The sudden stoppage of loans by the two central government lending agencies to the Kaleshwaram lift irrigation scheme (KLIS), being built on the Godavari river, has left the prestigious project of the Telangana government high and dry.
The Kaleshwaram Irrigation Project Corporation (KIPC), a special purpose vehicle (SPV) floated by the Telangana government to develop, engineer and execute the KLIS by mobilising required finances by 2025, entered into a loan agreement with Power Finance Corporation (PFC) and Rural Electrification Corporation (REC), both part of the Union ministry of power, for funding the project.
As per the agreement, the PFC is supposed to lend ₹37,000 crore, while the REC would lend another ₹30,000 crore for the Kaleshwaram project, the total cost of which is around ₹1.10 lakh crore.
“The PFC has already released 90 per cent of its agreed loan, while the REC has released around 60 per cent of the loan. But all of a sudden, both these Central financing agencies have stopped releasing the remaining amount,” KIPC managing director and engineer-in-chief of the project Bhukya Hari Ram Naik told Hindustan Times.
He said that both the PFC and REC had written to the state government in February, saying that the KIPC should enter into a revised agreement with them, involving the Reserve Bank of India (RBI), as per the directions of the central government.
“We have strongly resisted the condition, saying we shall stand only by the bi-partite agreements signed with the PFC and the REC for the loans and not a tripartite agreement, as the RBI was nowhere in the picture initially. If at all there is any such new policy, it should be made applicable for fresh loans or fresh projects and not with retrospective effect for already signed agreements,” Naik said.
The corporation MD said that following the protest by the state government, the two lending agencies stopped the further release of loans. “As a result, the project works, which are nearing completion at many places, have come to a halt,” he said.
He pointed out that both the lending agencies had earlier complimented the state government for prompt repayment of loans along with interest. “We never defaulted on repaying even a single rupee in the last five years. We fail to understand why they are doing like this now,” he said.
An officer on special duty (irrigation) in the chief minister’s office (CMO), Sridhar Deshpande, also wondered how the central government could suddenly change the conditions in the lending for the Kaleshwaram project. “The state government has written a letter to the Centre registering our protest. We have threatened to move the court if the agencies fail to stick to the agreements signed earlier,” Deshpande said.
He said negotiations were going on with the authorities of the PFC and REC to fulfil the lending obligation for the Kaleshwaram project as per the old agreements.
It would require another ₹30,000 crore for the completion of the entire project, including pending payments to Bharat Heavy Electricals Limited (BHEL) for the supply of motor pumps, completion of canal works and balance works on the chain of reservoirs as part of the project.
A senior official of the state finance department said the Centre had put forth the latest condition apparently to fix a cap on off-budget borrowings by the states through corporations and floating SPVs. “The Centre is suspecting that the states are resorting to indiscriminate borrowings over and above the limit fixed by the Centre under Fiscal Responsibility and Budget Management (FRBM) Act,” he said.
According to the FRBM Act, the states cannot borrow more than 3.5% of their Gross State Domestic Product (GSDP). “But the Centre is of the view that the states are borrowing more indirectly through corporations and SPVs, which do not fall under the budgetary borrowings,” the official said, adding that hence, the Centre wants to rope in the RBI to be part of the lending by the corporations.
The Telangana government has been representing to the Centre that the Kaleshwaram lift irrigation scheme, which is aimed at irrigating 45 lakh acres in northern Telangana and providing 10 thousand million cubic feet (tmc ft) of drinking water to en route villages and 30 tmc ft for Hyderabad, be declared as a national project so that the Centre would bear 90 per cent of the project cost.
However, the Centre made it clear the Kaleshwaram project was not eligible for national project status as it had no investment clearance from the Centre. Last month, Union minister of state for Jal Shakti, Bishweswar Tudu, told the Lok Sabha, while replying to a question raised by Congress MP N Uttam Kumar Reddy that the project was not apprised by the Central Water Commission (CWC) and accepted by the advisory committee on irrigation.
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