Yesterday (10 Sep), at the India-Singapore Business and Innovation Summit held in Mariner Bay Sands, the new Andhra Pradesh state’s Finance Minister Buggana Rajendranath told the media that the Amaravati capital project is a low priority for the new state government.
He described it as something of a “damp squib” (i.e., something that fails to come up to expectations) that did not figure high in the priorities of the new state government.
“We don’t have the money to build a city,” Mr Rajendranath said. “Our priority is bringing up the standard of living, providing equitable development to the entire state, providing an infrastructure for creating a manufacturing base, rather than to build a single city.”
“You have all of these lined up against that one issue. You can have this or that,” he said.
Senior officials of the new state government also told the media that the state is now in favour of developing a decentralised urban environment rather than concentrating all development in a single, large city.
Temasek-linked companies have been involved in the Amaravati project since the beginning of 2014. Surbana Jurong submitted the city’s masterplan in 2015, and a consortium of Ascendas-Singbridge (now under CapitaLand) and Sembcorp Development was announced in 2017 as the master developers. It was conceived to be 10 times the size of Singapore, requiring an investment of billions of dollars.
However, all came to a head when the YSR Congress party took over the state after the Indian’s general election in May. The new Chief Minister Jaganmohan Reddy was not keen to pursue the project which was seen as a brainchild of the previous Chief Minister. The new state government even hinted recently that they might drop Amaravati as the new state capital, thereby threatening the investments of those Temasek-linked companies. Chief Minister Reddy has accused the previous Chief Minister of corruption regarding the way land was acquired, as well as other improprieties including insider trading.
Simultaneously, both the World Bank and Asian Infrastructure Investment Bank (AIIB) have withdrawn the US$500 million of funding for the new capital. Due to politics, Modi’s central government has also dropped its support for the Amaravati development.
Earlier last month, Singapore High Commissioner to India Lim Thuan Kuan, alongside officials from Singapore’s Ministry of Trade and Industry, met Chief Minister Reddy in a bid to improve soured relations resulting from the takeover. The High Commissioner reportedly told the Chief Minister that over Rs20,000 crore (S$4 billion) worth of investments have already been made by Singapore companies in Andhra Pradesh. Of the S$4 billion, the majority would have come from those Temasek-linked companies. The uncertainty over the fate of Amaravati’s development is said to have led to a sharp fall in land prices across the state in the last two months. It’s not known how the fall in land prices would affect the bottom-lines of those GLCs.
Meanwhile, at the summit, Singapore Foreign Minister Vivian Balakrishnan said to give the new state government time to sort things out.
“I would ask everyone to give time to the new government in Andhra Pradesh to sort out its priorities, then allow the private sector to make its own decisions, rationally, on commercial grounds,” he said.