World Bank drops $300 million loan for Amaravati as India withdrew request, here’s why

Confusion arose in Andhra Pradesh when the World Bank website on Thursday showed that the $300 million loan request for the construction of capital Amaravati from the state government showed its status as "Dropped". Though groups of farmers and activists who had opposed the capital rejoiced at the loan being dropped, there was a lack of any formal announcement or explanation by World Bank. There was much speculation that the loan was dropped as many complaints had been made to the World Bank regarding irregularities and alleged illegalities surrounding the construction. However, World Bank Officials speaking to TNM say, the request to drop the project came from the Government of India's Ministry of Finance.

Speaking to TNM, Elena Karaban the Senior Communications Officer for World Bank, South Asia said, "The Government of India has withdrawn its request to the World Bank for financing the proposed Amaravati Sustainable Infrastructure and Institutional Development Project.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."

When asked for the reason as to why the GoI decided to drop the loan request for Amaravati, the official replied saying, "All decisions on World Bank financing for projects are made by the Department of Economic Affairs in the Ministry of Finance, Government of India.  As per normal procedure, the Bank accepts the member state’s decision not to move forward with a project."

According to the ruling party YSRCP, this was a result of alleged irregularities in the project.

Speaking to TNM, YSRCP MP Vijayasai Reddy said that the decision to withdraw the loan application was taken since the Indian and Andhra government did not want a foreign agency conducting an inquiry into any alleged irregularities by the previous Naidu government. “There were a lot of complaints about irregularities in the construction of Amaravati; irregularities committed by the previous Naidu government. The World Bank had received numerous complaints on these irregularities. The World Bank had sought permission to conduct an inquiry. Understandably, the Home Ministry was concerned and so was the Andhra Pradesh government, that a foreign agency would conduct an investigation in a sovereign nation like India,” Reddy said.

It is believed that this was the reason that the government of India told the World Bank that they did not want the loan.

Another government source told TNM that Jagan Mohan Reddy is expected to make a statement in the Legislative Assembly on Friday about why the World Bank dropped the loan.

However, it does not seem to be the end of the road, as there are still avenues to reapply for a loan.

The World Bank is reported to have taken the decision following complaints by farmers and people's organizations. They said that development of Amaravati will affect their livelihood and impact the environment.

Speaking to TNM, a senior leader of the YSRCP also said that they were still confident of continuing construction of the capital city soon. "We are awaiting the report of a sub-committee which is probing the various allegations raised about Amaravati. Once its final report is submitted, we will get clarity on how to proceed," the leader said.

Under Naidu's ambitious plans the capital city was to come up in an area of 217 sq km, spread across 29 villages between Vijayawada and Guntur. The project cost for the development of Amaravati capital region was pegged at $715 million and the state government in 2016 had sought the entire funding from the World Bank. It committed $300 million and had sent several teams over the years to prepare status reports on the project.

A person who had worked closely with the Naidu government however said that they would wait for government of India's official statement. "I doubt it is over a pending inquiry. Let the government of India make it clear," he said.

Naidu's government had claimed that farmers voluntarily came forward to give 33,000 acres under an innovative land pooling system to develop the state capital.

After taking over as the new Chief Minister in May, YS Jagan Mohan Reddy had alleged that there was a big land scam in Amaravati to benefit Naidu and those close to him. He had declared that the government will probe the alleged irregularities in land acquisition and works awarded for various projects. Even the recently announced state budget earmarked only 500 crores for the development of Amaravati.

(With Inputs from Nitin.B and Dhanya Rajendran)