Long road to reality for 'new Singapore' in India

Though work has begun on the proposed site of Andhra Pradesh new state capital Amaravati, in India, questions of financing remain unanswered.
Though work has begun on the proposed site of Andhra Pradesh new state capital Amaravati, in India, questions of financing remain unanswered.PHOTO: BLOOMBERG

State of Andhra Pradesh's plans for new capital face issues of finding land and funding

NEW DELHI • A short man with frayed clothes and hands made rough from long years of farming, Mr K. Subba Rao stands under the sun in his village in southern India, as the creases on his weathered face break into a sly grin. "I'm going to be a rich man," he says.

Amid banana plantations and cotton patches in Uddandarayunipalem, it seems like everyone's convinced they have hit the jackpot. Other farmers chime in with shouts of "shopping malls!", "apartments!" and "jobs!".

Their optimism is fuelled by a decision to split what was India's fifth-most-populous state of Andhra Pradesh last year. In the division, the state lost both its old provincial capital of Hyderabad and the lion's share of the economy.

So Andhra Pradesh needed a new capital. And Chief Minister N. Chandrababu Naidu wants to build it around Mr Rao's banana trees.

In a country where it can take a decade just to acquire enough land to build a factory, Mr Naidu's plan is daring. This will not just be a new city, but one to rival Singapore: A gleaming high-tech metropolis epitomising Prime Minister Narendra Modi's vision of a stronger, economically vibrant India.

To build a new Singapore, Mr Naidu, 65, turned to the Singaporeans. A master plan was developed in cooperation with the island-state's government.

"They were very keen to position this new capital city as a pioneer smart city for India," said Mr Wong Heang Fine, group chief executive officer at Surbana Jurong, the Singaporean firm that developed the plan.

At a ceremony last month to bless the city - named Amaravati after an ancient capital and a setting in Hindu mythology - Mr Modi arrived in a grey Indian Air Force helicopter to assure the crowd that "in the coming days, Andhra Pradesh will lead a new economic revolution".

Mr Naidu's challenge is to build a city with no land and little money to buy it. "As a matter of fact, we don't have resources," he says in a meeting room at Andhra Pradesh's state offices in New Delhi. "We are having so many problems."

He says he is considering different models for financing, but waves away questions on the details of of how much it will cost and how he will raise the cash.

"This is our pride, India's pride: We are building a capital," he says.

It is not just political rhetoric. Mr Naidu is implementing a novel plan to acquire land, typically the biggest headache in an Indian development programme. He has secured more than 12,545ha from farmers - an area bigger than Manhattan - with, essentially, a promise to trust him and you will be rewarded later.

In exchange for each hectare, the Andhra Pradesh government pays villagers up to 50,000 rupees (S$1,060) a year with 10 per cent annual increases for a decade, and guarantees it will return about a third of the property, outfitted with basic infrastructure like sewage.

While the approach probably saved the government a couple of billion dollars, it is still not clear how Mr Naidu will raise enough funds, says Mr S. Ananth, an adjunct faculty professor at the Institute for Development and Research in Banking Technology, which was established by India's central bank.

"That's the unanswered question: Where are they going to mobilise the huge amounts of money?" he asks. "I think their headaches are just starting because there's so much expectation."

The land development and basic infrastructure for the capital city alone will cost about 250 billion rupees, said Mr Srikant Nagulapalli, commissioner of the Andhra Pradesh Capital Region Development Authority.

In Uddandarayunipalem, Mr Nageswara Rao, 30, has a lot riding on the assurances of Mr Modi and Mr Naidu. His family put 8ha into the land pool, everything except their house.

"The government will develop a great city," he said. "We're expecting this."

BLOOMBERG

A version of this article appeared in the print edition of The Straits Times on November 04, 2015, with the headline 'Long road to reality for 'new Singapore' in India'. Print Edition | Subscribe