief secretary I.Y.R. Krishna Rao on Saturday held meetings separately and discussed about mobilisation of additional resources. In the meeting held by the Chief Minister, finance minister Yanamala Rama Krishnudu, agriculture minister Prattipati Pulla Rao, state Planning Board deputy chairman C. Kutumba Rao, NABARD former chairman P. Kotaiah and others participated.

According to sources after discussing various options finally they came to the idea of setting up a ‘Special Purpose Vehicle’ to mobilise the funds. Through this, the government properties will be mortgaged to the banks and get funds. On paper the government will transfer the assets to the ‘Special Purpose Vehicle’ and this will be mortgaged to the banks. The government will ask the banks to sanction the loans taking into consideration the next 10 years profit of the institutions.

Mortgage of government lands also came up for discussion. If those lands are mortgaged in the future, government will face problems in constructing any building on the government land. When the lands are mortgaged to banks, the government cannot do construction work on them. Finally this proposal was dropped by the government. The government may form a committee to study ways and means of mortgaging the public undertakings and issue of development bonds to mobilise the additional funds.

This committee may be headed by Telugu Desam MP Sujana Chowdary. Meanwhile, the RBI sent a letter to the Hyderabad branch office asking for some details like the yield of paddy in the drought and cyclone affected mandals of both the states.

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