News Brief

Amaravati Capital City Start-Up Area Project Cancelled: Reddy Drives The Last Nail In Naidu’s Dream Initiative

Andhra Pradesh Chief Minister Y S Jagan Mohan Reddy.

It is curtains for the ambitious project to develop Amaravati as the capital city of Andhra Pradesh.

The last nail in the plan was driven on Tuesday (12 November) after Singapore Minister for Communications and Information S Iswaran, who is also in charge of trade relations, announced the termination of the commercial development agreement between the Andhra Pradesh government and a Singapore consortium through mutual consent.

The Andhra Pradesh government and the consortium including Ascendas-Singbridge and Sembcorp Development joined hands in 2017 to develop Amaravati Capital City Start-up Area Project covering 6.84 square kilometres.

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Ascendas-Singbridge, which is now owned by CapitaLand Group, and Sembcorp Development had 58 per cent stake in the project with Andhra Pradesh having the rest.

The cancellation order of the project was issued on 11 November following a decision taken by the Y S Jagan Mohan Reddy cabinet on 30 October.

Singapore has been involved with Andhra Pradesh since 2014 to set up a new capital after Telangana was separated from it. Hyderabad, which was Andhra Pradesh capital, went to Telangana leading to the search for a new capital.

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A multi-layered partnership was formed for establishing the capital in 2017 with the consortium being made master developer for a financial centre that would come up on the banks of Krishna river.

A dream initiative of former chief minister N Chandrababu Naidu, Amaravati was conceived to be 10 times the size of Singapore. It was to be developed over a period of 10-15 years.

The project ran into trouble in May this year after a change of government with Reddy being elected the Chief Minister. From the beginning, he has been criticising the project.

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Soon after assuming charge, Reddy said his government started investigating land scams in the proposed capital city, resulting in real estate prices crashing.

The government also questioned concerns and sought clarifications from the consortium on the project.

The statement also led to fears that a probe would expose benami owners of the land, while there were also rumours that the capital could be shifted elsewhere for political and economic reasons.

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The master plan for the city also underwent changes on ecological grounds, while the World Bank withdrew its offer to grant $300 million loan after farmers complained of police excess in acquiring lands.

The Naidu government had pooled 33,000 hectares from the farmers, promising them to allocate a developed plot in the capital.

A couple of weeks before the project was shelved, State Minister for Municipal Administration Botsa Satyanarayana, in a statement, alleged irregularities in the land allocation. He also said the state would not have any objection if the project was scrapped.

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On Tuesday (12 November), he told the media that the Singapore consortium did not offer a convincing response to the concerns raised by the state government.

Progress of the project was slack and no explanation was forthcoming why it was being delayed. Moreover, the state didn’t get any response when it sought to know the benefits it would derive from the project.

Andhra Pradesh requires at least Rs 50,000 crore to set up a new capital. The Reddy government, however, would like to spend more on social welfare than on new capital.

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On the cancellation, Iswaran said Singapore companies recognised such risks and it had been factored into its investment decision.

Singapore companies were still keen on availing of business opportunities in the state, he said, pointing out to the size and potential of the market.

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