Telangana waives guarantee fee on Rs 2,944 crore HMWSSB loan

Loan has been sanctioned by the HUDCO and will finance the state government's share of a Rs 7,360-crore project.

Hyderabad: The Telangana government has cleared financial support for a Rs 2,944-crore loan to the Hyderabad Metropolitan Water Supply and Sewerage Board (HMWSSB). It removed the 2 per cent guarantee commission on the borrowing.

The loan has been sanctioned by the Housing and Urban Development Corporation (Hudco) and will finance the state government’s share of a Rs 7,360-crore project. The government will fund 40 per cent of the project cost while the remaining 60 per cent will be invested by the selected private agency.

Government to back loan repayments

Under the revised arrangement, the Telangana government will provide a sovereign guarantee for the HMWSSB loan.

The government will also provide budgetary support to meet both the principal and interest payments due to Hudco during the loan period.

The guarantee commission has been waived completely to remove the 2 per cent charge that is generally applicable to state-backed loans.

Hudco lowers interest rate

The decision was taken after negotiations with Hudco over the cost of the term loan.

Hudco reduced the annual interest rate from 8.97 to 8.85 per cent. Following the reduction, the state government decided to waive the guarantee commission for HMWSSB.

While deciding to provide the exemption, the government cited the public importance of the drinking water and river restoration works.