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Andhra Pradesh to review Rs 3 lakh crore capital, irrigation projects

YSR Congress govt has appointed an independent expert committee to review the contracts to “ensure transparency in execution and grounding of projects and to prevent corruption and rectify the existing discrepancies.”

, ET Bureau|
Updated: Jun 18, 2019, 09.31 AM IST
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The decision of the AP government to review the contracts may adversely affect thousands of crores of loans sanctioned.
HYDERABAD: Days after the Centre warned the Andhra Pradesh government headed by YS Jagan Mohan Reddy to desist from reviewing power purchase agreements pertaining to renewable energy, the Andhra government has now decided to review all the irrigation and capital region projects of erstwhile Chandrababu Naidu government.

Through orders issued on Thursday, the YSR Congress government has appointed an independent expert committee to review the contracts to “ensure transparency in execution and grounding of projects and to prevent corruption and rectify the existing discrepancies.”

This comes days after the new government’s earlier orders to cancel all the infrastructure contracts awarded before April 1 by the Telugu Desam Party government worth around Rs 50,000 crore, resulting in many listed stocks, including Nagarjuna Construction Company, tumbling and industry raising concerns.

The contracts that the new government proposes to review include those awarded and now at various stages pertaining to water resources, capital region development authority (CRDA), roads and buildings, municipal administration, urban development and rural water supply, among others.

“The size of the contracts awarded by the erstwhile TDP government in these departments are estimated to be over Rs 3 lakh crore and those which saw less than a fourth of completion amounted to over Rs 1 lakh crore,” a senior bureaucrat in the AP chief minister’s office told ET, requesting anonymity, adding that the exact value of these contracts would be ascertained by the expert committee appointed. “Not all the contracts will be cancelled. Only those involving irregularities will be annulled.”

A senior legal counsel for the banks, who did not want to be identified, said, the decision of the AP government to review the contracts may adversely affect thousands of crores of loans sanctioned by dozens of banks, both public and private, as the contracts will be halted and the government will delay the payments till the scrutiny is completed and may even cancel some contracts.

This is the second time after a decade that the infrastructure companies in Andhra will face the trouble of mounting receivables and defaults to banks after suffering a similar situation following the death of the then chief minister YS Rajasekhara Reddy (YSR).

After YSR’s death, dozens of construction firms that prospered during his regime by securing large irrigation contracts had plunged as the subsequent governments either shelved the projects or changed the scope, leading to inordinate delays in payments.

Chief Minister Jagan, son of the late YSR, had vowed to review the irrigation and capital region contracts awarded by the TDP regime led by N Chandrababu Naidu while alleging corrupt practices in his election campaigns.

Last fortnight, the union renewable energy secretary Anand Kumar aired serious concerns over Andhra government’s move to revisit the power purchase agreements signed by various wind and solar developers. In a June 6 letter to the state’s chief secretary, LV Subramanyam, Kumar said “revisiting PPAs shake the confidence of the investors in the sector and adversely affect the future bids and investment in the state and the country.”

“A contractual agreement once signed should not be revisited unless there is a specific provision to do so in the agreement or a case of conspiracy and undue gains is proved,” the union secretary pointed out in his letter.

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