AP to save Rs 200 crore via debt swap

The state government is expected to save around Rs 200 crore through swapping of high cost debt in the current financial year.

According to Yanamala Ramakrishnudu, the state finance and legislative affairs minister, the major portion of the savings would come from swapping of the high cost small savings to the tune of Rs 1,100 crore with low cost loans in the present financial year.

"In a small way, though, the pubilc sector enterprises too are expected to replace high interest loans to the extent of Rs 300 crore, adding to the savings this year," the ministed told Business Standard.

As per the budgetary provisions, the state government, which has a debt stock of about Rs 57,000 crore as on date, has to shell out around Rs 6,000 crore towards interest payments for the present fiscal.

The debt swap measures introduced by the centre for the loans with over and above 13 per cent interest rate are gaining momentum with the state government loans, especially small savings, being the prime target.

To replace the high cost small savings, the Reserve Bank of India (RBI) has been raising fresh loans from the market through issue of SLR instruments at a rate of around 6 per cent.

The loans received by the state government from small savings in the past has costed as much as 14.5 per cent. The present rate of interest on small savings, being entirely credited to the state governments, is 10.5 per cent.

According to the sources in the finance department, the Government of India has identified Rs 1,00,000 crore of high cost loans at the national level for replacement over a period of time.

As far as Andhra Pradesh is concerned, around Rs 850 crore loans, all from small savings, were replaced with new loans last year.

Taking lead from the central government, the Andhra Pradesh government issued directions earlier this year to all the state public sector corporations to take advantage of the slide in interest rates in the domestic financial market and get rid of high interest loans taken in the past.

APIDC, APGenco and some other public undertakings have joined this endeavour by clearing old loans by new borrowings. Loans being offered to power utilities by PFC and REC now are at as low as 9 per cent rate of interest.

To further benefit from the falling interest rate regime, the state government has also requested the centre to expand the scope of the debt swapping scheme to those loans having below 13 per cent rate of interest and market borrowings, Yananala Ramakrishnudu said. "The Government of India is yet to respond to our request," the minister added.

Though the state government is concerned with high interst rate of small savings, it still has to mobilese small savings to meet the expenditure requirements in an other wise lean period in terms of tax collections.

"Against the proportionate target of Rs 1,260 crore up to October 31, an amount of Rs 1670 crore was realised on small savings front, registering an additional mobilisation of Rs 410.51 crore.

Against the annual target of Rs 3,000 crore from the small savings, at least another Rs 600 crore is expected to fall in the government's kitty.

As the government's revenue collections fall in the second and the third quarters, small savings have come as handy for the day-to-day adjustments," the sources said.