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What’s in store for Amaravati as Jagan govt halts all work at Naidu’s dream capital city

Roads are deserted, worker colonies empty, eateries shut as Jagan govt halts all work at Naidu’s dream capital city, citing irregularities. Sreenivas Janyala on the future of Amaravati, even as the new Andhra govt stalls some other projects.

Written by Sreenivas Janyala |
Updated: September 8, 2019 11:03:28 am
What's in store for Amaravati as Jagan govt halts all work at Naidu’s Rs 1.09-crore dream capital city The six-lane access road to Amaravati is now largely deserted

FOR the past fortnight, hundreds of 16-wheeler flatbed trucks have been making their way out of Amaravati, carting away tonnes of steel rods, moveable equipment and material. On the six-lane roads going in the opposite direction, neo-rich farmers zip past in their swanky cars, down stretches that once had rows of construction trucks headed in. A workforce of more than 50,000 has left gradually, leaving the workers’ colonies empty; all the eateries and hotels are shut; the concrete plants and mixers that once hummed round the clock stand silent; while site offices of the Andhra Pradesh Capital Region Development Authority (APCRDA) are deserted.

During his 1995-2004 reign, N Chandrababu Naidu had transformed Hyderabad into hi-tech Cyberabad. With that city going to Telangana in the state split, Naidu as CM of the truncated Andhra had promised a new capital city that would be “world-class”. To make possible his ‘Tomorrowland’, Naidu had roped in both celebrated Baahubali director Rajamouli and famed British architects Foster and Partners, putting their designs through several changes, even as the deadline kept getting pushed.

What's in store for Amaravati as Jagan govt halts all work at Naidu’s Rs 1.09-crore dream capital city Amaravati city was meant to come up over 217 sq km, with a core capital area of over 16.94 sq km.

Now, the trouncing in the Assembly polls seems to have also put paid to Naidu’s Amaravati ambitions.

The signs have been there since Y S R Jagan Mohan Reddy came to power. Soon after, the YSRCP government stopped all work at Amaravati pending inquiry into “irregularities” in awarding contracts by the TDP regime. It also proceeded to dramatically pull down ‘Praja Vedika’, a hall built by Naidu to meet people and hear their grievances, in Amaravati, and issued notices to owners of the Lingamaneni Guesthouse that was the official residence of Naidu.

On July 17, the World Bank withdrew from the Amaravati capital project, dropping its plan to lend $300 million. The Asian Infrastructure Investment Bank which was to partner with the World Bank to give $715 million for Amaravati pulled out next, leaving the project with no financial backing. The Singapore government which helped prepare the seed capital plan has also kept away since the regime change in Andhra.

What's in store for Amaravati as Jagan govt halts all work at Naidu’s Rs 1.09-crore dream capital city Among the projects that were almost complete are the flats for MLA/MLCs and the All India Services Officers

Any remaining doubts were laid to rest on August 29. Emerging from a meeting on Amaravati called by Jagan, Minister for Municipal Administration and Urban Development Botsa Satyanarayana said only those projects in the city which were 70 per cent complete would continue, while tenders for the rest stood cancelled. With no word on bills worth Rs 2,800 crore owed to construction companies, or if the government would continue to develop Amaravati as the capital, work has come to a halt even on the projects that met the 70 per cent mark.

Speaking to The Sunday Express, Botsa said, “The previous government awarded contracts worth Rs 53,000 crore without any tie-up with any financial institution to fund projects. From where will we get the money? So, for now, these tenders are cancelled. We will take a decision later.”

What's in store for Amaravati as Jagan govt halts all work at Naidu’s Rs 1.09-crore dream capital city The design for the new city, prepared by British architects Foster and Partners, went through several changes

But construction giants like L&T, Shapoorji Pallonji and NCC, with crores stuck, are not waiting around. Calling the uncertainty “disappointing”, a site in-charge of L&T, which is doing the maximum projects, said on condition of anonymity, “The groundwork has been done to build a well-planned capital city, and the new government could have taken it further… We are moving machinery, material and men to other sites outside Andhra. Over 20,000 of our workers and thousands of tonnes of steel and machinery have already left.”

Even the BJP, which had an acrimonious parting with the TDP and Naidu, has expressed concern. “The lack of coherence on Amaravati and other issues has caused a lot of uncertainty and negative atmosphere in Andhra,” says BJP MP G V L Narasimha Rao.


Amaravati city was meant to come up over 217 sq km, with a core capital area of over 16.94 sq km. Land was acquired over a laborious 14 month-plus period, through a unique pooling scheme that provided farmers and landowners 800 to 1250 sq yards at an alternate place similar to the land they gave up, plus compensation ranging from Rs 30,000 to Rs 50,000 per annum for 10 years, with 10 per cent hike every year. The package also compensated tenant farmers and farm labourers, who lost livelihoods.

Over 60 per cent of Naidu’s dream capital was to be covered with water bodies and green cover. Canals would facilitate water transportation, while battery-operated or electric vehicles, and pedestrian and cycling tracks on roads, would help fight pollution. Provisions were made for amenities within 10-15 minutes walking distance from residential areas, and for all the city’s power, telecom and Information Technology cables to be laid underground.

Foster and Partners, an award-winning British architects team behind iconic structures like the Imperial War Museum in the UK and Kuwait International Airport, was selected to realise Amaravati. At Naidu’s insistence, the architects met S S Rajamouli of Baahubali fame to lend their design some “Telugu touches”.

The Naidu government even hired European design and engineering group Dassault Systems to build a “virtual Amaravati”. Speaking at a World Cities Summit in Singapore, Naidu said the virtual simulation model would help monitor air quality and wind direction as well as disaster management. Separately, a Singapore start-up used interactive hologram technology to incorporate citizens’ inputs into the Amaravati master plan.


Among the projects that are now 70 per cent complete in the city is housing for the All India Services Officers’ and MLA/MLCs, while the six-lane access roads to the core capital are fully laid. Besides this, 238 km of 320-km roads in the capital region are under construction.

However, in the core capital area, only 30 per cent of the work is complete. At the Secretariat, meant to comprise one tower of 50 floors and four towers of 40 floors each, only the raft foundations stand. The Andhra Pradesh High Court, Legislative Complex, and bungalows for bureaucrats and judges are all incomplete.

The Andhra government is currently functioning out of an Interim Government Complex (IGC) at Velagapudi — with the CM’s office, ministers’ chambers and offices of all secretaries and heads of departments — and an interim Legislative Complex.

Sources in the Andhra Chief Minister’s Office said Jagan may keep the existing IGC capital buildings as these are in Amaravati but not go in for further development. “Most likely Amaravati will be just an administrative capital rather than the grand capital city that was envisaged. The government is looking at decentralised development,” an official said.

In the process, institutions that have already started functioning from Amaravati are wondering about their future. Among them the Vellore Institute of Technology-Andhra, SRM University, NID, Amity, NIFT, AIIMS at Mangalagiri, the Indo-UK Institute of Health, and a 2,250 bed multi-super speciality hospital of the Mata Amritanandamayi Trust.

“They will be cut off if Amaravati is stopped. These are part of the capital’s eco-system and will be put to hardships without transportation and other facilities,” Naidu told The Sunday Express last month. “Even the direct Vijayawada-Singapore flight has been stopped by this government.”

Justifying it, minister Botsa Satyanarayana said the state had been “unnecessarily” paying Viability Gap Funding of up to Rs 3 crore per month to Indigo to operate two flights to Singapore.


The halting of work at Amaravati is having a cascading effect in neighbouring Vijayawada and Krishna and Guntur districts too, which had seen a boom in construction in the capital’s wake.

Said an official at the Andhra Pradesh Chambers of Commerce and Industry Federation (APCCIF), “The five-six big infrastructure companies involved in the construction of Amaravati had sub-contracted a lot of work to local companies. There was a boom in small hotels to accommodate guests arriving at Amaravati. People purchased trucks, tractors and autorickshaws to ply in the capital region.”

R Satyam, a real-esate agent, said Hyderabad-based techies, businessmen, government employees and others formed groups to purchase land, driving up prices from Rs 80 lakh to Rs 2 crore per acre in the Amaravati region. “The value has now crashed by 40-50 per cent.”

The fact that the YSRCP government is unable to specify the “large-scale irregularities” it had cited to stop awarding contracts in Amaravati, even three months later, is adding to the uncertainty. The reasons cited now, like the recent flooding of Amaravati during the monsoon, and the need for decentralisation and uniform development, don’t convince many.

While Botsa too talks of using the existing infrastructure to make Amaravati the “administrative capital”, he adds, “we may look at developing other areas too across the state”. However, asked to elaborate, he had nothing to say.

Regretted A Siva Reddy, the Chairman of the Confederation of Real Estate Developers’ Associations of India (CREDAI)-Andhra Pradesh, “The decisions that the government has taken so far do not inspire confidence. Investors and businessmen feel Andhra has become a risky venture… A new government should continue the projects started by the previous government, taking action if there are any irregularities. But shutting down the entire system is detrimental to the state.”

Siva Reddy claimed a “drastic” decline in enquiries for investments and real-estate projects in Vijayawada, Krishna and Guntur. “Buyers and investors wonder whether it would be prudent to put their money here if the capital is not developed further.”

Andhra Pradesh Chambers of Commerce and Industry Federation (APCCIF) president G Sambasiva Rao echoed Reddy’s views. “The ease of doing business has taken a big hit in Andhra. In the last three months, no new investment proposals have come. Entrepreneurs and businessmen are wary.”

Denying this, Industries Minister Goutham Reddy said, “The Andhra Pradesh Industrial Infrastructure Corporation is receiving lots of proposals. We have started a single-window clearance system and one special officer will be available daily to deal with enquiries.” He named sectors like infrastructure development, education, healthcare, SMEs and marine products as core investment areas.


But Amaravati isn’t the only worrying news as far as investors are concerned. The APCCIF’s Rao questioned the cancellation of the old sand policy, saying it had “crippled” the construction industry and was having a ripple effect on related sectors. “The new government should have first prepared own sand policy. Even after the new policy is announced, it may take three months to set it in motion,” he pointed out.

Siva Reddy of the CREDAI-AP added, “Sand is the main ingredient for construction, which is now unavailable in all 13 districts. A workforce of over 20 lakh skilled and semi-skilled people and labourers have lost livelihoods in the last three months. There are reports that large numbers are migrating to Hyderabad and Bengaluru.”

The YSRCP had scrapped the policy claiming the existence of a sand mafia headed by TDP members. Sticking by that, Mines Minister Peddireddi Ramachandra Reddy claimed that a new, radical policy will be implemented shortly. “We have created 46 godowns in all the 13 districts where sand is being stored. It will be sold through Andhra Pradesh Mineral Development Corporation at Rs 375 per tonne. People can order sand online and private transporters will deliver it by charging a fixed amount per kilometre. The TDP looted thousands of crores with illegal sale of sand. Our policy is very transparent.”

Others cite the Jagan government’s decision to ask the industry to reserve 75 per cent jobs to locals. O Naresh Kumar, Member of the Information Technology Association of Andhra Pradesh, warned that placing restrictions on the entry of skilled people would impact investments and employment. “Take Bengaluru, where attracting highly talented people in IT is a priority and skilled people are given importance. Andhra produces lots of unskilled engineers, and if someone wants to start an IT company, he will end up recruiting freshers with no skill sets. If any state has to develop, and ours is a new state, it needs both capital and skilled manpower. I believe that if you hire one skilled person, he will create the ecosystem for creating 10 local jobs.”

Labour, Employment, Training and Factories Minister P Gummanur Jayaram said there will be no rethink in the government, and that the provision is meant to ensure employment for local youth. “There are apprehensions that non-locals will lose jobs… that cannot be helped. Our stand is that the industry will still employ 25 per cent non-locals. If locals do not have the required skills, they should be trained.”

Now, like Amaravati, there is a cloud over the Rs 55,548.87-crore multi-purpose national project of Polavaram, in the works since 2004. On July 29, the Jagan government cancelled the contract to Navayuga Engineering Company Ltd (NECL), despite objections by the Centre that is funding the project meant to provide water for irrigation, industry, and drinking purposes to cities like Visakhapatnam.

NECL went to the Andhra Pradesh High Court, which ordered a stay on the cancellation and directed the state government not to go in for fresh tendering. However, on September 5, the government reiterated its stand.

With the government stopping payments to NECL, nearly 20,000 workers have lost jobs, while over Rs 1,000 crore of machinery is lying unused. NECL CEO Satish Agnihotri said machinery and equipment would be moved to their other projects.

Sainur Haque, a labour contractor from Goalpara, Assam, who engaged over 200 workers from Assam, Odisha and Jharkhand at Polavaram, said they had not been paid in three months. “We have diverted many labourers to projects outside the state, but several want to go home for some time and are demanding their wages. Shortly all workers will have to vacate the housing colonies.”

Questioning the government’s logic, an official previously associated with the Polavaram project said, “The Andhra government has no option but to compensate NECL if it wants to cancel the contract. No other firm will quote the same rates as NECL, which accepted the project at very old rates (of 2004) regarding concrete, earthfill and spillway, just because of the prestige associated with it. The Andhra government will have to lure some company to accept Polavaram at old rates with a promise to allocate another project to it.”

A top NECL executive asked which infrastructure firm would agree given the new rule requiring all contracts worth over Rs 100 crore to be first reviewed by a judicial commission.

While refusing to talk about the above concerns, Irrigation Minister P Anil Kumar said the government has time till end of October to sort the matter, as work is usually stopped due to monsoon floods in the Godavari.

The Andhra Pradesh Chambers of Commerce and Industry Federation has also raised concerns over the Jagan government ordering a review of PPAs (power purchase agreements). In a letter to Chief Secretary L V Subramanyam on June 7, Secretary, Ministry of New and Renewable Energy, Anand Kumar had said that cancelling or revisiting PPAs was not good for the confidence of investors.

Even Japanese Ambassador to India Kenji Hiramatsu had written a letter to the CM requesting him not to revisit the PPAs as it would affect investor confidence and growth. Japan has investments in two solar companies in the state.

A Vijayawada-based industrialist, who refused to be named, said there is a pattern to all this. “The thinking in the YSRCP camp is that if Jagan continues to build the capital as planned by Naidu, then the former CM will take all the credit, and Jagan would not want that. That is the reason Amaravati, Polavaram, PPAs… everything that has Naidu’s stamp on it… is being stalled.”

Naidu has the same fear. Speaking to The Sunday Express on August 30, he said, “A successor government should not scrap everything initiated by the previous government without a solid reason… I don’t think Y S Jagan Mohan Reddy is interested in development of the state.”

While Jagan has not spoken openly about his plans for Amaravati, sources say that in conversations with Cabinet colleagues, he has stressed the importance of not concentrating development there but taking it to places like Srikakulam and West Godavari.

Jagan gives the example of Hyderabad to show why development should not be focused at one place.

That would just add insult to Naidu’s injury.

An earlier version of the story said “Naidu’s Rs 1.09 crore dream capital city”. It should have been Rs 1.09 lakh crore. The error is regretted. 

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