An agency release issued in Mumbai on Tuesday said that the ratings assigned to the debt programmes of Andhra Pradesh Water Resources Development Corporation (APWRDC), Andhra Pradesh Road Development Corporation (APRDC) and AP State Irrigation Development Corporation (APSIDC), with an individual size of Rs 303 crore, Rs 408 crore and Rs 62 crore respectively, are based on unconditional and irrevocable guarantee provided by the Government of Andhra Pradesh (GoAP).

"The ratings are also supported by a structured payment mechanism to ensure timely payment of debt obligations," Crisil said, adding that the ratings reflects GoAP's commitment to the structural reforms in the state (primarily in the power sector), high economic growth in last one year, relatively buoyant growth in revenue receipts and increasedcontribution of `own revenues' to the total revenues.

"The ratings are constrained by the likely fiscal strain on GoAP on account of the large expenditure commitments towards power sector reforms, pay revision for state employees, rising revenue and fiscal deficit and increased indebtedness," Crisil said.

APRDC, APSIDC and APWRDC have been established for the purpose of development and maintainence of roads; implementation of irrigation schemes; promotion/operation of irrigation projects and to harness the state's river-waters for drinking and industrial water supply in Andhra Pradesh.

Crisil said that the `own revenues' of the three state government agencies in the medium term are expected to be insignificant as compared to the debt servicing requirements. "Thus the timely payment of interest and principal to the bondholders is directly linked to the ability and willingness of GoAP to support the three debt programmes," Crisil said, adding the the GoAP has extended funding support to each of the threestate government agencies through budgetary provisions in the past.

Crisil said that under the `credit enhancement mechanism' wherein GoAP has extended unconditional and irrevocable guarantee to service the financial obligations on the bonds, the timely repayment is being insured through three tripartite agreements which the GoAP and the trustees to the bondholders are having with --one each with--APRDC, APSIDC and APWRDC, to meet the financial obligations of the bonds.

"The agreements also define the mechanism for the timely payment of interest and principal," Crisil said.