Hyderabad: Hyderabad was all of 50 years old when 17th century French traveller and merchant Jean-Baptiste Tavernier marvelled at its wide boulevards and bridges, during one of his several voyages to India. Built on the banks of the Musi river by the Qutub Shahi dynasty, Hyderabad had a majestic city centre with a thriving bazaar.

Four hundred years later and 290km away, another Deccan dream is rising in the fertile plains of Andhra Pradesh, along the banks of the Krishna river: Amaravati.

The pet project of chief minister N. Chandrababu Naidu, Andhra Pradesh’s designated capital spanning 7,420 sq. km, is 10 times the size of Singapore, or closer home, six times bigger than Chennai. A master plan prepared by the Singapore government envisages Amaravati as a modern megapolis—towering structures, glass facades, a central boulevard, wide avenues and footpaths, metro and riverway transport, and walkways along a 35km promenade.

Coming up between Vijayawada and Guntur towns in central Andhra Pradesh, Amaravati will be the newest state capital in the country. It is the fifth planned capital in independent India after Gandhinagar, Chandigarh, Bhubaneswar and Naya Raipur. The capital, if it indeed shapes up the way it’s visualized, will stand tall among the best cities in India, and probably the world.

View Full Image Amaravati is the pet project of Andhra Pradesh chief minister N. Chandrababu Naidu. Photo: Hindustan Times

In the words of Naidu, “We have built capital cities in India but there are no world-class cities. We want to create a world-class city, a smart city in true spirit... The world should talk about our capital."

Will it happen? Or is Naidu conjuring up a utopian dream?

After Hyderabad became part of Telangana, which was carved out as India’s 29th state in June 2014, building a new capital for the residuary state became the number one priority for Naidu, whose Telugu Desam Party came to power in Andhra Pradesh in elections that preceded its formal bifurcation.

To be sure, Andhra Pradesh has time until 2024 to build its capital. Till that time, Hyderabad will serve as the joint capital of Telangana and Andhra Pradesh.

But Naidu is wasting no time. He knows that he needs to show progress on the ground before the 2019 elections and is aiming to finish the first phase of construction of the new capital one year ahead. That is three years after the foundation stone for Amaravati is laid on Thursday, 22 October.

Land acquisition

The state government has managed to gain consent from the majority of the landowners on whose land the new capital will be built.

To sidestep the tedious provisions of the Land Acquisition Act, 2013, which would have made the cost of acquiring land prohibitively expensive for revenue-deficit Andhra Pradesh, the state government initiated the largest ever land pooling exercise in the country.

The capital region development authority (CRDA), a body set up to plan, co-ordinate, execute, finance and promote Amaravati, took control of almost 33,000 acres from farmers who, in turn, will receive plots in the developed capital. Depending on the type of land holding, landowners will receive a residential plot measuring 800-1,000 square yards and commercial plots of 100-450 square yards.

While the capital is being built, farmers who parted with their land under the land pooling scheme will be paid an annual compensation for 10 years. The compensation would increase 10% (of the original amount) every year.

Dryland owners are eligible for ₹ 30,000 per acre in the first year. Wetland owners will get ₹ 50,000 per acre. In the second year, the compensation for dryland owners will rise to ₹ 33,000 while in the third year, it would be ₹ 36,000.

Not surprisingly, the land pooling scheme received good response from farmers because of the generous compensation scheme and the prospect of capital appreciation on promised plots.

An urban utopia

The development plan is ambitious. Expressways and semi-expressways of 127km will run across the capital city out of a total road network of 938km.

The master plan, developed by urban planning consultancies Jurong International Holdings Pte. Ltd and Surbana International Consultants Pte. Ltd, envisages a bus rapid transit system, which can eventually be upgraded to a mass rapid transit network with four lines, spanning 135km.

The plan also provides for a greenfield airport. Till the time it’s built, Amaravati’s flying needs will be met by an existing airstrip at Gannavaram, 55km away.

The state expects $30 billion in investments over the next decade, according to Parakala Prabhakar, communications adviser to the Andhra Pradesh government. Infrastructure projects proposed in the master plan will require $16.5 billion, or around ₹ 1 trillion, of investment, according to one estimate.

Challenges and opportunities

Amaravati faces some major challenges. First is scale.

An expressway or infrastructure project needs a certain level of traffic to be viable. The government was smart not to build the capital in an isolated area.

By locating the capital between Vijayawada (12km away) and Guntur (20km), it can assure developers of traffic movement not only between these two towns but also other districts of Andhra Pradesh as Amaravati shapes up.

The region encompassing Vijayawada, Andhra Pradesh’s trading and business hub, and Guntur would act as feeder towns for the new capital, urban planner Maheep Singh Thapar said. Besides, as the government prepares to relocate its offices from Hyderabad, a sizeable number of government staff (and their families) will move to the capital region over the coming years, assuring developers of some scale in traffic.

But will it be sufficient to ensure economic viability of the proposed infrastructure projects? “Most planned city developments in the past have not achieved expected densities as per plan, even though the infrastructure planning and implementation was in place," Srivatsa Anchan, partner and leader-capital projects advisory services at consulting firm EY, said.

The most famous example is of Naypyidaw, Myanmar’s capital built from scratch. A Guardian feature in January 2015 showed a desolate city with wide roads and golf courses.

The second concern is of fiscal manoeuvrability.

Depending on the site conditions and requirements, a single-lane national highway can cost around ₹ 3-5 crore per km. To build 127km of four lane expressways, in each direction, the cost can be upwards of ₹ 3,000 crore. Apart from these, it has to build arterial roads, and other urban amenities such as government buildings, state housing, drinking water and sewage network, electricity transmission lines, bunds and hospitals.

Funding challenge

With the state already strapped for funds, the government is relying on a master developer to bring in investments through the public private partnership (PPP) mode.

However, considering the long gestation periods and uncertain financial viability of urban projects, experts wonder if private developers will be enthused. The limited success PPPs have seen at the state level too might deter private participation. Users are often reluctant to pay toll fee in road projects. Toll payments is a politically sensitive issue and there is often resistance from the locals.

“The challenge is funds," observed Venkataraman Rajaraman, director, India Ratings and Research Pvt. Ltd. “The existing state finances cannot support huge outlay for roads. Alternatively, it would be difficult to build roads on a toll-charges basis as tolls as the state level did not achieve much success."

Can Amaravati attract institutional investments? With not a brick laid yet, land values already hover around the prices of Hyderabad (which has solid infrastructure compared with Amaravati’s zero infrastructure today), making economic activity in Amaravati unfeasible. That’s because of a flood of speculative capital.

“What will be the key economic driver apart from the government offices will be the most critical thing," said Veera Babu, who oversees Hyderabad operations for real estate consulting firm Cushman and Wakefield. “Why will IT companies go there if real estate cost is higher than Hyderabad? That’s detrimental."

One challenge to Amaravati is Naidu himself.

For the capital city to take shape the way its planners have imagined, the project shouldn’t be entangled in power struggles. Opposition leader Y.S. Jagan Mohan Reddy is boycotting the foundation ceremony after calling the capital a real estate-driven project. The state government doesn’t have the opposition’s support for the project.

In these circumstances, Naidu has to return to power at least in the 2019 state elections if his pet project has to take shape. “Mr Naidu has come to power continuously for the next two terms to make this a reality," said Babu.

It takes 5-15 years to build a decent-sized livable city. After all, Cyberabad in the suburbs of Hyderabad took 15 years to emerge as the IT hub and economic engine of the city, points out Thapar. “But, of course, it had the advantage of Hyderabad city as a proximal mother city."

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