The joint project between Singapore and Andhra Pradesh to develop the Indian state's new capital called Amaravati has been terminated.
Singapore's Ministry of Trade and Industry (MTI) confirmed this in a press statement yesterday, soon after the Government of Andhra Pradesh (GoAP) officially closed the project through a government order issued on Monday.
The order states that Amaravati Development Partners (ADP) - the joint company formed by Singapore firms and Amaravati Development Corporation, an Andhra Pradesh government entity - will be wound up by voluntary liquidation.
MTI said the closure is based on mutual consent between the GoAP and the Singapore consortium.
Minister-in-charge of Trade Relations S. Iswaran noted that the newly elected Andhra Pradesh government "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," he said.
Separately, Andhra Pradesh Minister for Municipal Administration and Urban Development Botsa Satyanarayana said the project was called off with mutual consent because when the state asked about work delays, it did not get "a convincing reply".
"There was no progress in the required measure and set parameters in the capital area region… The work has not begun in the desired pace in the start-up area and other basic formalities were not completed," he said yesterday.
A statement from his office said "the consortium did not undertake tangible work" in the start-up area while other institutions had built colleges. "How the state would benefit out of the project was the genuine concern we have expressed, and a satisfactory reply was not forthcoming. The government wants development and growth on a fast track, which was found wanting and has decided to close the issue," added the state minister.
In MTI's statement, Mr Iswaran said the Singapore consortium companies have stated the project has cost them a few million dollars, and its closure does not impact their investment plans in India.
Singapore companies remain interested in opportunities in Indian states because of their market size and potential, he added.
Amaravati was the pet project of the state's former chief minister Chandrababu Naidu, who had promised to model the city after Singapore, and inked two memorandums of understanding with the consortium backed by the Republic.
Ascendas-Singbridge company, now part of CapitaLand Group, and Sembcorp Development were awarded a joint venture (JV) opportunity to develop the city.
But plans were thrown out of kilter after Mr Naidu's election defeat by Mr Jagan Mohan Reddy's YSR Congress party in May.
Mr Reddy, long critical of the project, set up a committee to review everything from the land pooling system - a unique method of acquiring land from locals by offering farmers a developed plot in the future city as payment for their land - to the tenders issued for road building and housing.
In a separate announcement yesterday, Singapore Amaravati Investment Holdings (SAIH), the JV vehicle formed by Sembcorp and Ascendas-Singbridge, said it was "no longer feasible" to develop the city as originally planned.
It said: "The development of the project was envisioned to take place over 20 years in partnership with the GoAP. 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."
Yesterday, a spokesman for Sembcorp would not comment on whether SAIH would recover the costs incurred, saying that a few million dollars is the anticipated expense since the liquidation process is not completed.
In September, Mr Iswaran had told Parliament that no government funds, including any subsidies or grants for investments in the state, were used for the project.
SAIH said yesterday that this latest development should not impact CapitaLand and SAIH's investment plans in India, which remains a key market for both companies.
It 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, it said.