How will Telangana and Andhra share $30b debt?

Hyderabad: One tricky issue that stands out after the Telangana decision is how to divide the debt between the two states, which stands at Rs1.79 lakh crore (Dh110 billion).

Normally, the debt is divided between the bifurcated parts on the basis of their ratio of population. This formula was followed in case of Chhattisgarh, Jharkhannd and Uttaranchal, which were formed in year 2000.

But the case of Andhra Pradesh was more complicated and officials and experts say that population ratio formula cannot be applied given the nature of the loans and their use for region-specific projects.

If the population ratio was used as the basis for the distribution of liabilities, then the major part will fall on the Andhra-Seema region, which will have 58.39 per cent of the total 8.46 million population of the state. Telangana has 3.51 million or 41.37 per cent of the population. On this basis, Andhra-Seema’s liability would be Rs100,000 crore and the remaining Rs74,000 crore will be in the account of Telangana, making the debt burden on the state around Rs21,000.

However, this is unlikely to be acceptable to the Andhra and Seema regions. As the most recent loans borrowed by the state government from international and multi-lateral agencies including Japan Bank were meant for projects like the cleaning of Hussain Sagar lake in Hyderabad, the drinking water supply to Hyderabad, the Outer Ring Road project in Hyderabad, which are all Telanganan-specific projects.

In this context, experts say that the sharing of liabilities between the two states will have to be decided on the basis of some other formula that takes into account which loan was spent in which region. If a project was meant for all the regions, it will be shared by all three.

To prepare the list of assets and liabilities to be shared by Telangana and Andhra states, the central government has started collecting the latest data, including the revenue of each regional department.