Making Amaravati a reality

To realize his audacious goals, perhaps Chandrababu Naidu will need three to four terms in office to ensure Amaravati becomes his vision of ‘world-class’ city

Andhra Pradesh chief minister Chandrababu Naidu has been clever with his choice of location. To minimize risk, the ‘capital region’ is strategically located between two major urban agglomerations—Vijaywada and Guntur. Photo: Reuters

The development of Amaravati on a greenfield site of 217 square kilometres is by far the most audacious project undertaken by Andhra Pradesh chief minister Chandrababu Naidu. His previous goals pale in comparison to this one. City-building, as global and Indian experiences suggest, is a feat in itself. Why? Because globally, most economically vibrant cities have developed organically. Building cities inorganically entails significant risk in thinking through and developing the human capital, infrastructural, financial and administrative dimensions, all of which are interrelated. In effect it requires setting in motion a virtuous development cycle by taking bold steps and making significant investments across all dimensions. In such ambitious projects there is little room for error. It is not akin to an airport design exercise in which if the simulation goes wrong, it can be rectified with a few hundred crore of investment that will pay for itself reasonably quickly through assured air traffic volumes. For a city to work, synergy across various dimensions is vital.

To begin with, Naidu has been clever with his choice of location. To minimize risk, the “capital region” is strategically located between two major urban agglomerations—Vijayawada and Guntur. The Vijayawada metropolitan cluster will be one of the 49 metropolitan clusters to disproportionately contribute to India’s gross domestic product by 2025. Second, the region is well connected by road, rail and air, and is close to the planned Machilipatnam port. In short, planned and existing infrastructure ensures smooth connectivity and limits the need for fresh investments. Third, existing social infrastructure in Vijayawada, about 40km away, will facilitate densification. Effectively, Naidu’s Amaravati is Mumbai Metropolitan Region’s Navi Mumbai. Navi Mumbai is spread across 344 sq. km and at a distance of 33km from the core city.

Last week’s appointment of two Singapore-based companies—Sembcorp Industries Ltd and Ascendas–Singbridge Pte Ltd—to develop a world-class city and the adoption of the Swiss challenge method highlights five underlying factors.

First, it reaffirms the chronic lack of capacity in India’s private and public sectors in urban development. The state government’s emphasis on the need for a foreign partner underscores its recognition of India’s limited capabilities. Of course, the Swiss challenge model means that the proposal submitted by the Singapore consortium will be challenged by other potential master developers, including the Japanese, Chinese and British. If the competing proposal beats the one proposed by the Singapore consortium, the mandate to build the capital goes to the other party.

Second, it shows the lack of trust between the public and private sectors in India. Importantly, it points to the private sector’s lack of interest in infrastructure development. Indian developers could have partnered with leading global companies to bid for this project, but it’s the lack of confidence in the policymaking process, and policy continuity, coupled with overleveraged balance sheets that has made the private sector wary. The overall approval process for infrastructure projects hinges on the whims and fancies of bureaucrats.

Third, it is reflective of the rising aspirations of India’s political leaders. City-building has replaced erstwhile symbols of power and development—roads, expressways and airports. Gujarat International Finance Tec-City, Amaravati, Gurgaon and Navi Mumbai Airport Influence Notified Area are all examples of this.

Fourth is India’s vast need for long-term foreign capital. To meet basic service standards, Amaravati’s capital region will require an investment of Rs.155 trillion over the next 20 years. Naidu’s My Brick- My Amaravati fundraiser with transfers from the central government will alone not suffice. Neither will land monetization really work as a lever. Financing Amaravati’s development needs private sector investors with very deep pockets who can develop and market the city over the next 20 years.

Fifth, it underscores the significance of the core of urban planning—getting economic planning right. Given the life cycle of such projects, the financier-cum-developer is only likely to earn sizeable profits after the first 5-10 years as valuations rise. Valuations, in turn, are a function of the buoyancy of economic activity. To begin with, Amaravati will need to have the right incentives in place to attract relevant upstream and downstream industries based on its natural endowments and existing economic activity ranging from agriculture to mining, and electronics manufacturing. Equally it will need to invest in building social and recreational infrastructure to attract capital and talent.

But the ultimate question is—will this consortium enjoy the continuity of vision and purpose required to really cash out in the medium to long term? Can Andhra Pradesh develop the talent to make Amaravati an economically vibrant city? Will successive regimes in the state and city cut red tape, weed out bureaucratic arbitrariness and set in motion a virtuous cycle of development? In short, will Amaravati become the land of Naidu’s dreams? To realize his audacious goals, perhaps Naidu will need three-four terms in office to ensure Amaravati becomes his vision of a “world–class” city and not another Navi Mumbai.