Hyderabad: The Union finance ministry has asked the World Bank not to go ahead with the funding of Amaravati, the proposed capital of Andhra Pradesh, state finance minister Buggana Rajendranath said on Monday.
The World Bank, which had promised $300 million investment for the project, however, said it would be happy to support additional proposals for finance, the minister added.
In a press release, the World Bank said that the government of India on 15 July withdrew its request for financing the proposed ‘Amaravati Sustainable Infrastructure and Institutional Development Project’. “The World Bank’s board of executive directors has been informed that the proposed project is no longer under preparation following the government’s decision. The World Bank continues to support the state of Andhra Pradesh with (an) over $1 billion programme that covers the health, agriculture, energy and disaster management sectors. This includes a new $328 million support to the state’s health sector signed with the government of Andhra Pradesh on 27 June, 2019," it added.
The World Bank’s decision to back out of the Amaravati project has become a major issue, especially between the ruling YSR Congress Party (YSRCP) government, led by chief minister Y.S. Jagan Mohan Reddy, and the opposition Telugu Desam party (TDP).
The TDP-led government in Andhra Pradesh had “completely ignored the adverse environmental, social, economic and financial implications" of setting up the new capital, Rajendranath told the assembly at Amaravati.
“Moreover, the actions of the previous government have embarrassed the nation, as it is the first time that the independent panel of the World Bank recommended investigation into a project that has not yet been approved by the World Bank board," he alleged.
The World Bank has, however, sanctioned $328 million to the state’s health sector and has also expressed interest to extend financial assistance to other viable projects to be taken up by the state government, he said.
The TDP government, after announcing its decision to build a new capital, had submitted proposals for the new capital to the World Bank’s department of economic affairs (DEA) in October 2016, but it was only registered in June 2017, according to Rajendranath. The DEA subsequently cleared the proposal for funding from the World Bank and the Asian Infrastructure Investment Bank (AIIB), following which both financial institutions conducted five joint and several missions, he added.
The project had an outlay of $715 million, which included a loan component of $300 million from the World Bank, with the AIIB and the Andhra Pradesh government contributing $200 million and $215 million, respectively. Rajendranath said the government had launched 10 contract packages during 2017-18 in anticipation with the project’s approval.
“The contract packages were taken up with the state government’s funds as the project approval was delayed. In a clear reflection of lack of understanding and lethargic attitude of the previous government, the World Bank informed that contracts awarded for seven roads would not be eligible for retroactive financing and that the cost would have to be borne by the state government," Rajendranath said.
The project has not been approved by the World Bank even after two years following of an adverse report submitted by an inspection panel formed by the World Bank to look into complaints by several landowners and non-governmental organizations.
“Nobody is asking why the Centre asked the World Bank to stop funding the Amaravati project. If it has made that decision, then the Centre itself should provide the funding required instead of stalling it. The future of Andhra Pradesh is at stake, and the state as such will come to a halt without a new capital. Nobody will be interested in investing if this continues," said a TDP leader who did not want to be named.