‘Borrowed’ dreams: How Chandrababu Naidu is building castles in the air

That the finances of Andhra Pradesh are in a mess is now an open secret. The Chandrababu Naidu government has in the last four years emptied the coffers of the state even as people desperately wait to see any development on the ground.

When the state of Andhra Pradesh was divided in 2014 to carve out neighbouring Telangana, there was an overriding feeling of despair and anger over the loss.

But there was also hope.

Hope that the ruling leaders would once again ensure that the state scaled new heights despite all the odds. A hope of a new beginning to make up for the losses suffered. Hope that the dream of a strong Andhra Pradesh would once again be realised.

But alas all the dreams and the hope has been shattered by Chandrababu Naidu, who has presided over four years of misrule, corruption.

The fledgeling state needed sincere, honest and intelligent governance to fight the odds. Instead, it got a corrupt and inefficient government that did little to realise the dreams of its people.

And this is not just a political allegation.

A letter was written by EAS Sarma, former secretary of the Central government, to the state’s special chief secretary of the finance department, N Ravichandra is a telling commentary on the condition of the state’s finances.

Citing the numbers from AP’s Budget for 2018-19, the 1965-batch IAS officer, points to some disturbing trends.

Sarma writes: “More than 62% of the amounts borrowed by the State during 2018-19 will go towards interest payments alone. With increasing borrowings resorted to by the State, the position will worsen further. This will leave no room for genuine development activity. This will progressively shrink the productive investment of the State on education, health, rural development, transport and so on.”

“The same budget figures for 2018-19 corroborate what I have indicated above. If one compares the budget estimate for social sector capital expenditure for 2017-18 with the corresponding revised estimate figures, there was a shortfall of more than 11%. The corresponding shortfalls in planned and actually realised capital expenditure figures for 2017-18 are 25% for agriculture, 27% for rural development, 19% for energy, 71% for industry and 8% for transport. This shows that, as a result of the diversion of revenue for non-productive purposes and shrinkage in the space for capital investments, the State is unable to devote enough resources for lifeline sectors such as agriculture and crucial sectors such as social welfare,” he says.

Hitting out at the TDP government for doing nothing to stem the slide, he writes: “While the State’s finances are deteriorating thus, there seems to be no conscious effort on the part of the government to observe economy and austerity. Meetings are held, not in modest State guest houses, but in Five Star hotels. Special aircraft are routinely used for travel, unmindful of the fact that even US ministers are reluctant to charter special aircraft, fearing public uproar.”

The second important point of concern that he raises in his letter is the state government’s “Amravati Bonds”.

While the grandiose plans for Amravati cannot be questioned as Andhra Pradesh needs a dream state capital. But it is the means adopted by the present TDP government that has put this great dream to scrutiny.

Criticising the high rate of interest offered on the Amaravati Bonds, Sarma writes: “The latest attempt by the State government revolves around “Amaravati Bonds” offering an interest rate as high as 10.32%, payable quarterly, of 10-year maturity,. There is a moratorium of 5 years for the principal amount and, after that, the principal is to be redeemed at the rate of 20% per year during the next five years.”

Asking the finance department’s special secretary to introspect over this, he writes “The State’s political leadership seems to be in a self-congratulatory mood but, as the head of the State’s Finance Department, do you feel comfortable with such high-cost borrowings?”

He further writes: “Amaravati Bonds are truly expensive compared to bonds raised by other urban local bodies. For example, Greater Hyderabad Municipal Corporation (GHMC) recently issued bonds which were subscribed for an interest rate of 8.9%. Similarly, Pune Municipal Bonds were issued at an interest rate of 7.59%. Perhaps, taking into account the huge risks involved in bringing up Amaravati city, the State has had to dangle such a high rate of interest as a carrot to attract unwary investors to put in their hard earned savings. The present government is using the “sovereign” shield to get away with this but the debt service liability will ultimately devolve on the innocent people of the State!”

Sarma in his letter questions the rationality of the huge investments to make Amaravati a dream capital. We beg to differ from him on this count. To make Amaravati a dream capital is a matter of pride for every resident of Andhra Pradesh. There cannot be any compromise on that. We have lost Hyderabad, so Amaravati needs to be the new capital benchmark and every effort should be directed to achieve this.

However, we agree that are better and more efficient ways to achieve this goal. We agree with EAS Sarma that there is a need for a public debate and also perhaps a need to bring together the best economic minds on one platform to realise this dream.

If the YSR Congress comes to power, we will ensure that every voice of concern is listened to and addressed. We will build the capital of everyone’s dreams without compromising on concerns for health, education and social welfare of the people.