Andhra officials seek to bail out fund-starved infrastructure firms

Andhra officials seek to bail out fund-starved infrastructure firms

Hyderabad: Andhra Pradesh’s top officials are trying to serve up some relief to the fund-starved infrastructure firms executing scores of irrigation projects in the southern state, only to come up against fresh hurdles.

They are arranging bank loans, looking at fast-tracking one-third of the pending projects, and seeking national status for some works so most of the cost for those would be borne by the Union government.

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These and any other measures that can be thought up are essential for completing the pending irrigation projects.

Andhra Pradesh has taken up 86 major and medium irritation works since 2004-05 under its Jalayagnam (water worship) programme, but has delayed payments for several months now because of a shortfall in its revenue collection and fund-raising plans. It still has 74 projects in various stages of development.

The irrigation projects are estimated at around Rs1.8 trillion and are to be completed by 2012.

Shailendra Kumar Joshi, principal secretary with the Andhra Pradesh irrigation department, says the state has to clear around Rs5,500 crore in dues and “some Rs700-800 crore of fresh bills are getting added every month."

Joshi said some banks and financial institutions are willing to fund up to Rs500 crore each to irrigation contractors against pending dues from the government. But state authorities are in a spot on who would bear the interest charges—the government or the construction firms.

“At present, the government is not in a position to bear such interest charges since it would result in additional burden on its finances," said Joshi.

Some infrastructure firms, though, have agreed to pay the charges to keep the projects alive.

“We have expressed our willingness to bear the interest charges on such bill discounting arrangements proposed by the banks and financial institutions against the dues of government," said T. Sandeep Reddy, managing director of Gayatri Projects. “It eases significant burden."

State officials also submitted a proposal late February to the chief minister’s office to consider prioritizing the projects based on the current stage of development, said another senior bureaucrat, who did not want to be named as he is not authorized to speak to media.

“Prioritization of projects helps avoid thinning of financial resources over larger number of projects...," said the official.

Some 15 major and 11 medium irrigation projects could be completed by the year-end with an investment of some Rs2,556 crore, to provide an ayacut—an area served by an irrigation project—of some 1.3 million acres, he added.

The chief minister’s office is currently in talks with the major irrigation ministry to evaluate the proposal.

But the ongoing turf battle in the state over carving out a separate Telangana state could pose a big challenge to this plan.

“Given the current political scenario in the state, where almost all the political parties are virtually divided based on the regional sentiments, prioritization of irrigation projects is unlikely to take place," said E. Sudhir Reddy, chairman of infrastructure company IVRCL Infrastructures and Projects Ltd.

Citigroup Global Markets India Pvt. Ltd, in a report on 2 February, said IVRCL has stopped working on most of its irrigation projects pending payments of around Rs90 crore from the state. Around 22% of IVRCL’s order book was from the irrigation projects, it added.

Mint had on 21 January reported how the irrigation projects were hit by the delays in payments by the state government.

Another long-pending proposal is for obtaining national status for certain projects so about 90% of the cost would be reimbursed by the Union government.

“We will get a relief of some Rs5,800 crore if one of our major irrigation projects, Polavaram, gets national status," said principal irrigation secretary Joshi.

The proposal was first made in May when late the Y.S. Rajasekhara Reddy was the state chief minister. The Union government is likely to declare the Polavaram work a national project shortly, Union minister for environment and forests, Jairam Ramesh, said on 27 February.

The Andhra government is pursuing the status for two more major irrigation projects as well—Pranahita-Chevella and Dummugudem. The three projects together involve an outlay of some Rs61,500 crore.

Meanwhile, as reported by Mint on 28 February, the Prime Minister’s Office (PMO) has sought details of the engineering, procurement and construction contracts awarded by the Andhra irrigation department, following charges of corruption by opposition parties.

A senior official in the state irrigation ministry had refuted any wrongdoing by the department but conceded that the cost of some projects had escalated after the contracts had been awarded because of changes in the scope of the works.

Another official in the same ministry, who did not want to be identified, said on Tuesday that the Andhra government has sent the details to the Central Water Commission, which had asked for the information for the PMO.