After 2 years, AP draws excess funds

For the first time since 2013, the Andhra Pradesh government went into overdraft on Thursday.

The Reserve Bank of India, Nagpur branch, has sent a communication to the AP finance department that the state government was in overdraft of `537.46 crore.

Facing a financial crisis, the government has been opting for a ways and means advance every month to pay salaries to its employees.

According to the rules, the state government can take a ways and means advance for `740 crore, after which, it can opt for the special ways and means advance for another `740 crore. Once the advances cross `1,540 core, it is called as an overdraft. The Reserve Bank charges 7.5 per cent interest for ways and means advances and 2 per cent more for overdraft.

AP finance minister Yanamala Ramakrishnudu said in the Assembly on Thursday that the state government was in a bad financial position and added that the government had to go for overdraft to mobilise funds.

But despite the RBI communication, AP finance department officials said that the government had only taken ways and means advances and not overdraft.

As of now, the AP government has taken `1,315.04 crore advances including `537 crore that was taken on Thursday. However, the RBI has not allegedly taken the special ways and means facility into consideration and informed the state government that it is now in overdraft, implying that it will have to pay 9.5 per cent interest.

The state government has to clear all advances taken from the RBi within 14 days, otherwise its bank accounts will be frozen. This means it will have to clear `1,315.04 crore before April 1.

At the same time, the state government has to pay the salaries of government employees and pensions to retired employees. For this, it needs around `3,000 crore. The government is considering paying salaries on April 2 or 6.

The government is also expecting some funds from the Centre before the end of this month.

After borrowing `11,000 crore, the AP government has exhausted its borrowing limit in the financial year. If the Centre does not release any funds, the state government will face a huge financial crisis.