YSRCP govt scraps Amaravati capital city startup area project

Amaravati start-up area project, Telugu Desam party, Andhra Pradesh capital, Singapore consortium, Ascendas-Singbridge, Sembcorp Development
YSR Congress Party chief Jaganmohan Reddy. File Photo: PTI

Andhra Pradesh’s capital dream faces another setback after Singapore announced closure of the Amaravati capital city startup area project with “mutual consent” of the state government.

Singapore’s Minister for Trade Relations S Iswaran on Tuesday (November 12) said, “The project has been shut down on mutual consent between the state government and the Singapore consortium comprising Ascendas Singbridge, and Sembcorp Development.”

The consortium to develop a 6.84 square-kilometer start-up area in the new capital in three phases over 15 years was appointed during Telugu Desam Party’s previous regime in 2017.

However, with the change of guard in the state in May this year, the project has been hanging fire.

A Memorandum of Understanding (MoU) signed on May 15, 2017, under the Chandrababu Naidu government showed that the plan was the first major real-estate venture undertaken as a part of the Public-Private Partnership mode and selected the Singapore consortium of Ascendas-Singbridge and Sembcorp Development to form the core area of the capital city.

“We note that the newly elected Government of Andhra Pradesh has decided not to proceed with the Start-Up area given its other priorities for the state. Companies recognise such risks when venturing into any overseas market and factor them into their investment decisions,” Iswaran said.

“In the light of this development, Singapore consortium companies have stated that the project has cost them a few million dollars, but the closure does not impact their investment plans in India,” the statement said.

The statement comes in response to the decision of the Jagan Mohan Reddy’s YSRCP in a GO dated November 11 which emphasised on the project’s closure.

Question mark over Amaravati

Ever since the change of government in the state, Amaravati capital project, Chandrababu Naidu’s dream initiative, has been under review also with the World Bank pulling out of the project and dropping the loan proposal.

Unconfirmed reports state that Amaravati would be retained as “functional capital” with administrative headquarters while a “cluster of hubs” would be developed across the state’s—north coastal, south coastal and Rayalaseema regions.

Last week, the state cabinet decided to terminate the agreement following “unsatisfactory responses” from Singapore consortium to the concerns raised by the state government.

“There was no progress in the required measures. The works had not commenced at the desired pace and the basic formalities were not completed. This was a great concern for us,” said the state’s minister for municipal administration and urban development B Satyanarayana.

“During the past four years, it was noted that the Consortium did not undertake tangible work while it could be seen that other institutions like VIT, SRM and Amrutha had utilized the land allotted to them for the intended purpose and colleges were built during that period,” he said.

The Minister further added that, “The Government wants development and growth on a fast track which was found wanting and has decided to close the issue and it was done on mutual consent.”

Original plan

The consortium was to partner with a state government entity, Amaravati Development Corporation (ADC), through a special purpose vehicle Amaravati Development Partner (ADP).

In the SPV, the consortium was expected to put ₹306 crore as equity (58 percent) and ₹222 crore (42 percent) was to be contributed by the ADV.

The ADP should have spent ₹2,118 crore for the creation of basic infrastructure like roads, water supply, drainage and electricity and subsequently transfer the infrastructure to the Capital Region Development Authority.

At that time, the Chandrababu government announced that in the first phase, real estate would be developed in 656 acres of land in the start-up area and 8.07 lakh sqft of building space created in three years.

The previous government had also announced that 1.25 lakh families were expected to settle in the new capital in the next 15 years and 2.50 lakh jobs were likely to be created.

The start-up area, once developed, was expected to contribute 1.15 lakh crore to the state’s gross domestic product and generate revenue of Rs 8,000 crore to Rs 10,000 crore to the government in different taxes.

However, the land allotted for the purpose was stuck in an ecological-legal tangle as 170 out of 1,691 acres was right on the river bed.

Since no development activity was permitted in that portion of land, as per River Conservation Act and also the National Green Tribunal orders, the consortium sought alternative land.

For this, changing the core capital Master Plan was the only option. The then TDP government tried to alter the Master Plan but it never happened as several Central government organisations and also some private companies were allotted land.

The closure of the project comes even as an expert committee constituted by the state government in September and headed by a retired IAS officer GN Rao is studying the projects related to Amaravati and is expected to submit its report next month. The committee will also look into possible relocation of the capital.