Proposed State Secretariat and Heads of Departments building structures as designed by the Andhra Pradesh Capital Region Development Authority (APCRDA) in Amaravati capital city
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Extending a helping hand to Andhra Pradesh, the Centre is poised to convert a ₹15,000 crore loan extended by multilateral agencies for the Greenfield Capital at Amaravati into grant for the State.
“The conversion of the loan into a grant is almost final, as it is not being reflected as borrowings of Andhra Pradesh under Externally Aided Projects (EAP) from the World Bank and Asian Development Bank. This move will relieve the State exchequer from the liability of interest and repayments,’‘ a senior official told businessline.
According to the note submitted by the State Government to the 16th Finance Commission recently, loans secured for the Capital so far amount to ₹31,000 crore, comprising ₹15,000 crore from the World Bank and ADB, ₹11,000 crore from HUDCO, and ₹5,000 crore from German State-owned bank KfW. It pegged the total estimated cost for the project at ₹71,000 crore. Already, tenders have been awarded for construction works in the new capital to the tune of about ₹58,000 crore.
In the Union Budget presented in July last year, Finance Minister Nirmala Sitaraman had announced that the Centre would “arrange ₹15,000 crore this fiscal and in future years for the development of the capital city of Andhra Pradesh.’‘ Subsequently, the State Government announced consent of the World Bank and Asian Development Bank to provide about ₹15,000 crore loan to Andhra Pradesh for the capital.
Debt relief
This is a significant move because it will reduce the public debt of the State as well as the interest outgo, as the N Chandrababu Naidu-led NDA Government in the State inherited a huge debt burden and unpaid dues. In 2025-26, the State government is estimated to spend ₹34,998 crore on interest payments, which is 16 per cent of its revenue receipts.
According to State Finance Department data, there are ₹48,000 dues to be paid by the State Government under various heads, including clearance of bills as on today, including those that were due to be paid by the previous Government.
If the loan is converted into a grant, it will give further headroom for additional borrowings to meet the fiscal deficit (the excess of total expenditure over total receipts). In 2025-26, the fiscal deficit is estimated to be 4.4 per cent of Gross State Domestic Product (GSDP).
Apart from easing financial burden, grants from the Centre will also reflect the access Naidu has in the NDA Government at the Centre.
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Published on July 4, 2025
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