Three years ago, the Vijayawada Municipal Corporation (VMC) knocked the doors of Asian Development Bank (ADB) for a loan of Rs. 200 crore to maintain the momentum of the developmental works taken up under Jawaharlal Nehru National Urban Renewal Mission (JNNURM), but did not materialise so far.
The consultants of the ADB visited the corporation on a couple of occasions since then and the VMC had been knocking the doors of financial institutions including HUDCO and nationalised banks for a loan. The VMC, however, failed to avail of the loan from them for various reasons including, counter guarantee from the State Government.
The ADB asked the corporation to set up a Special Purpose Vehicle (SPV) to sanction the loan. The ADB told that the loan would be sanctioned through the SPV to the corporation. And, the VMC had to escrow its revenues generated through realisation of charges for water supply and underground drainage schemes in the city. And, the VMC too was ready to pledge to the ADB its revenues generated through water supply and underground drainage for 15 years.
Later, the corporation explored the chances of taking loan from some nationalised and scheduled banks. The bankers strongly favoured a counter-guarantee by the State government. In addition, the interest rates of the nationalised banks, the VMC officials felt, was high compared to the HUDCO. Subsequently, the corporation approached the HUDCO for the loan. The VMC officials made umpteen presentations, and paid visit to Delhi for the loan of Rs.100 crore.
The HUDCO, recently, made it clear to the corporation that it cannot sanction loan unless the State government gives counter guarantee despite the fact that the VMC was ready to mortgage some of its properties. The HUDCO wanted the corporation to clarify how it could mortgage the properties without approval from the government.
A couple of weeks ago, the consultants of ADB once again visited the corporation to study its finances, rekindling hopes. But, senior officials feel that it would not materialise as the ADB was insisting on the SPV, which was not practically possible.
The VMC, now, is looking for prospective bankers who can sanction loan to meet its requirements.