Hyderabad: After the state bifurcation, the AP Chief Minister N. Chandrababu Naidu is continuing to be in communication with the World Bank, while Telangana Chief Minister K Chandrasekhar Rao isn’t showing interest.
Two days ago, the World Bank held a meeting with financial officials of all the states in Delhi to discuss their proposals for loans.
The AP government has proposed four projects linked to the capital city Amaravati for roads, drinking water, power and flood management to the tune of Rs 4,700 crore.
But the Telangana government did not propose any project. In the last three years, the TS government did not take a loan from any foreign financial institutions including the World Bank. The TS government prefers Indian commercial banks to get loans.
The World Bank will sanction any loan within the Fiscal Responsibility and Budget Management (FRBM) Act limits. The TS government wants off-budget loans, to which the World Bank does not agree.
The officials said that the interest rate is almost the same in the World Bank and Indian commercial banks. Moreover, if a World Bank loan is taken for any project, all the works, from calling tenders to completion of the project, has to be done under the supervision of the World Bank.
Any loan from foreign financial institutions has to come through the Central government. If due to any reason, the state government fails to repay the loan to the World Bank or any foreign financial institutions, the Central government will pay the amount and deduct it from its devolutions or grants to be given to state government.
Officials say that in such situations, the state government can manage Indian banks to get some time for repayment of loans. The state government has made off-budget loans of about Rs 40,000 crore for Mission Bhagiratha from local commercial banks and financial institutions.
If the state government takes a loan from the World Bank, it will come under the FRBM purview. The state government is currently taking loans under the FRBM limits and taking off-budget loans through corporations by extending guarantees.
As per rules, the state government can give guarantees to corporations and other financial institutions to the tune of 90% of its total annual revenue. Off-budget loans will not come under the FRBM purview.
