Balakrishna M. 
Amaravati: The Andhra Pradesh government, grappling with a staggering debt of over Rs 10 lakh crores, is exploring multiple avenues to secure funds for implementing welfare schemes, paying employee salaries, and managing administrative expenses. Chief minister Chandrababu Naidu and coalition leaders have openly acknowledged the dire fiscal situation, emphasising the urgent need for resource mobilisation. As part of these efforts, the Andhra Pradesh Mineral Development Corporation (APMDC) is gearing up to issue bonds worth Rs 9,000 crores, a move that has sparked intense debate.
Plans under scrutiny
The APMDC has drafted a proposal to raise funds through market bonds to finance various projects. The state cabinet recently approved the plan, but critics, including opposition parties, question the rationale behind such massive borrowing. Concerns revolve around interest rates, repayment burdens, and the state’s ability to avoid repeating past mistakes, notably the controversial Amaravati bonds issued in 2018.
The ghost of Amaravati bonds
In 2018, the previous TDP government issued Rs 2,000 crores worth of Amaravati bonds under the Capital Region Development Authority (CRDA) with a state-backed guarantee. These bonds carried a high interest rate of 10.32% over a 10-year tenure. However, after the YSRCP came to power in 2019, the Jaganmohan Reddy-led government neglected Amaravati’s development and defaulted on interest payments. This led credit rating agencies like CRISIL and ICRA to downgrade the bonds to “C” status, signalling severe financial risk. By December 2023, pending interest payments ballooned to Rs 211 crores, with total dues reaching Rs 372 crores.
The current proposal
The APMDC’s new bond plan has reignited fears of unsustainable debt. While the government claims the funds will boost infrastructure and mining projects, critics argue that excessive borrowing could further strain public finances. Financial experts warn that the state must learn from the Amaravati episode, where high interest rates and poor fiscal management compounded liabilities.
The YSRCP government had previously attempted to raise Rs 7,000 crores through APMDC bonds and even explored selling stakes in public sector units to secure Rs 14,000 crores, though these plans never materialised. Now, the TDP-led coalition’s decision to approve fresh borrowing has drawn accusations of hypocrisy.
Debt burden
Andhra Pradesh’s debt exceeds Rs 10 lakh crores, translating to a burden of Rs 2 lakh per citizen. The current government insists it will prioritise wealth creation over reckless borrowing. However, with pending payments for past bonds and mounting pressure from creditors, skepticism remains.
Key questions remain unanswered. The APMDC bond proposal has not clarified the interest rate, raising concerns about affordability. There is also concern over whether the funds will be used for genuine development, or diverted to manage existing debts. Can the state avoid another credit rating downgrade and investor distrust?
The Amaravati bonds fiasco underscores the dangers of politically driven financial decisions. With agencies like CRISIL slashing ratings due to payment defaults, Andhra Pradesh’s credibility took a hit. The current administration must balance immediate fiscal needs with long-term stability to prevent further public hardship.
All eyes are on Chandrababu Naidu’s coalition to deliver on promises of prudent fiscal management. The government’s ability to convert debt into productive investments – rather than burdening future generations – will determine Andhra Pradesh’s economic trajectory.