The Centre is reportedly of the opinion that the Andhra Pradesh government was indulging in wasteful expenditure, and therefore, has capped its borrowing at Rs 2,000 crore for the third quarter.

According to a report in Deccan Chronicle, the state had sought permission to borrow Rs 4,000 crore. The Centre had permitted the state to borrow Rs 3,500 crore in each of the first two quarters.

Quoting sources, the report also adds that Union finance ministry officials told their state government counterparts that Andhra was spending crores of rupees on unproductive work.

This move comes even as the state plans to borrow Rs 1,500 crore on October 11.

The state is preparing for a grand ceremony to lay the foundation stone for its proposed capital on October 22, with Prime Minister Narendra Modi as one of the chief dignitaries for the event.

In December last year, Andhra Pradesh chief minister N Chandrababu Naidu had sought the Centre’s permission to enable the residuary state to borrow up to 7 per cent of its GDP for the next five years,claiming that it has to build a new capital.

According to the Fiscal Responsibility and Budget Management Act (FRBM), a state can annually borrow a maximum of three percent of its GDP.

The Centre, in the last week of September, had approved a further ‘special assistance’ of Rs.1,000 crore to Andhra Pradesh for the current financial year, including Rs.350 crore for the development of seven backward districts covering Rayalaseema and north coastal regions. 

An additional Rs.350 crore was also provided to develop the new capital, while another Rs.300 crore for the Polavaram Irrigation Project. 

Earlier, Rs.4,403 crore was released to Andhra Pradesh in 2014-15.

The government has already borrowed Rs 7,000 crore against the cap of Rs 17,851 crore. This also covers loans from Nabard and external agencies, the DC report adds.