Criticism that the Chandrababu Naidu government in Andhra Pradesh is continuing on the path of borrowing has gained further ground with another government order. At a time when concerns are being raised over the state’s financial position, the government is once again providing guarantees for fresh loans in the name of power sector companies. The latest issue involves government guarantees for loans worth ₹1,950 crore.
Of this, ₹1,000 crore is a special-term loan from HUDCO to the Andhra Pradesh Power Finance Corporation Limited (APPFCL), while another ₹950 crore is a medium-term loan from the Power Finance Corporation Limited (PFC) to AP TRANSCO. Critics argue that by providing state guarantees for loans taken by government-owned power sector companies, the government is further increasing its future financial liabilities.
Andhra Pradesh’s Debt Burden
Chandrababu Government Guarantees ₹950 Crore Loan
In Energy (Power-III) Department G.O.Ms.No.74, issued on September 7, 2026, the government disclosed key details relating to AP TRANSCO.
After examining the proposals submitted by the CMD/Director of AP TRANSCO, the government approved the extension of the state government guarantee for the ₹950 crore medium-term loan being obtained by AP TRANSCO from PFC.
In other words, although the loan is being taken by AP TRANSCO, the state government is standing as the guarantor for it.
This is where criticism begins: “The loan is in the name of the government-owned company, but the ultimate responsibility lies with the state government.”
Conditions Imposed by the Government on the Guarantee
G.O.Ms.No.74 clearly specifies several conditions regarding the government guarantee for the ₹950 crore loan.
1. The guarantee will remain valid for the entire tenure of the loan.
2. The guarantee will cover both the principal and interest.
3. The government has directed AP TRANSCO to ensure that the loan agreement does not impose foreclosure charges in the event of early repayment of the loan.
4. AP TRANSCO is required to submit a repayment schedule containing details such as the principal amount, interest rate, loan tenure, moratorium period and other relevant terms.
5. The debt servicing obligations related to the loan must be met by AP TRANSCO from its own resources.
6. The Government Guarantee will come into effect only if AP TRANSCO fails to make the payments due to the lender.
7. The order makes it clear that the Guarantee Deed will not be valid unless it is signed by an authorized officer of the Finance Department.
8. Most importantly, AP TRANSCO will have to pay a 5% Guarantee Commission on the guaranteed amount.
Thus, apart from providing a government guarantee for the ₹950 crore loan, the government has also imposed a provision for a guarantee commission.
Loans in the Name of Power Sector Companies… Is the State’s Financial Liability Increasing?
This issue cannot simply be dismissed as a matter concerning only the ₹950 crore loan, according to political critics.
₹1,000 crore from HUDCO and ₹950 crore from PFC a total of ₹1,950 crore in loans are linked to the state’s power sector companies. Of this, the state government has directly issued a guarantee for the ₹950 crore AP TRANSCO loan.
Although the government order states that the concerned government-owned company must repay the loan using its own resources, it cannot be ignored that a government guarantee ultimately represents a potential financial liability for the state government.
The key question now is: Are loans being taken for public-benefit investments and projects that generate revenue, or is the state taking new loans to meet existing financial requirements and thereby pushing itself further into debt?
“Borrow, Give Guarantees, and Shift the Burden” Is This the Model of Governance?
The government has said that it would reduce the tax burden on people and put the state’s financial system back on track. However, with the government continuing to provide guarantees for loans, opposition parties are now in a position to raise serious questions.
What happens if the borrowing institution fails to repay the loan in the future?
If the total amount of government guarantees keeps increasing, what impact will this have on the state’s financial position?
How much pressure will principal and interest payments place on future state budgets?
These are questions that the government needs to answer to the people.
Borrowing money may not be immediately visible to the public. But when debt + interest + government guarantees + future repayment obligations are taken together, their impact eventually reaches the state’s financial system. If financial pressure increases, the indirect consequences may ultimately be borne by the people.
Orders Issued With Finance Department’s Consent
The government has also stated that the orders were issued with the consent of the Finance Department.
The G.O. clearly states that concurrence was obtained from the Finance Department through U.O.No.FIN01-FMUOBES(IIE)/48/2025-FMU-IC-IIE (Computer No.3067005), dated August 19, 2026.
The government has also directed the CMD of AP TRANSCO to take the necessary further action in this matter.
According to the order, copies were sent to the Chief Secretary to Government, Energy Department, Finance Department, PFC, AP TRANSCO and other concerned officials.
How Long Will the Borrowing Continue?
Another fresh financial liability has come to the fore during the Chandrababu Naidu government’s tenure.
₹1,000 crore from HUDCO + ₹950 crore from PFC = a total loan-related transaction of ₹1,950 crore. Of this, the state government itself has provided a guarantee for the ₹950 crore AP TRANSCO loan.
The government, however, has stated that the borrowing institution must undertake the debt servicing. But the government, as guarantor, could be required to shoulder the responsibility if the borrower defaults on its repayment obligations — a possibility reflected in the government order itself.
That is why the question being raised now is:
The government promised to take the state out of debt how long can it continue to run the state’s future on the basis of more loans and more guarantees?
Are debts being increased in the name of development? Or is governance itself being sustained through borrowing?
Who will ultimately bear the real burden of these debts? Will it not eventually fall on the people?
