India’s Largest Public Sector Bank, State Bank of India raised doubts on the financial health and credibility of the Andhra Pradesh government after Andhra Pradesh Power Finance Corporation Limited (APPFCL) raised an application for a loan of 3000 Crore.
SBI raised two concerns about the loan. Firstly, the Bank raised many doubts about the repayment capacity of the Corporation due to the ‘D’ rating given by rating agency CRISIL for existing bonds for two consecutive rating periods. it also expressed serious concern over the increasing debt of the state government. Moreover, there is a sharp increase in the outstanding guarantees of the state. The second concern is that the tendency of successive governments not honoring commitments made by previous governments.
This has become an issue ever since the Jagan Government has decided to revisit the PPAs signed during the then Chandrababu Naidu. SBI is rightly concerned if the Government’s guarantee will be honored by the next Government. Successive governments are the reason for the debts of Power Entities since they are involved in mindless populism in everything. Jagan Government went ahead revisiting the PPAs despite the concerns of the Central Government, Financial Experts, Power Experts, and even the industry and that decision is already showing adverse effects.