Hyderabad: AP Capital Regional Development Authority’s latest status report on Amaravati has revealed that AP government will go for the Masala bonds and pension funds to the tune of Rs 347 crore for the capital construction.
Masala bonds are Indian rupee denominated bonds issued in offshore capital markets. They are issued to offshore investors in dollars and currency risk lies with investors and APCRDA will optimise the liability and minimize the cost.
AP Government is not only pinning hopes on masala bonds and loans from World Bank, Hudco but also on selling the land (land monetization) if real estate market goes up in the capital city. The land monetization money will be used for construction of capital city.
Interestingly the budget requirement scheme was drawn for capital construction only up to 2020 for four financial years. There is no clue on how to fund the capital project after 2020-2021.
While the report revealed it needs Rs 41,235 crore for the development of new Amaravati capital city and Rs 2537 crore for the up-gradation of existing infrastructure in the capital villages the State government has only Rs 273 crore for this year as allotted in the recent budget of 2016-2017. AP will also be giving Rs 2074 crore grant as it’s share for world Bank loan in the next three fiscal years.
The status report says that Rs 1850 crore to be given by the centre will be spent this financial year and in next in 2017-18. APCRDA report says, “The 3 years of the project are crucial to send positive signals in the market and to prepare the ground for funding the subsequent stages. Trunk infrastructure is proposed to be completed using the funds allocated by State and central governments in a speedy manner.”
Further AP has to depend on World Bank for a loan of Rs 4841 crore and around Rs 7500 crore Hudco loans. AP Government has made application to centre for World Bank loan to the tune of Rs 6000 crore.
APCRDA has already entered into a MoU with HUDCO for a loan of 7,500 crore which will help fund the projects within Phase 1 and part of Phase 2 of capital construction.
APCRDA report said, “Initial conversations with international institutional investors e.g., New Development Bank (BRICS) suggested possible funding mechanism can be developed within first 2-3 years. Indian Institutional investors e.g., LIC, EPFO many collaborate by subscribing to State Development Loans (SDL). First 7 years of development and significant population ramp-up, will naturally attract more patient sources of capital (investment horizon of 10-15 years) e.g., Sovereign wealth funds, Pension funds, Masala bonds.”
User charges and property tax options are also kept open by CRDA for raising the funds. “With trunk infrastructure put in place, land prices are expected to appreciate significantly and hence land monetization will emerge as a strong source of raising funds from Year 5 onwards. Land monetization will continue to be a key source of funding after Year 5, as the land prices are expected to further increase with a hockey-stick growth pattern, as the critical mass is achieved,” the report said.
