Costs in Amaravati soar as new projects take off

HYderabad: As the Andhra Pradesh authorities headed by chief government minister N Chandrababu Naidu is coming come out with thomas more challenging projects in Amaravati capital region, the cost of construction of the capital city is also shooting up enormously, leading to a mounting debt burden on the government, people familiar with the matter said.On September 19, the state cabinet approved the decision of the AP Capital Region Development Authority (APCRDA), which is overseeing the capital construction, to set up a special purpose vehicle (SPV) to raise funds for the execution of large infrastructure projects and other developmental works in the capital city.The fresh projects proposed by the APCRDA include development of a greenfield airport, setting up of smart industries, construction of an iconic bridge across Krishna River, development of a sports city, river front development, ropeway, inner ring road in the capital and erection of statue of former chief minister N T Rama Rao.“At the 52nd meeting of APCRDA chaired by the chief minister on September 3, it was also decided to take up a bio-design project to develop a health city in Amaravati capital,” an official familiar with the project said.In addition to the originally proposed road network, the government has decided to construct four elevated corridors at specific points to avoid traffic bottlenecks, especially in the core government area. Depending on future requirements, this number may increase.For all these fresh projects to be developed as per the master plan, the APCRDA requires additional land, which Naidu suggested could be acquired from the farmers through land pooling by convincing them.After assuming office in 2024, the chief minister had announced that ₹64,910 crore would be required for capital construction as per the original plan. However, as the government began contemplating more and more infrastructure projects, the estimations have also shot up. “Going by the latest proposals, the projected expenditure for the capital has further increased to ₹91,000 crore,” the official quoted above said.Speaking at an event in Mangalagiri in Guntur district on September 12, Naidu said at present, works on various projects in Amaravati worth ₹50,000 crore had been taken up and they would be completed by 2028. “We shall get the Amaravati capital city inaugurated by Prime Minister Narendra Modi in 2028,” he said.Naidu defended his decision to expand Amaravati by acquiring additional land. “I want to develop Amaravati as an international city. The farmers who have given their lands for the capital will reap rich benefits in the coming years. Before the development of Hitec City in Hyderabad in early 2000, the land price was just ₹1 lakh per acre. Now the land costs ₹100 crore per acre. So, nothing to worry,” he said, adding: “If we fail to develop Amaravati by taking additional land, it will remain a small municipality.”According to the official quoted above, tenders worth ₹50,000 crore covering 90 projects have been cleared, and of them, contracts for 78 projects worth ₹49,000 crore have already been awarded. Works will include housing, buildings, trunk infrastructure, flood management, and development of land pooling scheme plots.“Together, these constitute the 110 projects under execution. Among them, projects worth about ₹36,000 crore are still under scrutiny, with detailed project reports (DPRs) already prepared,” he said.Another APCRDA official pointed out that the cost of the newly proposed projects would be rising sharply in the coming years in line with the current Master Plan. “As the cost of project estimates goes up, Amaravati’s debt burden is also mounting,” he said.According to him, every rupee spent so far has come through borrowings. Funding sources include ₹15,000 crore from the Asian Development Bank (ADB) and the World Bank, another ₹15,000 crore from HUDCO and a consortium of banks, ₹5,000 crore loan from German firm KfW and about ₹7,000 crore from other channels, bringing the total entirely in the form of loans.The state government is confident that these loans could be repaid using future revenues generated from Amaravati city. But with the debt burden already high, raising fresh loans has become inevitable for the continuation of works.Alternatively, the APCRDA is designing branding programmes to attract anchor investors, and private sector participation for the economic development. It is also promoting public-private partnership models for the development of various infrastructure projects, the official added.