AP development bonds oversubscribed 5 times

The Rs 375-crore Andhra Pradesh development bonds raised by the Reserve Bank of India (RBI) on behalf of the state government were oversubscribed five times.

Over 98 bids were received from various banks, financial institutions and funds for the purchase of bonds, which were opened by RBI on Thursday. These are the long-term bonds with a ten-year maturity period, and carry an interest rate of 7.34 per cent.

Despite subsidies like free power to the farm sector and heavy bias towards irrigation projects in the plan expenditure, the image of Andhra Pradesh in terms of financial management and creditworthiness appears to be growing in the eyes of banks and financial institutions.

The discipline in the management of state finances, recent enactment of the State Fiscal Responsibility Act and maintaining the overall borrowing levels strictly within the limits of budgetary sanctions are the reasons for the growing creditworthiness of the state, according to a senior official.

The present bonds are part of the Rs 1,328-crore AP State Development Loan for the current financial year under which the government has already raised nearly Rs 700 crore through the RBI.

"We will stick to our present requirement," responded the official on the possible revision of the bond size in view of the overwhelming response.

Interestingly, the response from international lending agencies, including the World Bank, with regard to funding various projects in Andhra Pradesh is also on similar lines.

Overseas banks and financial institutions such as KfW of Germany and JBIC of Japan apart from other multilateral lending agencies have recently come forward to lend generously to the Andhra Pradesh government.

In fact, following the willingness of JBIC to provide about Rs 7,000-crore loan for the implementation of High Voltage Distribution System (HVDS) and new transmission lines in the state, the APTransco management is considering cancelling the earlier understanding with the Rural Electrification Corporation(REC) for part funding the project as REC also takes loan from JBIC and, in turn, provides loan to the power sector projects.

Though the World Bank had expressed its keenness to fund the HVDS project much before JBIC's offer, the state government is not willing to take funds from the multilateral agency owing to the tirade launched against the World Bank-guided power sector reforms by the Congress when it was in the Opposition.