Andhra Pradesh to get Rs 24K cr additional funds

HYDERABAD: In what could be a windfall to the exchequer, Andhra Pradesh is all set to receive Rs 24,271.91 crore as additional funding from the Centre. This was made possible with the latest special financial package announced by Union finance minister Arun Jaitley that increased the Centre's share in both Central Aided Projects (CAP) and External Aided Projects (EAP) to 90 per cent from the existing 60 per cent.
In the current financial year, the state government is set to receive a bonanza as the Centre agreed to give Rs 7,336 crore to compensate for 201516 and 2016-17 financial years.As part of special financial package, the Centre agreed to provide 30 per cent extra funding in all CAP and EAP schemes from 2015 to 2020.
“We have calculated the additional funding on the basis of ongoing funding to north-eastern and hill states which are enjoying special category states with normal states which do not have. The Centre has agreed to compensate additional 30 per cent which works out to be a major increase in the overall funding to Andhra Pradesh,“ PV Ramesh, special chief secretary and development commissioner, told TOI. Money raised under EAP will have lower interest rates and also moratorium in the name of tax holiday starting from three to seven years. This will give the state government a major relief as the repayment starts only after 7 years.
The finance department prepared a detailed note on the possible benefit with the special package announced by the Centre and concluded that most of the benefit would be coming in the CAP and EAP projects. As per the projections, for 2017-18, the state would get 4,139 crore, for 2018 19 it would be Rs 4,760 crore, for 2019-20 it will be Rs 5,475 crore and for 2020-21 Rs 6,296 crore. To make most of the CAP and EAP , the state government has proposed a 15 per cent annual increase in the funding to beat the inflation. As part of the package, the Centre agreed to bear the foreign exchange fluctuation on the foreign loans which is likely to benefit to the tune of about Rs 2,000 crore.
The normal practice is the state governments should make up for the foreign exchange fluctuations that worked out to be around 1per cent of the total loan. In turn, the Centre would pay for the increase in the dollar rate and depreciating rupee. Under the special package, AP has been exempted from paying for foreign exchange fluctuations. AP has already submitted Rs 42,000 crore worth EAP schemes of which nearly Rs 28,000 crore worth project have been received in-principle clearance from the Centre. To make best use of special package, the AP government has decided to pose more infrastructure projects for foreign funding. “The major advantage for the state is that the funding under EAP and CAP would not come under the FRBM rules. Right now, we are not in a position to raise additional loans from foreign financial institutions as the loan raising limit was fixed at 3 per cent of Gross State Domestic Product. The special package has resolved the issue in our favour,“ said the special chief secretary .
AP government is mulling to pose some of the projects from Rs 65,000 crore worth Amaravati infrastructure projects to foreign banks which are offering loans at the interest rate of 1.5 per cent per annum. As the Centre will bear 90 per cent of the loan, the state government need not bother for the repayment.