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February 19, 1999


WB loan, tax-free, low-deficit Budget perk up Andhra

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The World Bank's nod to a massive loan, the presentation of the state Budget and the release of a paper on infrastructure made the week eventful for Andhra Pradesh.

The World Bank's approval to a $ 210 million loan for an Andhra Pradesh power project has come after the United States had dropped its objection citing flexibility in India's policy on nuclear non-proliferation.

The bank took the decision at a meeting of its board of directors in Washington on Thursday.

The loan is the first in a series of adaptable programme loans totalling up to $ 1 billion that the bank plans to provide over the next eight years. This will help transform Andhra Pradesh's power sector from being a major drain on the state's Budget into a contributor of resources for priority sectors.

An US official, however, made it clear that the Clinton administration had only made a one-time exception in its nuclear-related economic sanctions in case of the Andhra project.

The US would continue to oppose other World Bank loans for India until there was ''greater clarity'' on an agreement to ban nuclear weapons testing.

The World Bank, apparently at the initiative of the US, had stopped lending for India's infrastructure projects after its nuclear tests in May last. Since then, the World Bank has put in abeyance consideration on proposed loans of $ 1.7 billion for India.

According to reports, further disbursement of the Andhra Pradesh loan may also depend on the progress in the United States' ongoing non-proliferation dialogue with India.

According to a World Bank statement, the Andhra Pradesh government has asked the bank to support its ongoing reform efforts to make its power sector more economically viable.

The first phase of the programme will support the establishment of a new legal, regulatory and institutional framework and industry structure, and the preparatory work for privatisation of the distribution of power. The first phase will also finance critically-needed transmission, sub-transmission and distribution system's rehabilitation and expansion.

To help reduce power sector losses, the programme will also help improve the metering system, and provide technical assistance to support the implementation of the reform programme, institutional development and capacity-building of the new power sector entities.

Meanwhile, in Hyderabad, a tax-free, Rs 1.85 billion deficit Andhra Pradesh Budget for the year 1999-2000 was presented to the state assembly today.

Finance Minister Pusapati Ashok Gajapathi Raju, presenting the Budget, said the government programmed an expenditure of Rs 191.89 billion under non-plan and Rs 50.32 billion under the state plan, resulting in a revenue deficit of Rs 15.63 billion.

After taking into account the overall transactions of the year, the state would have a net deficit of Rs 1.66 billion, and with the opening balance of Rs 194.4 million, the financial year was expected to end with a negative balance of Rs 1.85 billion.

The Budget, the last to be presented to the current assembly, showed more than 17 per cent increase in the plan outlay over the last year's outlay, with an emphasis on social and irrigation sectors.

Chief Minister Nara Chandrababu Naidu was not present in the house during the Budget presentation as he was away in Delhi to attend the crucial National Development Council meeting.

Andhra Pradesh needs an investment of Rs 16 trillion ($ 400 billion) in infrastructural development over the next 20 years to achieve a nine per cent growth rate, according to a recent document prepared by the state government.

The document, titled the 2020 Document released by the state government, said the requirement of the state in the sector up to 2010 would be about Rs 4 trillion ($ 100 billion). The sectors that required investments were power, ports, roads, airports and telecommunications, it said.

The targets envisaged in the document included installation of 30,000 mega-watt of power generation capacity with necessary quality improvements, development of four to six major ports of 30 to 50 million tonne capacity and development of four-lane superhighways to important cities and doubling of the road length to 400,000 km.

Besides, the government planned to build two international and six domestic airports and increase the telephone lines to 14.5 million, the document said.

The document also envisages a growth rate of six per cent for agriculture, 11 per cent for industry and 12 per cent for the services sector.

A release issued by the state government said that to attract private investments from both domestic and foreign sources, it was necessary to rationalise pricing and Budget allocation systems so that the prices reflect economic costs.


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