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Amaravati Capital Project: Andhra Pradesh now looks at Centre for funds

BV Mahalakshmi

With the World Bank dropping its plan to lend $300 million for the Amaravati capital city expansion, the Andhra Pradesh government has decided to put all works on hold due to lack of funds, and is likely to approach the Centre for further funding for the project. "This (World Bank action) will not affect future construction activities, as we can always approach the Centre for release of funds,'' a senior official from the state finance department told FE on Saturday. The state is relying on an unused quota of funds due to it, which is yet to be released by the Centre.

Ruling YSR Congress Party leader and party spokesperson Srikanth Reddy had also told reporters after news of the WB withdrawal: "The state government has to follow a proper process, which we suspect was not done under Chandrababu Naidu. They just created a hype around the capital without a proper plan. But we want to continue the project in the interest of the state's people. We will talk to the Centre for funding the project."

However, the state has a huge debt burden to be cleared. "Officials have already been instructed to put a halt on all works that are yet to begin and no new construction will be undertaken. This decision comes as a setback to thousands of farmers who had given their land for the construction of the capital city. This is a big jolt to the state's real estate sector too,'' said the finance department official.

"We understand that the AP government is considering to cancel work orders issued prior to April 1," an official from NCC Ltd said. "If this were to happen, work orders totalling to about Rs 6,100 crore issued to our company (including projects other than Amaravati) are likely to be cancelled by the state government," the official added.

The total cost of the Amaravati Sustainable Infrastructure and Institutional Development Project is estimated at $715 million or `4,922 crore, of which the World Bank had committed to lend $300 million or Rs 2,066 crore. The Jagan Mohan Reddy-led government's white paper on state finances cited a total outstanding debt of Rs 2,58,000 crore.

Meanwhile, the Andhra Pradesh Capital Region Development Authority (APCRDA), the nodal agency for the capital project, said they have not received any official communication from the World Bank. In fact, APCRDA had issued an Amravati bond, which was oversubscribed a record 1.53 times, raising Rs 2,000 crore. As per APCRDA, the money raised through the bonds would be utilised for infrastructure development in the capital city.

Earlier, state finance minister Buggana Rajendranadh Reddy had said during the release of the white paper: "We will consider the capital city construction works when our government will be able to afford the Rs 32 crore per kilometre of road. We cannot continue the capital city works ignoring priority sectors like education and health."

However, the escalated political war and blame game between previous chief minister N Chandrababu Naidu and present CM YS Jagan Mohan Reddy will just put a question mark over the future of over 3 lakh farmers who gave up their land as part of land pooling system for the city. Moreover, Naidu's tall promises on employment to farmers or plots in exchange are nowhere near reality. The compensation to these farmers is also a mystery.

While Naidu alleged that Jagan Reddy failed to send positive signals about the project to the inspection team of World Bank, the present government alleges that Naidu and his accomplices profited by insider trading while announcing the capital, as they had prior information of land rates shooting up. The YSR Congress Party has now formulated a sub-committee to probe alleged irregularities in the project, which is expected to be released next week.