Why Telangana and Andhra Pradesh are still fighting over a loan taken a decade ago

Why Telangana and Andhra Pradesh are still fighting over a loan taken
Even after 11 years since Andhra Pradesh was divided to form the new state of Telangana, the two states remain in disagreement over how to share nearly ₹9,000 crore in loans taken for externally aided projects before the bifurcation. The financial liabilities tied to these projects remain unresolved, and both states have yet to agree on a clear method for dividing them, a TOI report stated.

Centre steps in to mediate loan sharing dispute

Andhra Pradesh had borrowed ₹8,929 crore under 15 foreign-funded projects before the 2014 bifurcation. These loans were meant for infrastructure and development initiatives. However, Telangana and Andhra Pradesh have not been able to agree on how the burden should be shared.

Two months ago, the Union Ministry of Home Affairs held a meeting to address the issue. The Department of Economic Affairs stated that loans should be borne by the state where the project is located. For projects that benefit both states, it suggested that the share should be worked out as per the recommendations of the respective accountants general.

Telangana raises legal and financial concerns

This recommendation was not accepted by Telangana. Its officials argue that the method of division should follow Section 54(1) of the Andhra Pradesh Reorganisation Act, 2014, which calls for a population-based sharing model.

Telangana maintains that dividing the loans based on the location of the project would not reflect the law. Officials from the state say that the loans were allocated without proper consultation with Telangana and that a location-based formula would unfairly increase its financial burden.

Projects in question span both states

The loans in dispute are not tied only to projects in Andhra Pradesh. Some of the borrowed funds were also used in Telangana. For example, Andhra Pradesh cited the Krishnapatnam Super Critical Power Station located within its boundaries and the Hussainsagar development project in Telangana as examples where loan division should follow the project's location.

However, Telangana's position remains firm. Its officials say that accepting Andhra Pradesh’s formula could result in an additional ₹1,449.75 crore in liabilities for the state, which is already under financial stress.

Some senior officials from both states believe that further discussions may help resolve the issue. They suggest that a more balanced approach, keeping in mind both the law and the financial realities of each state, could lead to a solution.