“AP Industry Push: Escrow, Sovereign Guarantees Raise Questions”
Andhra Pradesh Chief Minister Chandrababu Naidu… Minister Nara Lokesh keep repeatedly using the word “brand.” Both of them claim that it is because of their brand that industries and investments are pouring into the state in huge volumes. This publicity is also going on in a big way. But it can be clearly said that the brand they boast about has no truth in it. Because they are luring industrialists by offering massive incentives and concessions, in some cases up to 60 to 70 percent of the project cost. Anyone setting up an industry looks only at where they will get maximum profit. Ignoring the dire financial condition of Andhra Pradesh, which is drowning in debt, Chandrababu and Nara Lokesh are announcing industrial incentives — this criticism is being heard widely. A senior IAS officer opined that Chandrababu has always followed a model of benefitting the wealthy and in return receiving praise and other kinds of advantages from them.
Chandrababu is known for turning even negative aspects into positives through his publicity — this situation is no different. Any government issues GO s (Government Orders) regarding major investments coming into the state and the incentives given to the industries. These clearly mention what the investing company should do and what incentives the government will offer in return. These details are even more clearly stated in the MoU. This system has been in place for a very long time. Once a government issues a GO, it becomes a commitment on behalf of the state government, and it must be implemented. However, when it comes to payment of industrial incentives, there is always significant delay. Sometimes industries have to go around the government for years to get these incentives released. For the past several years, this has been the situation in the Telugu states — Andhra Pradesh and Telangana. Now, Chandrababu Naidu has introduced a new model in Andhra Pradesh.
According to this new model, no matter what the state’s financial situation is, the government must pay the incentives it promised to industries. Escrow accounts are generally used to ensure that no fraud or misuse occurs. Both parties — the government and the industry — complete their responsibilities as per the agreement, and only then the incentive funds are released to the industry. In simple terms, if an industry asks for an escrow account after a GO is issued, it means they do not trust the government. Beyond this, it is now being said that the government is going even further by offering sovereign guarantees on incentives and concessions. A sovereign guarantee means the government itself stands as guarantor. This clearly implies that industrialists, instead of trusting the “brands” of Chandrababu and Nara Lokesh, are asking for escrow accounts and sovereign guarantees.
An official commented that earlier governments were able to secure investments merely by issuing GOs, but now it is unclear why there is a need to plead so much in front of industrialists. Comments are also being heard that this escrow and sovereign guarantee model is being introduced only to ensure that even if Jagan comes to power in the future, industries won’t face any issues. Discussions are going on that this is nothing short of an insult to the government. But the Telugu Desam Party, through its official page, is proudly publicizing that for the first time in the country they are implementing escrow accounts and sovereign guarantee systems for industrial investors — and that investors could not ask for anything more.
