AP’s capital bonds may boomerang
Economists sceptical about government’s ability to pay interest
Though the Amaravati Bonds- 2018, issued by the Andhra Pradesh Capital Region Development Authority (CRDA), were subscribed one and half times on the electronic bidding platform of the Bombay Stock Exchange on August 14, new doubts are being raised by economists and financial experts over the possible heavy burden on the state’s exchequer in the days to come.
The CRDA has stated that these funds are vital to making swift progress in greenfield projects and realize the potential of development works. However, the economists ask how the state government would pay the huge interest for the `2,000 crore worth bonds. The interest rate the CRDA offered was 10.5 per cent and on the acquired `2,000 crore, the CRDA has to pay `21 crore as interest per month and `252 crore per annum. It will be `2,520 crore interest at the end of 10 years and financial experts have expressed apprehension on this huge burden.
Apart from this, the government has to pay commission to the Bombay Stock Exchange (BSE) and around `400 crore additional funds are needed to pay 20 per cent incentive for the bonds after five years. When all these are clubbed, it comes to around `3,000 crore towards interest itself on the `2,000 crore funds raised through capital bonds, said Dr LSN Prasad, retired professor of Economics.
However, the government version is different from that of the apprehensive economists and financial experts. It claims tht the bonds’ oversubscription has helped raise `2,000 crore, surpassing the cumulative funds of `1800 crore raised by several local bodies so far, said a senior bureaucrat, who has been actively involved in the entire process.
The official also said that the government was contemplating about exercising the green shoe option and retaining the oversubscribed amount of `700 crore as equity pool.
“The same would be invested towards equity contributions for other major infrastructure projects at Capital Amaravati through Special Purpose Vehicles,” the official added.