Tightrope walk for Amaravati

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Andhra Pradesh Chief Minister N. Chandrababu Naidu has a big test in store in the form of the Herculean task of resuming and completing the delayed development of Amaravati during his tenure.

It is common knowledge that the ball which he set rolling in 2014-15 was stopped five years later by the YSRCP government because the then Chief Minister Y.S. Jagan Mohan Reddy came up with the idea of three capitals, including Amaravati as the Legislative Capital that would be a truncated one having only the Legislature Complex at its current location which is about 21 km from Vijayawada city.

But, he could not take it forward for reasons that are all too apparent. In the process, the YSRCP government abandoned the Amaravati project.

Mr. Jagan Mohan Reddy firmly believed that pouring all resources into Amaravati would be counterproductive. He suggested developing Visakhapatnam, Kurnool, and Amaravati as the Executive, Judicial, and Legislative Capitals, respectively.

Now, what makes the redevelopment of Amaravati an unenviable task for Mr. Naidu is mobilising the sheer amount of money required and regaining the trust of those associated with the project earlier.

Phase-I of the Amaravati project was estimated to cost approximately ₹51,687 crore, of which the cost of the Amaravati government complex alone was pegged at about ₹14,010 crore. Tenders were first called for a value of nearly ₹41,171 crore, of which all works were grounded; a sum of ₹4,319 crore was paid and the balance was in the process of being paid in tranches.

That was when international funding agencies like the World Bank (WB), Asian Infrastructure Investment Bank, Japan International Cooperation Agency, and KfW came forward to support the project.

Challenges ahead

Mr. Naidu faces the challenge of re-engaging international partners, such as the Singapore government and Japan, who played a significant role in preparing the Amaravati master plan. Restoring their support and mobilising funds for the greenfield capital project are some of the major hurdles.

He rued that investor confidence had been lost and the State’s brand image suffered due to Mr. Jagan Mohan Reddy’s concept of three capitals, which ended up nowhere.

On the financial front, the NDA government in Andhra Pradesh will meet the huge cost escalation of Amaravati’s reconstruction (currently under assessment) and realise the value of funds locked up in incomplete works.

These challenges are essentially stumbling blocks for the government, which has not fully recovered from the impact of bifurcation and is still grappling with a fund crunch exacerbated by alleged financial mismanagement by the previous government.

A silver lining is the support pledged by the Union government. Following Mr. Naidu’s recent meeting with the Prime Minister, the Centre had come forward to bail out the Andhra Pradesh government with the Amaravati project. The Centre promised to provide special financial assistance of ₹15,000 crore through multilateral development agencies initially, with additional funding to be arranged later.

Union Finance Minister Nirmala Sitharaman’s statement in Parliament rekindled the hopes that the Centre would help the State government in taking the project forward.

Against this background, a joint team of the WB and Asian Development Bank (ADB) made a stock-taking visit to Amaravati last month to explore ways to extend financial and technical assistance for the capital’s development.

The ‘preliminary scoping visit,’ will be followed by further site visits and discussions with the government, and stakeholders. Only then will the contours of the potential WB-ADB support become clear.

In the process, WB representatives duly gathered inputs on the likely future course of the State’s political economy, being wary of the risks involved in funding such projects albeit with sovereign guarantee, and the consequences of the reversal of policies when a new government takes the reins.

So, the crux of the issue is who will provide the funds for the construction of the capital and to what extent. After all, it is money that matters the most for the State government at this crucial juncture.