Debentures and Dissent: APMDC’s Fiscal Shortcut Faces Legal Roadblock

A ₹9,000 crore debenture issue by Andhra Pradesh Mineral Development Corporation (APMDC) has created a political and legal storm, with allegations of constitutional impropriety and fiscal irregularity reaching Parliament and the courts.

Key Points from the Scandal

Tirupati MP Dr. M. Gurumoorthy raised it in the Parliament under Rule 377 questioning the validity of the debenture structure

The pact supposedly provides unrestricted access to the state exchequer by a private trustee through RBI's direct debit system, transcending Articles 203, 204, and 293 of the Constitution

Money mobilized is allegedly channeled back to the state government in the form of veiled loans in the name of mining lease compensation

ex-CM Jagan Reddy accused the TDP government of having mortgaged ₹1.91 lakh crore worth of mineral assets against bonds carrying an interest of 9.3%

The second tranche raised ₹5,526 crore by itself, bringing APMDC's debt to ₹14,000 crore

Legal and Political Consequences

The case is pending before the High Court of Andhra Pradesh, with notices being served on the respondents

Opponents of the decision say it diminishes budget transparency and creates a bad example for off-budget borrowing

The YSRCP has described the deal as unconstitutional and has requested central intervention

Rating agencies have warned the state's fragile fiscal picture even as the economy grows

The Bigger Picture

With Andhra Pradesh's debt now crossing ₹10 lakh crore, experts cautioned against mimicking previous errors such as the Amaravati bonds

The issue immediately raises issues of public money guarantees, the limit on state borrowing, and long-term fiscal responsibility

Sources: Deccan Chronicle, India Today, The Hindu, The Wire