Andhra Pradesh - Vijayawada

VMC plans to approach HUDCO for loan?

VIJAYAWADA: The high interest rate regime and the bankers’ insistence on security or government guarantee are likely to dampen the hopes of the Vijayawada Municipal Corporation (VMC) to get a loan of Rs. 400 crores from the consortium of bankers.

VMC officials recently held parleys with a consortium of bankers led by the State Bank of India (SBI) and the consortium reportedly asked the corporation to explain the ways and means of revenue mobilisation and how it plans to repay the loan.

The bankers were told by the officials that the corporation would be able to “repay the loan out of its own revenues and future revenues.” But, not convinced of the assurance, the bankers reportedly asked for security or government guarantee, sources say.

The bankers are likely to sanction loan at an “interest rate of 14 per cent minus”, which roughly translates into 13.5 per cent to 13.75 per cent. The corporation officials feel that a loan at an interest rate of 13.5 per cent to 13.75 per cent would be on the higher side in view of the corporation’s financial position. The consortium, including the SBI, the Indian Bank, the Syndicate Bank, the Axis Bank, the UBI and the Andhra Bank, would release Rs. 5 crores to Rs. 10 crores each, provided the VMC meets their requirements.

In view of these conditionalities, the VMC officials are now contemplating knocking on the doors of Housing and Urban Development Corporation (HUDCO). They feel that the HUDCO can be approached as it is likely to sanction loan at a less rate of interest, if counter guarantee by the State Government is provided.

The corporation requires Rs. 40 crores to Rs.60 crores by the end of April, 2009 for meeting its immediate requirements.

The VMC had earlier knocked on the doors of the Asian Development Bank (ADB) for a loan and later started exploring the chances of taking a Rs.400-crore loan from some nationalised and scheduled banks to maintain the momentum of the developmental works taken up under Jawaharlal Nehru National Urban Renewal Mission (JNNURM). As there is a considerable escalation in the cost of these projects, for which estimates were prepared in 2004, and as there is no provision to meet this cost escalation under JNNURM, the corporation needs to “find some resources” to bridge the gap, officials explain.

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