SINGAPORE - The joint project between Singapore and Andhra Pradesh to develop the state's new capital called Amaravati has been officially terminated, said the Ministry of Trade and Industry in a press statement on Tuesday (Nov 12).

The statement noted that the decision by the government of Andhra Pradesh to close the Amaravati Capital City Start-Up Area project via a government order dated Nov 11 is based on mutual consent between the Andhra Pradesh government and a Singapore consortium.

"Following the change in scenario for the development of Amaravati Capital City, it is no longer feasible to develop the Amaravati Capital City Start-up Area as originally planned," said Singapore Amaravati Investment Holdings (SAIH) in a separate statement.

"Therefore, our joint development company Amaravati Development Partners (ADP) and the state government of Andhra Pradesh have mutually agreed to terminate the project."

In the press statement by MTI, Minister-in-charge of Trade Relations S. Iswaran said: "We note that the newly elected government of Andhra Pradesh has decided not to proceed with the start-up area given its other priorities for the state.

"Companies recognise such risks when venturing into any overseas market and factor them into their investment decisions...

"Singapore companies remain interested in opportunities in Andhra Pradesh and other Indian states because of the size and potential of the market. Our economic agencies will continue to help our companies internationalise by exploring opportunities in India and other overseas markets."

He also noted that the Singapore consortium companies have stated that the project has cost them a few million dollars, and that its closure does not impact their investment plans in India.

SAIH said in its statement: "As the project is still at its early stages and the land in the start-up area has yet to be made available to ADP for development, costs incurred are limited to design services prior to commencement of execution works on the ground, amounting to a few million dollars."

In September, Mr Iswaran had told Parliament that Singapore companies involved in the project were evaluating their investment.

No state funds had been used for the project, he had said.

"In terms of whether there were any subsidies or grants by the Government for investments in the state, the answer is no."

He said then that the companies' commercial discussions were confidential and he was not privy to the details of their total investment.

The Andhra Pradesh government sought Singapore's help in 2014 to plan the new capital. It was the brainchild of its then Chief Minister N. Chandrababu Naidu.

Subsequently, a consortium of Ascendas-Singbridge, now part of CapitaLand Group, and Sembcorp Development was awarded a joint venture opportunity to develop the city.

After Mr Naidu's election defeat by Mr Jagan Mohan Reddy's YSR Congress party in May this year, the World Bank withdrew US$300 million (S$417 million) in funding for the project, after the central government stopped supporting it.

SAIH said that termination of the project should not "in any way" impact CapitaLand's and SAIH's investment plans in India, which remains a key market for both companies.

The project closure is also not expected to have a material impact on the earnings per share and net asset value per share of Sembcorp Industries for the financial year ending Dec 31, 2019, it said.

Ms Laurel Ostfield, spokesman for Asian Infrastructure Investment Bank (AIIB), had told The Straits Times in September that "AIIB is no longer considering the Amaravati Sustainable Infrastructure and Institutional Development Project for funding", reiterating an earlier announcement the bank made in July.

Mr Reddy, in criticising the project, claimed the land rates were fixed under the previous administration.

Other reports claimed he was trying to erase the political legacy of his electoral rival.

He set up a committee to review the project, covering everything from the land pooling system to the tenders issued for road building and housing.

The son of former chief minister and influential Congress politician Y.S. Rajasekhara Reddy, the younger Reddy's party won 151 out of the 175 seats in the state assembly.

His government also cancelled the twice-weekly flights connecting Amaravati's Vijaywada Airport and Singapore's Changi Airport, citing costs, according to Indian media.

The flights started last December.