World Bank, ADB to fund $1.6bn for Andhra's Amaravati capital

A senior Andhra Pradesh government official announced the World Bank and the Asian Development Bank have, in principle, agreed to fund $1.6 billion (approximately Rs 13,600 crore) for the first phase of the Amaravati capital city's development.

The official added that the disbursement of funds is expected to begin by January, 2025.

Over five years

The official said the central government will fund the remaining Rs 1,400 crore of the Rs 15,000 crore needed for the phase-I development, adding that the total amount from the World Bank should be drawn within five years.

The International Bank for Reconstruction and Development (IBRD), part of the World Bank, which provides loans and guarantees, among others and ADB will be funding USD 800 million (Rs 6,800 crore) each for the project.

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The repayment of the WB and ADB loans will be taken care of by the Centre, the official said.

"The project is being funded jointly by the World Bank and Asian Development Bank. The funds will be released starting from January 30, 2025 or it can happen even before that also. The amount should be utilised before five years otherwise it would lapse," the official on condition of anonymity told PTI.

The bureaucrat further said the funding for phase-II depends on how fast the state government would be able to complete the first phase and that the World Bank may come forward for the second phase as well.

Work to commence in Dec

Andhra Pradesh Chief Minister N Chandrababu Naidu recently said the WB has agreed to extend Rs 15,000 crore for Amaravati Phase-I development and that work will start from December.

The voluntary LPS (Land Pooling System) pooled 34,390 acres of farmland when Naidu was in power between 2014 and 2019, in exchange for serviced residential and commercial plots and other safety net benefits, for the construction of Amaravati capital.

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Keeping the greenfield city project on the backburner, the then Congress government came up with a three-capital concept which did not cut ice with the people.

After Naidu took over the reins of power in Andhra Pradesh, the capital city project was rejuvenated with the Centre’s assurance of helping to get loans from multilateral agencies.

According to a WB document, the Department of Economic Affairs at the Centre is the borrower, while the Andhra Pradesh Capital Regional Development Authority is the implementing agency.

Ample help and backing

Support from the WB and ADB will not only help fill financial gaps in the initial development of the Amaravati Capital City (ACC), but also offer global expertise and technical support to help Andhra Pradesh government in diverse areas such as urban planning and regulations, municipal governance and finance and infrastructure design and delivery, among others in an integrated and holistic manner, the WB project document said.

The World Bank was initially engaged with the ACC project from 2016 but then it did not materialise. The new WB reengagement on Amaravati draws on the lessons of the previous engagement and the ground situation surrounding ACC development, it further said.

Also Read: Andhra minister Lokesh welcomes Centre's commitment for Polavaram project, funds for Amaravati

Troubled history

The ambitious Amaravati capital city project in Andhra Pradesh, initiated by former Chief Minister Chandrababu Naidu, hit a major roadblock when Y.S. Jagan Mohan Reddy assumed office in 2019.

Naidu had envisioned Amaravati as a world-class capital, getting huge investments and setting the foundation stone in 2015.

However, when Jagan took over, his government halted major construction work, pointing out financial irregularities and a skewed focus on real estate benefiting only a few. Jagan’s administration proposed a "three-capital" plan — executive capital in Visakhapatnam, judicial in Kurnool, and legislative in Amaravati — to promote decentralisation.

(With Agency inputs)