Vijayawada: In a strategic bid to reduce debt burden on the exchequer, the state govt has decided to reduce the Asian Infrastructure Investment Bank (AIIB) loan by 50% to support drinking water schemes in urban areas.
The AIIB had previously agreed to grant a 3,500-crore loan to the state govt to complete the drinking water schemes in about 50 municipal towns during the previous TDP regime in 2018.
According to the revised scheme, the state would secure a 1,750 crore loan from the AIIB to complete drinking water schemes in 25 urban civic bodies, with a total cost of 2,500 crore. The schemes in the remaining towns will be completed with the Centre’s support.
After returning to power in June last year, chief minister N Chandrababu Naidu reviewed the progress of the drinking water schemes planned in the past and advised authorities to prioritise them. It was found that the YSRCP govt could utilise only around 387 crore of the total approved loan of 3,500 crore from the AIIB due to the non-release of the state’s share. With poor progress in project implementation, the AIIB had also stalled the release of further financial assistance between 2019 and 2024.
Exploring options
Following the instructions of the CM, the finance department explored various options and suggested that the municipal administration department seek more support from the Centre instead of taking loans from international lending agencies such as the AIIB.
The municipal administration department stated that the AIIB-backed drinking water project was implemented in two phases across 20 work packages. However, due to various operational challenges, the project achieved only 12% physical progress and 8.75% financial progress. The extension of time (EoT) for all packages also expired on March 31, 2024, rendering the agreements ineffective. Subsequently, the state govt approached the Centre with a request to extend the deadline for the project, with a promise to expedite the works. To facilitate the project’s completion, the department of economic affairs (DEA), the Union finance ministry, and the AIIB have agreed to extend the project timeline by four years, until 2028.
Negotiations with Centre
After reducing the schemes to 25 from the previous 50 in the AIIB project, the state govt negotiated with the Centre and requested it to extend financial assistance to complete the drinking water schemes that had been pending for over a decade. Thanks to the TDP’s clout in New Delhi, the Centre readily agreed to grant financial assistance through the urban infrastructure and development fund (UIDF).
“We have revised the AIIB project cost to 2,524.91 crore. While the AIIB will release 1,767 crore (70%), the state govt will bear 757 crore (30%). Urban local bodies will cover the operation and maintenance (O&M) cost for 7 years, amounting to 466 crore,” said S Suresh Kumar, principal secretary (municipal administration).
The AIIB had previously agreed to grant a 3,500-crore loan to the state govt to complete the drinking water schemes in about 50 municipal towns during the previous TDP regime in 2018.
According to the revised scheme, the state would secure a 1,750 crore loan from the AIIB to complete drinking water schemes in 25 urban civic bodies, with a total cost of 2,500 crore. The schemes in the remaining towns will be completed with the Centre’s support.
After returning to power in June last year, chief minister N Chandrababu Naidu reviewed the progress of the drinking water schemes planned in the past and advised authorities to prioritise them. It was found that the YSRCP govt could utilise only around 387 crore of the total approved loan of 3,500 crore from the AIIB due to the non-release of the state’s share. With poor progress in project implementation, the AIIB had also stalled the release of further financial assistance between 2019 and 2024.
Exploring options
Following the instructions of the CM, the finance department explored various options and suggested that the municipal administration department seek more support from the Centre instead of taking loans from international lending agencies such as the AIIB.
The municipal administration department stated that the AIIB-backed drinking water project was implemented in two phases across 20 work packages. However, due to various operational challenges, the project achieved only 12% physical progress and 8.75% financial progress. The extension of time (EoT) for all packages also expired on March 31, 2024, rendering the agreements ineffective. Subsequently, the state govt approached the Centre with a request to extend the deadline for the project, with a promise to expedite the works. To facilitate the project’s completion, the department of economic affairs (DEA), the Union finance ministry, and the AIIB have agreed to extend the project timeline by four years, until 2028.
Negotiations with Centre
After reducing the schemes to 25 from the previous 50 in the AIIB project, the state govt negotiated with the Centre and requested it to extend financial assistance to complete the drinking water schemes that had been pending for over a decade. Thanks to the TDP’s clout in New Delhi, the Centre readily agreed to grant financial assistance through the urban infrastructure and development fund (UIDF).
“We have revised the AIIB project cost to 2,524.91 crore. While the AIIB will release 1,767 crore (70%), the state govt will bear 757 crore (30%). Urban local bodies will cover the operation and maintenance (O&M) cost for 7 years, amounting to 466 crore,” said S Suresh Kumar, principal secretary (municipal administration).
