The Hindu 10.11.2009
HUDCO agrees to sanction Rs. 150-cr. loan to VMC
G.V.R. Subba Rao
| The corporation is expecting the government’s nod shortly |
Corporation will have to pledge some of its properties to the HUDCO to utilise the loan
It will also have to open an escrow account and deposit some of its revenues
VIJAYAWADA: The Housing and Urban Development Corporation (HUDCO) has, in principle, agreed to sanction a loan of Rs. 150 crore to the Vijayawada Municipal Corporation (VMC). The decision was conveyed to the VMC a couple of days ago.
The HUDCO will release Rs. 50 crore towards first instalment of the loan, and the VMC is free to take a decision on whether to take the remaining portion of the loan or not, officials say.
The VMC officials have kept the issue under wraps as the State government is yet to give its “formal nod” to the loan.
The VMC is expecting the government’s approval shortly, and the loan is likely to be released in the next fortnight. The Corporation will have to pledge some of its properties to the HUDCO to utilise the loan.
It will also have to open an escrow account and deposit some of its revenues into it towards repayment of the loan, sources say.
Once the first instalment reaches the VMC, the officials are contemplating clearing the pending bills of the contractors to the tune of Rs. 30 crore.
These bills pertain to the works taken up under Jawaharlal Nehru National Urban Renewal Mission (JNNURM).
The VMC approached the HUDCO for the loan after a consortium of bankers it dealt with laid down stringent “conditionalities”. Moreover, the HUDCO’s loan was found to be coming with a relatively lesser rate of interest, if the State government’s counter guarantee was provided.
Bankers’ conditions
A consortium of bankers led by the State Bank of India (SBI) had earlier agreed to sanction a loan of Rs. 50 crore, but it insisted on collateral security.
The consortium also reportedly asked the Corporation to explain the ways and means of revenue mobilisation and how it planned to repay the loan.
The VMC told the bankers that it would be able to “repay the loan out of its own revenues and future revenues.” But, not convinced of the assurance, the bankers reportedly asked for security or government guarantee. As a result, the VMC opted for the HUDCO loan.
The VMC scaled down its loan requirements to Rs. 150 crore from the earlier Rs.225 crore, after the HUDCO suggested to it to revise the figure.
